The Fashion Channel Case Study

The Fashion Channel

Team 5: Danny Aoun, Michael Cooney, Peer Gerber, Alex Siu

Case Summary:

        Founded in 1996 by two entrepreneurs, The Fashion Channel (TFC) was a successful cable TV network and the only network dedicated solely to fashion. Providing up-to-date, entertaining features and information broadcast 24 hours per day, 7 days per week, TFC had experienced constant revenue and profit growth above the industry average almost since the beginning without any detailed segmentation or positioning strategy.

Revenues for 2006 were forecast to be $310.6 million, which were right in line with projections. However, other networks were taking note of TFC’s success and started to add fashion-related programming to their line-ups, particularly Lifetime and CNN, both of which had higher overall consumer satisfaction ratings than TFC. According to Norm Frazier, TFC’s senior vice-president of advertising sales, these two competing companies were achieving notable ratings with their fashion-specific programming blocks and that TFC might need to drop the advertising unit price by 10% in 2007 unless TFC made some changes to improve its ratings performance.

Dana Wheeler’s Recommendations:

Dana Wheeler, TFC’s senior vice-president of marketing, believed that, in order to hold or increase advertising unit price, TFC needed to attract a critical mass of viewers who were interested in the networks’ content and that was also attractive to advertisers. The key would be to target the right viewers while offering advertisers an attractive mix of viewers when compared with what the competitors were offering. Wheeler also knew that TFC needed to maintain its overall audience ratings with the cable consumers and the cable affiliate distribution network. If too many cable subscribers became disappointed in the network’s changes, it could risk losing support with the cable affiliates. In fact, a recent Alpha research study on customer satisfaction with cable networks revealed that TFC was facing additional competitive challenges from CNN and Lifetime, which scored higher in consumer viewing interest, brand awareness and perceived value. Wheeler determined that TFC needed to introduce new marketing initiatives in order to improve TFC’s ratings in the above-mentioned categories.

Wheeler’s plan was to create a segmentation strategy and use it as a base to employ every marketing tool- traditional and Internet advertising, public relations and promotions- to reach targeted customers with integrated positioning messages. Since networks were increasingly evaluated on their ability to deliver specific target groups, increasing the ratings in highly valued demographic groups could result in substantial growth in advertising revenues for TFC, which was it primary revenue source. Regarding the second source of revenue, cable affiliate fees, Wheeler believed that TFC had already achieved full cable household market penetration and that there was limited opportunity to raise fees. However, Wheeler felt that it was important to maintain cable viewer’s satisfaction because cable operators and affiliates could threaten to drop unpopular channels.  She determined that the two key factors driving revenue growth were increased viewership (ratings) and increased advertising pricing.  She believed that the key to increasing advertising revenue was to deliver quality audiences as demanded by advertisers. Her determinations were based on her strong background in marketing for packaged consumer products as well as her broad experience in the advertising industry. By increasing the quality of its audience, advertisers would pay a higher premium for time on TFC.