Question Develop a factual analysis of the segmentation options and evaluate the Pros and Cons of each. I.

. Introduction and Background The Fashion Channel is a 24/7 cable TV network which exclusively serves a fashion interested audience. Since its founding in 1996, TCF has experienced a steady, above average growth both in audience and revenue. Although TCF is still the only pure fashion channel, new entrants in the fashion segment like CNN and Lifetime have increased competition and threatened market share. Because of this, Dana Wheeler, the senior vice president of marketing, has been chosen to develop a new brand strategy. To convince management of the strategic change she developed three scenarios: a broad multi segment approach, a focused one segment approach, and a two segment strategic approach. The first strategy option provided involves continuing on the companys current marketing approach with special focus on women aged 18-34. The target clusters involve Fashionistas, Planners & Shoppers, and Situationalists. The second scenario identified offers a narrow strategic approach exclusively focusing on Fashionistas. Although this cluster only accounts for 15% of the accessible households, it is most valuable to advertisers. The final approach described narrows down segments and includes only Fashionistas and Shoppers & Planners. option 1: Broad multi segment approach
Pros Reduced risk as approach is consistent with company mission (Fashion for everyone) and past strategic approaches cons

No additional programming costs 1.0 to 1.2 increase in ratings Less expected internal and external reluctance due to minimal changes Easy to obtain economies of scale, scope, and density, covers wide range of population There are women aged 18 to 34 in all four clusters, so TFC would be marketing to 100% of all 18 to 34 year-olds. Also, because TFC would be investing in a major marketing campaign across all clusters, awareness and viewing of The Fashion Channel would go up.

10% drop in CPM to 1.8 Continued loss of market share due to strong competition Also, because The Fashion Channel would not target a specific audience under this scenario, TFC would run the risk that their competitors could continue to penetrate the premium CPM groups causing TFCs CPM revenue to decrease even further. Loss of advertising revenues No strategic improvement or development, lack of focus Lack of customized services as all viewers are treated the same TFC would still struggle to compete with Lifetime and CNN without changing the programming offered by the channel.

This situation reflects the easy way with low expected reluctance from audience and supervisors. The company would stay closely with its current strategy while ignoring customer and advertisers demand as well as

competitive threat. In the short-term Dana might be able to promote this strategic approach as revenue and ratings rise, however in the long-term it will not be profitable as it leads to a drop in CPM. option 2: Focused approach Fashionista Segmentation
Pros Highest value for advertisers as it appeals to a specific segment Because this scenario targets a premium CPM group, TFCs average CPM would increase from $2.00 to $3.50. High focus, unique niche strategy The fashionista segmentation scenario also improved TV ratings from 1.0% to 1.2%. Targeting the fashionista segment could also help TFC compete against Lifetime, which currently boasts the largest share of female audience members between the age of 18 and 34. cons Most competitive segment Risk to lose loyal audience Smallest cluster, less audience Additional programming costs of 15 Million because TFC would re-position its programming

Lack of strategy-company fit (fashion for everyone) And, although TFC would be able to differentiate its programming from its current competition, the fashionista segment may be too specific that the programming does not attract new consumers and therefore fail to compete with other channels that offer programming for a broader segment.

Opposed to scenario 1, this approach would be a drastic change in the current overall strategy. As it focuses solely on Fashionistas opposed to a broad audience it would be easier to establish a true market niche and build a reputation as the true fashion channel. It would further help to distinguish the company from its competitors who take a more mainstream approach. The focus on the Fashionistas-Cluster which is highly valued by advertisers is expected to increase the CPM to $3.50. However, Dana will have a hard time selling this approach to her supervisor as it offers high risk and demands the openness to reinvent the channel. A 20% loss of viewers; a rating drop from 1.0 to 0.8, and additional programming cost $15,000,000 per year compose additional financial hurtles. option 3: Two segment approach Fashionista plus Planners/Shoppers Segmentation
Pros Increase in rating from 1.0 to 1.2 cons Higher programming expenses of additional 20 Million Under this scenario, TFC would only be targeting about 50% of US TV households that make up the fashionistas and planners/shoppers. Becoz of which There could be a decrease in their loyal viewers and might negatively affect their TV ratings

Growth in CPM to 2.50 Leveraged risk as focus is not as narrow as in option 2 Transition and development of strategy instead of radical change as opposed to option 2 Companys past mission is still feasible to retain If TFC can target these two segments effectively, they will help increase advertising revenue by

increasing the number proportion of females ages 18-34 audience members. The Fashion Channel could differentiate its programming from its current and future competition by producing programs specific to the fashionista and planner/shopper consumer audience.

The third scenario seems to be a compromise between scenario 1 and 2, targeting the two most relevant segments without going too broad. Although strategic changes would be made, the channel would still be able to maintain its mission. The change would lead to 20% growth in ratings, from 1.0 to 1.2 as well as a boost in CPM to $2.50. However the increase in revenue comes with additional cost of $20,000,000.

Decision In regard to the different analysis conducted, scenario 3 is the most fitting long-term strategic option Dana can suggest to her supervisors. Although this strategy does not offer the highest CPM, it convinces with the highest profit margin and net income. Furthermore, it allows the company to segment with leveraged risk as the strategy is not as narrow as in scenario 2 and not as broad as in scenario 1. As it is not a drastic change to the current strategy, less resistance from supervisors and audience is expected. Although Scenario 2 offers a higher CPM and its profit margin is only marginally less than in scenario 3, the concept is entirely too risky. While advertisers might favor this narrow target market, supervisors and the broad audience would be hard to convince as it alters the current concept completely. Scenario 1 is out of question as Dana would not be able to initiate the needed change. This option not only offers the least beneficiary financial data, it is disadvantageous as the company would lose audience, awareness and reputation to its main competitors. The Fashion Channel should position their new marketing plan towards fashionistas plus planners/shoppers. The risk involved with this scenario is tremendous. TFC jeopardizes losing some of their most loyal consumers by repositioning the channel towards fashionistas and the planners/shoppers. This scenario also calls for a $20 million incremental programming expense that could truly set the company up for disaster. If it werent for the implied benefits of this scenario, this would seem like a foolish decision. However, the benefits truly do seem to outweigh the risks in this scenario. Besides the increase in average rating, average CPM, and almost 40% margin, this scenario puts The Fashion Channel in the most opportune situation. Therefore, TFC should not only garner higher TV ratings from this scenario, but they should also increase advertising revenue because of the increase of the premium CPM that the 18-34 female audience market should bring in. The third scenario is more favorable than the second scenario, which did not include planners/shoppers in the new marketing plan. Altogether, The Fashion Channel gives itself the best chance to increase viewership and advertising revenue by re-positioning the channel toward fashionistas and planners/shoppers. Lastly, TFC must find other ways to improve consumer interest, awareness, and perceived value of The Fashion Channel. Now that CNN and Lifetime were able to produce successful fashion programs, other networks will most likely try to produce their own fashion program. TFC must continually find ways to improve consumer interest, awareness, and perceived value. Whether a channel decides to produce a fashion program or a channel

is created that broadcasts fashion 24 hours a day, 7 days a week, TFC must be aware of its competition and be ready to differentiate and re-position in order to earn the best TV ratings and capture the most market share.