The Fashion Channel

Situation Analysis

The Fashion Channel first entered the cable networks industry in 1996, marketing itself as the only network dedicated to fashion and entertainment with programs broadcasted 24 hours per day, 7 days per week. In 2006, the firm's revenues were forecasted at $310.6 million, derived from ad sales, viewer ratings and cable affiliated fees. Based on Alpha research on customer satisfaction, TFC had achieved 3.8 rating on consumer interest, while CNN scored 4.3 and lifetime a 4.5. On Perceived value, TFC was at 3.7, CNN at 4.1, and Lifetime a 4.4. Exhibit 1 shows that TFC reached a 1.0 rating, Lifetime a 3.0 and CNN a 4.0 in terms of average viewer rating. Cable operators utilized this data to scale how much to pay for each network. The Fashion Channel has decided to lean towards target segmentation to offset the competition and the potential drop in ad sales. Dana Wheeler, senior vice president came on the team in order to improve ratings and build revenue. Wheeler is looking to strengthen the TFC's brand and will be spending an additional $60 million for 2007 in advertising, promotions and public relations. Wheeler is looking to surpass competition, while keeping an attractive audience for the advertisers.

Problem Statement

Although extremely successful, The Fashion Channel doesn't currently have any segmentation, positioning strategies, or branding. They are the only 24 hour, 7 days per week network focusing only on fashion. However, The Fashion Channel is losing advertising dollars and viewers to both Lifetime and CNN. If the Fashion Channel doesn't make a change, their advertising dollars (CPM) will drop 10% to $1.80. In order to drive their revenue, The Fashion Channel wants to: a) increase their ratings, and b) increase the amount of advertising dollars (CMP).

Alternative Evaluation

After deciding to move into target segmenting, The Fashion Channel has brainstormed three different scenarios to act on. The three different scenarios include women aged 18 to 34 1) targeting all four clusters, 2) targeting just the Fashionistas, and 3) targeting the Fashionistas and Planners/Shoppers. By looking at 2006 and the base of 2007, three scenarios have been developed in order to increase ratings and CPM. In 2006 and current 2007 the ad sales is at $230,630,400 and $207,567,360 respectively. The net incomes for 2006 and current 2007 are $93,711,488 and $54,060,339 respectively (See Appendix). Looking at Exhibit 3, Scenario 1 focuses on all four clusters, bumping the ratings from 1.0 to 1.2. The downfall of this scenario is that there would be a drop of 10% drop in CPM to $1.80. This scenario runs the risk of the competition attracting premium segments and dropping The Fashion Channel's pricing. Scenario 2 turns all the focus to the segment of Fashionistas