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Case Scenario

• Dana Wheeler - Senior Vice President Of The
Fashion Channel (TFC)
• Recommendations for TFC's new segmentation
and positioning strategy
• Strengthen Competitive Position
• Rethink approach to marketing
• Presenting to CEO Jared Thomas at senior
management meeting
• Prepare analysis and propose strategy

 Mostly viewed by women between 35 and 54 years of age according to annual demographic survey.Background  Only successful cable TV network dedicated solely to fashion – 24 X 7  Constant revenue and profit growth above industry average since beginning in 1996.  Most widely available niche networks reaching out to 80 million households.  Realized competition from other networks adding fashion programs in their line-ups. which prompted management to hire an experienced marketer.6 million. .  Revenues for 2006 forecast at $310.“Fashion for Everyone” – concept of mass marketing.  Theme for marketing programs .

.6 million out of $20 billion that all US consumer advertisers spend cumulatively on TV advertising. which meant average 1% household out of 110 million US households watch Fashion Channel at any point of time.  Revenue from advertising $230.TFC ADVERTISING Revenue Model  Average present rating of 1.0.

which was at the lower end of the industry range. .TFC CABLE AFFILIATE FEES  Cable affiliate fees was $80 million targeted for 2006.  Negotiated subscriber fee was averaged at $1.00 per cable network subscriber on the basis of carriage.

5 ◦ CNN – 4.6  Perceived value – ◦ TFC – 3.8 ◦ Lifetime – 4.  Personal telephonic survey of 800 households yielded the following ratings (in a scale of 5):  Consumer interest in viewing – ◦ TFC – 3.7 ◦ Lifetime – 4.1 ◦ Lifetime – 4. both capable of being sold at premium CPM (Cost per thousand).5 ◦ CNN – 4.4 ◦ CNN – 4.Competition  Lifetime and CNN started hosting fashion programs targeting young women and men respectively.1 .3  Awareness – ◦ TFC – 4.

Situationalists.  Most of the males in the Basics group. and Basics.ATTITUDINAL RESEARCH FINDINGS  GFE Associates conducted research with 100 questions on a panel of consumers about their attitudes towards fashion and TFC. .  Used sophisticated statistical correlation program to analyze answers.  Women were distributed in all groups.  Reports suggested 4 unique groups – Fashionistas. Planners and Shoppers.

lack of focus .0 to 1.8 • Continued loss of market share due to strong competition • Loss of advertising revenues • No strategic improvement or development.Strategy Option I: Broad multi Segment Approach Pros Cons • Reduced risk as approach is consistent with company mission (Fashion for everyone) and past strategic approaches • No additional programming costs • 1.2 increase in ratings • Less expected internal and external reluctance due to minimal changes • 10% drop in CPM to 1.

less audience • Additional programming costs of $ 15 Million • Drop in rating from 1.8 • Lack of strategycompany fit (fashion for everyone) .50 • High focus.0 to 0.Strategy Option II: Focused one Segment Approach Pros Cons • Strengthen the value of audience to advertisers as it appeals to a specific segment (Income > 100K) • Increased CPM up to $ 3. unique niche strategy • Most competitive segment • Risk to lose loyal audience • Smallest cluster.

50 • Low Risk as focus is not as narrow as in strategy option 2 • Company’s past mission is still feasible to retain. i.0 to 1.Strategy Option III: Two segment Strategic Approach Pros • Increase in rating from 1.2 • Growth in CPM to $ 2. fashion for everyone Cons • Higher programming expenses of additional $20 Million .e.

Quantitative Analysis of three Strategy Options .

 Strategy Option 2 is expected to be almost as successful as Strategy Option 3 with a profit margin of 37%. In case this strategy is selected.According to the Ad Revenue Calculations  Strategy Option 3 offers the highest revenue prospects per year.  The expected net income when choosing Strategy Option 3 is 80% higher as in the year 2006 and 77.9 % higher as in Strategy Option 1. .  Though Expenses for Strategy Option 3 are the highest (Exhibit 5)¸ it offers the highest profit margin (39%) too. revenues are expected to increase by more than 50% in comparison to the current year.

Strategy Option 3 seems to be the most fitting long-term strategic option Dana can suggest to her supervisors. although. awareness and reputation to its main competitors. Strategy Option 2. While advertisers might favour this narrow target market. offers a higher CPM and its profit margin is only marginally less than in Strategy Option 3. it generates the highest profit margin and net income. Although this strategy does not offer the highest CPM. . the concept is entirely too risky. Strategy Option 3 is not a drastic change to the current strategy and hence less resistance is expected from supervisors and target audience.Decision Making Conclusion Strategy Option 1 is not viable as this option not only offers the least net income & revenue. supervisors and the broad audience would be hard to convince as it alters the current concept completely. it is disadvantageous as the company would lose audience.