Fashion Channel Case Analysis Wenwen Gao (872236636) 2010. 07. 07 Introduction and Problem Definition As the only network dedicated solely to fashion, The Fashion Channel’s (TFC) consistent “Fashion for everyone” strategy is facing challenges by the other two competitors Lifetime and CNN, which are separately targeting young females and men by their fashion-related programming. The channel needs to target the right viewers and offer advertisers an attractive mix of viewers, consequently strengthening its competitive position. External Situation Analysis ?Current Networks Industry
In 2006, consumer advertisers spent almost $20 billion on cable networks. In the industry, there are more than 700 cable networks, and most networks’ revenue stream comes from cable-affiliate fees and advertising sales. As a basic network which is automatically received by customers when they sign up for basic cable service, TFC has already achieved full penetration of available cable households and there is limited opportunity to raise fees. Advertising sales becomes a key weapon of TFC’s growth opportunity. Advertising campaigns among networks make the marketing price go up and down all the time.
Nowadays most networks are trying to increase their ratings because the ad buyers are more interested in buying ratings and demographics than in specific programming subjects. Other than that, traditional networks have fixed supply of advertising because they have long-term loyal business relationships. It’s not that easy for other networks such as TFC to get these ad customers from them. ?Competitors of TFC Lifetime and CNN are the two biggest competitors of TFC. They start to offer fashion-specific programming and attract advertisers by their higher ratings, the audience’s characteristics, and competitive trends. ?Consumer behavior
Competitors such as Lifetime and CNN have been targeting fashion-specific programs. Now consumers have more choices. When looking at Alpha research study on customer satisfaction, we find that when it comes to consumer interest, awareness and perceived value, both CNN and Lifetime have higher scores than TFC does. Both the ratings and the research show that non-loyal consumers are starting to choose alternatives to TFC. Advertising buying process becomes sophisticated. Many advertisers are using tools such as surveys to analyze and target customers and audiences. And then they will figure out the best fit networks.
Internal Situation Analysis ?Successful cable TV network with constant profit growth TFC ‘s main focus is solely on fashion which is broadcast 24 hours of the day and 7 days a week. The channel reaches around 80 million viewers in US households, among which most are women between 35 to 54 years of age. From 1996 to 2006, TFC enjoyed great success by attracting as broad an audience as possible. Before other significant competitors appeared, their “fashion for everyone” approach worked pretty well. ?Experienced management team Dana Wheeler, senior vice president of marketing, had a strong marketing background in the advertising industry.
Norm Frazier, senior vice president of Advertising Sales, is a high-energy salesman with strong ad sales performance. With the growing competition in the industry, most members of the leadership team are urging to change the current situation. ?No correct identification of consumer segmentation While Lifetime is taking away ad buyers by targeting younger female viewers, and while CNN is delivering fashion information and news to men, TCF is still using their out-of-date strategy. Besides its basic demographic, the channel didn’t have detailed information about its valued viewers.
In failing to target correct consumer segmentation, TCF will lose the customers, both of viewers and advertisers. However, since TFC’s customer satisfaction score is still above the midpoint, changing the segmentations of the company might upset some current viewers who enjoy the network’s current programs. Strategic Alternatives In order to target the potential loyal viewers and advertisers, TCF needs to strengthen the company’s brand and positioning strategy. At the same time, the program must maintain consumer satisfaction with the network. Dana Wheeler comes out the following three alternatives: ?
Target segmentation and position to women between 18-34 Pros: The audience mix can stay almost the same. TFC won’t lose current loyal customers while attracting more women between 18 and 34. Rating will boost from 1. 0% to 1. 2% (See Exhibit 2). Increased rating can attract advertisers. Ad sales will be increased from $230,630,400 to $249,080,832. Net income will be increased from $93,711,488 to $94,908,407 (See Exhibit 3) Cons: Without clarifying the brand’s essence, TFC can’t position its programming in the minds of the valued target market. CPM will drop from $2 to $1. 8 (See Exhibit 2).
Compared to Lifetime and CNN, which provide specific audience’s characteristics to advertisers, TFC’s broad multi-segment approach is not competitive and differentiated enough to avoid CPM’s dropping. Advertisers are more interested in higher value of the audience. TFC’s advertising revenue potential will be greatly threaten by its competitors who provide more valued viewers to advertisers. ?Place more focus on Fashionistas segment and spend additional 15 million on programming Pros: Highly valued customer in 18-34 female demographic will attract advertisers who mainly focus on younger, female-oriented fashion.
CPM will be increased from $2 to $3. 5. (See Exhibit 2). Ad sales will be increased from $230,630,400 to $322,882,560. Net income will be increased from $93,711,488 to $151,496,083(See Exhibit 3). Because of this narrow and specific segment, TFC could be differentiated from their competitors greatly. Most of these viewers have highly potential to be TFC’s long-term loyal customers. Cons: This segment is very narrow and smaller than other segments. It is only 15% of households. Targeting this small segment might lead to a drop in viewers, decrease rating from 1. % to 0. 8% (See Exhibit 2). TFC needs to invest additional $15 million per year on programming. ?Target two segments: the Fashionistas and the Planners & Shoppers Pros: There are 35% households are Planners & Shoppers. Through targeting these 2 segments, the number of highly valued viewers can be increased. Ratings can be increased from 1% to 1. 2% (See Exhibit 2). CPM will be increased from $2 to $2. 5 (See Exhibit 2). Ad sales will be increased from $230,630,400 to $345,945,600. Net income will be increased from $93,711,488 to $168,867,232(See Exhibit 3). Because f these two specific segments, TFC could be differentiated from their competitors greatly. Most of these viewers have highly potential to be TFC’s long-term loyal customers. Cons: TCF needs to spend additional $20 million per year on programming Recommendation Comparing the ratings, CPM, Ad revenue and net income of these three scenarios, scenario three will be the best marketing plan for TFC. In scenario one, Dana considered maintaining a broad appeal to a cross segment of Fashionistas, Planners & Shoppers, and Situationalists. These are mostly women aged between 18 and 34.
Instead of focusing on everyone, targeting at these three segments and neglecting most of the male will lead a temporary rating increase. However, CPM will decrease because the segments and the channel’s brand essence are not differentiated enough to get advertisers. Their broad positioning strategy cannot target the high valued audience. In scenario two, Dana considered only maintaining the segment of Fashionistas. They are mostly highly valued female viewers between 18 and 34. Although this segment is just a small section among all households, targeting them can strengthen the value of the audience to advertisers.
However, this segment is too narrow to increase the ratings. Lower ratings won’t be acceptable for ad buyers. In scenario three, Dana considered maintaining a cross segment of Fashionistas and Planners & Shoppers. These two segments are totally 50% households. Customers who belong to these two segments show the most interests and passion in fashion and shopping. They are the most valued viewers of the channel. By increasing the number of highly valued viewers, this network could successfully grow in the revenues made from advertising without dropping the unit ad price.
The channel’s programming can also be differentiated enough to compete with the competitors. By scenario three, TFC can also get the highest ad revenue and net income for 2007. Conclusion A marketer can rarely satisfy everyone in a market. Although TFC’s profit and revenue is still going up, TFC’s “Fashion for everyone” should still be changed with the growing competition. Targeting the right consumers are the very first and most important step of the marketing plan. All these three scenarios are trying to target valued consumers and boost ad sales. Among hese three alternatives, TFC can target the broadest highly valued viewers and advertisers through scenario 3, and then get the highest ad sales and net income. It can be a strong point for Dana Wheel to emphasize in the meeting. Exhibit 1: SWOT Analysis| Strengths| Weaknesses| Internal| 1. The only network dedicated solely to fashion| 1. Some leardership team members resist change| | 2. Broadcast 24 hours per day, 7 days per week| 2. Weak customer segment| | 3. Steady profit and revenue growth for 10 years| 3. Current program needs to enhance to better meet specific customer needs| | 4.
One of the most widely available niche networks| 4. Lower customer loyalty(awareness, perceived value and interests)| | 5. Experienced selling team and marketing experts| | | Opportunities| Threats| External| 1. Changing customer behavior and attitudes| 1. Changing customer behavior and attitudes| | 2. Huge advertising buying market| 2. Rapid expansion and growing competition in the advertising market| | 3. New market segments (Attracting highly valued viewers)| Limited opportunity to raise cable affiliated fees. | | 4. Seasonal Fashion Influence| 4. Cost of advertising investment| | | | |