The Fashion Channel Reguler 36 Jakarta

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The Fashion Channel

Background
The Fashion Channel case illustrates the development of market segmentation options
in implementing marketing strategies in a changing competitive environtment, and
demontrates how quantitive analysis may be used to support a strategic marketing decision.
The Fashion Channel (TFC) which is a successful cable TV network and which had
been started by two entrepreneurs in 1996, with up to date and entertainment features and
information broadcast 24h x 7d which was relared to fashion only.
TFC was a widely available niche cable network which only offers fashhion-orinted
programming. It was very successful until other regular networks began to copy its concept
and take market share of it which as a result, had a severe negative effect on TFCs
advertising revenue and afiliate fees.
In 2006 TFC has relized that some of the other channels like CNN and Lifetime are
following the footsteps of TFCs and also they are telecasting the programs related to the
fashion world, which were now started to become more popular in comparison to the
prpgram of TFCs. These channels were giving competition to the TFCs directly by taking
the share of its ad revenue, these channels were giving a double edge competition to TFCs.
Fraizer, senior vice president of advertising sale, advised that in order to increase the
TFCs ad revenues either TFC has to decrease its ad pricing by 10% to increase its
viewership by improving the quality and contents of the program.
A detailed demographic breakdown shows as 39% - 61% spllit in favor of women,
with of viewer aged 18 34 and 45% aged 35 54. A survey of consumers by GFE
Associates indentifies four group that make up potential viewers: Fashionitas (the fashion
devoted, who comprise 18% of those surveyed); Planners and Shoppers (enjoy of fashion,
35%); Situationalists (occasionally interester in fashion specific purpose, 30%) and Basics
(generally uninterested in fashion, 20%). Attitudinal research by GFE indicates that male
consumers tend to fall into basic group, while 61% of Fashionstas are women. Also 50% of
Fashionistas are age 18 to 34 a demographic highly desirable to advertisers.
The Problem
The problem is how to develop the segmentation and positioning, change the current
content of programming, and reach the target customers, so as to get back those market
shares from competitiors, create more revenues and maintain TFCs early standing.



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Problem Solving
TFCs senior vice president of marketing, Dana Wheeler, believes increasing both
viewership (ratings) and advertising pricing would increase the advertising revenue that the
company was seeking. She developed three different scenarios to mix their most popular
viewing segments and the expected resulrs int would have on advertising pricing (CPM)
The first (#1) scenario would target the Fashionitas, the Shoppers/Planners and
Situationalists. This would create a broader marketing base, but miss the primary group that
advertisers are seeking. Based on this scenario, the viewership could increase over time from
1.0% to 1.2%, while the average CPM would decrease from $2.00 to $1.80. Overall, this
scerario would generate an increase in advertising revenue of 8% from 2006 revenues to $249
million.
The second (#2) scenario narrows the focus on the Fashionitas, preferred by
advertisers. In this scenario, the average viewership rating would drop from 1.0% to 0.8%
due to the narrow focus, but the CPM would increase dramatically from $2.00 to $3.50
resulting in an increase of 40% in advertising revenue or rooughly $92 million. This scenario
would also require and additional programming cost of $15 million per year, but given the
additional revenue it would generate the invesment seems like a good one to make.
The third (#3) approach focuses on both Fashionistas ad the Shoppers/Planners
segments. This dual approach would increase viewership from 1.00% to 1.2% and increase
CPM from $2.00 to $2.50. By using this approach TFC would increase the advertising
revenue by 50% or over $115 million. This approach would also require an additional
invesment in programming cost of $20 million.
SCENARIO 1 ADVANTAGES DISADVANTAGES
Develop a multi-segment
strategy, and focus on
Fashionitas, Planners &
Shoppers and Situation list
between the women age 18
to 34
Through implementing
various marketing tools on
new target segment, the
rating will increase from 1.0
to 1,2, leading to the
increase in average viewers.
Since there is no real change
in viewers type and
programming, the CPM will
drop by 10% or more and
competitors will continue
taking its market share.

SCENARIO 2 ADVANTAGES DISADVANTAGES
Focus on the Fashionitas
segment and spend $15
million on programming.
(Single segment
concentration)
This segment shows the
highest interest in fashion
and is dtrong in high valued
18-34 female demographics,
which will deliver a CPM
boost. With $15 million on
contect improvement, it will
attract more target consumers
Fashionitas is the smallest
segment in four slusters. Its
is risky if only target at this
group and the average
viewers will decrease as well.
It also needs additional
expense to change the
programming which will
bring upset to subscribers
and employees.

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SCENARIO 3 ADVANTAGES DISADVANTAGES
Target of both Fashionitas
and Shoppers & Planners
clusters and spend $20
million on programming.
(Product specialization)
Dual-targeting will ensure
the average viewer and
rating. It is expected that
rating will grow to 1.2 while
CPM will come to $2.5.
The additional $2 million
should be draw from the net
income.

Recommendations
The Fashion Channel needs to maintain if not increase its overall viewers numbers in
order to insure its revenue stream from cable Affiliate fees, while simultaneously targeting
specific demographics to raise the price (CPM) it can charge for advertising
The Fashion Channel face some important challanges with the implementation of this
new marketing plan. One of the more difficult challenges for TFC is trying to keep their loyal
consumers while attracting the new fashionitas and planners & shoppers (scenario 3). The
new marketing plan muct focus on capturing a majority of the 18-34 female audience market
without neglecting their female audience segments. Although the 18-34 female audience is
important because of the premium CPM benefits, it TFC neglects their older market, which
currently makes up almost 67% of their total audience, they could certainly lose more than
they gain. TFC should analyze the loyal consumers favorite programs and make sure to keep
these programs when they begin their new marketing. Targeting at two valued groups and
then take the product specialization strategy to satisfy both segments is the best solution to
this problem. It will create more revenues, make TFC get back market shares quickly, and
maintain TFCs leading status.
Adoption of scenario 3 requires a key shift in consciousness with TFC. The
something for everyone strategy has served it well for over a decade. Revenues remain
high and audience has continued to grow, and this may encourage resistance with in the
network structure to change. Thus, a policy of detailed by the development of competition,
and the great benefits to TFC of moving in new, carefully researched direction of marketing
to specific segments of its viewers.
The scenario 3 will improve rating, in order to attract more ad buyers and will
enchange the CPM to gain more ad revenue. Also if we calculate it in revenue term the we
find from the ad revenue calculator (Exihibit 4) the total ad revenue from scenario 1 is
$249.080.832; Scenario 2 is $322.882.560; and scenario 3 is $345.945.600 so from here it is
clear that scenario 3 gives the more revenue and also from Exhibit 5 Net income in case of
scenario is $283.867.232 more than the other two options, so from here also we can derive a
conclusion the scenario 3 is the best suitable option for the TFC. Targeting at two
segmentation and then take the product specialization strategy to satisfy both segments is the
best solution to this problem. It will create revenues, make TFC get back market shares
quickly, and maintain TFCs leading status.
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The last, TFC must find other ways to improve consumer interest, awarness, and
perceived value of the Fashion Channel. Now that CNN and Lifetime were able to produce
successfull fashion programs, other networks will most likely try to produce their own
fashion program (like The fashion competition, Celebrity focus fashion, etc). TFC must
continually find ways to improve consumer interest, awareness, and perceived value.
Whether a channel decides to produce a fashion program or 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 orger to earn the best TV ratings and capture the most market
share.