The Fashion Channel Case Essays

The Fashion Channel Case Essays The Fashion Channel Case Paper The Fashion Channel Case Paper In doing this we need to focus on ways to increase our share of the market (targeting ratings), and how we can ultimately target ways to boost our viewers versus the increasingly competitive assign programming being released by CNN and Lifetime. The two key levers to drive revenue growth would be Increased viewers (ratings), and increased advertising pricing. Also Important Is to deliver quality audiences, as demanded by advertisers. Based on these key Issues It will be vital to choose the scenario for implementation that will increases TV ratings and advertising revenue. The state of the economy at the beginning of 2007 was promising (pre-housing bubble and job loss). The Fashion Channel at that time had been around for 11 years. The company was started by two entrepreneurs in 1996, with up to date entertainment features that focused on material relating to fashion only on 24 hour a day, 7 days a week schedule. To that point the mall audience was women aged 35-54 and the company tagging was Fashion for Everyone. Coming off of revenues of $310. Million and only $230 million in ad sales, the goal going forward was to find a way to increase that amount. In 2005, one of the more popular series on TFH was a show called Look Great on Saturday Night for Under $100. Other networks like CNN and Lifetime began following the programming plan put on by TFH which started to come more popular In comparison to the programs being broadcast by TFH. This in effect resulted In direct competition against TFH and directly affected the ad revenue shares. Vice President Norm Frazier had advised the management team to decrease the ad pricing by 10% in order to increase our viewers. As mentioned earlier, a key issue to attack in this marketing plan is to improve our average rating compared to similar programming being broadcasted on CNN and Lifetime. Utilizing information obtained in Exhibit 1, Tiffs average rating was 1. 0 based off of 1. 1 million households. In comparison, CNN relished an average rating of 4. 0 (4. 4 million households) while Lifetime enjoyed an average rating of 3. 0 (3. 3 million households) respectively. Major differences exist amongst these three networks based on the fact that Tiffs programming only revolves around fashion 24 hours a day, 7 days a week, whereas CNN and Lifetime serve a larger target audience and therefore only present programs dedicated to fashion Monday through Friday from 9-11 pm (Lifetime) and Monday through Friday from 8-pm and Saturday and Sunday Trot 10-11 pm ) Because tense networks are not ovate to a spectral ice, it allows them the opportunity to capture a larger audience that may have never looked for fashion programming if it werent for Fashion Today and Fashion Tonight. The other key objective of The Fashion Channels new marketing plan was to boost advertising revenue. On pages 3 and 4 of the case study, it is noted that advertisers would pay a premium CPM (cost per thousand, represented by the price an advertiser would pay for a moment of viewing) to reach certain groups, and at the time of this study these groups were men of all ages and women aged 18-34, respectively. Based on information in Exhibit 1, TFH is currently in the most unfavorable position amongst the big three networks based on consumer demographics. CNN carried the best percentage of the male audience at 45 % while TFH at 39%. Lifetime carried the best percentage of the 18-34 female audience at 43% while TFH captured Just 33%. Lack of consumer interest, awareness, and value added to potential advertisers could be negatively impacting their advertising revenue. In the competitive threats section of the case study, TFH is noted as being below average in many important categories based on the Alpha research study. They received ratings of 3. 8 for consumer interest, 4. 1 for awareness, and a 3. 7 on value added (perceived value). The other two networks outscored TFH by at least . 4 points on all questions asked. I believe this to be an indirect consequence of programming for a specific niche market. In order for TFH to increase ad revenue we must find a way to penetrate the high dollar CPM groups that our ad buyers are most focused on attracting. Based on our key goals and objectives mentioned earlier, I believe that we have three courses of action to discuss and decide on as a team. These approaches include a broad-based marketing plan (scenario #1), the Factionists segmentation, and the Factionists plus Planners/Shoppers segmentation. I will list the pros and cons of each below as well as the final decision and rationale based on the final decision. Broad-Based Marketing pros: When comparing this plan to the base numbers of 2007, we see that the broad- based scenario delivers the company almost $40 million more in potential net income ($94. 9 million versus $54. 6). This scenario also doesnt require additional incremental programming expense that will cost the other two plans at least $1 5 million to implement. Additionally, women aged 18-34 in all four clusters, so The Fashion Channel will be marketing to 100% of all 18-34 year-olds. This scenario will also allow awareness and viewers to increase by investing in a major marketing campaign across all clusters in the spectrum. Cons: While this marketing plan produces a higher net income the 2007 base, the CPM is $. 20 lower than the current CPM of $2. 00. This plan also lacks a specific target audience and we would run the risk of our competitors penetrating the premium CPM groups, causing our revenue to decrease even further. Differentiation would change as a result of implementation and as a company we would struggle to compete against ten toner two networks walkout canalling our programming. Factionists Segmentation Compared to the 2007 base numbers, this scenario produces almost $100 million more in net income ($1 51. 4 million versus $54. 6 million). This plan also targets a premium CPM group, which increases Techs average CPM from $2. 00 to $3. 50. This plan would make TFH a more attractive ad producer for advertisers because 50% of factionists are females ag ed 18-34. Targeting this segment will help us compete against Lifetime, which is currently the market leader in female audience members aged 18-34. Cons: The factionists segmentation results in a . % reduction in TV ratings for The Fashion Channel. There is also a requirement of $15 million incremental programming expense in order to reposition our programming. The factionists segment is the smallest of the four clusters, which would decrease our viewers amongst the remaining clusters. Its also possible to the targeting only the factionists target is too specific of a niche and will lack the ability for TFH to attract new nonusers. This will pose a threat to us by not allowing us to compete against the CNN and Lifetime which offer programming to a broader segment. By targeting the smallest cluster, awareness amongst our consumers would not change, and our ratings over the long term might decrease even further. Factionists plus Planners/ Shoppers Segmentation Compared to the 2007 base numbers, this scenario produces almost $1 1 5 million more in potential net income ($168. 8 million versus $54. 6 million). The plan improves our TV ratings from 1% to 1. 2% and the average CPM from $2 to $2. 0. Targeting these two clusters will allow us to market to 50% of all TV households also allows us to advertise to the clusters that are made up of 50% and 25% of women aged 18-34. Effectively targeting these two segments will increase advertising revenue by increasing the proportion of women aged 18-34 audience members. This new found repositioning will allow The Fashion Channel to differentiate its programming by producing programs specific to these two separate segments. Cons: Although the scenario produces favorable numbers in terms of ratings and CPM, here is a requirement of incremental programming expense of $20 million to reposition our programming. This scenario only targets 50% of households. This could lead to a reduction amongst our loyal viewers and might adversely affect our TV rating. Decision We at The Fashion Channel should focus our efforts on the third scenario which targets factionists plus planners/shoppers. There is an immense risk associated with this plan because we will Jeopardize losing some of our most loyal consumers by positioning ourselves more towards the higher ad revenue drivers. The $20 million incremental programming expense is another added possibility that could set the company up for failure. However, based on our analysis and forecasting, the benefits outweigh the potential setbacks as we will see an increase in average rating, CPM, and an almost 40% contribution margin (up 10% from 2006). Advertising revenue will increase because of the premium increase in CPM that women aged 18-34 wall erelong In T all I v nauseous out represent ten largest viewers for fashion). This plan is clearly more favorable than the second scenario hat left out the important segment including planners and shippers. While both scenarios provide substantial increases in net income, the long term growth associated with rating and ad revenue increase clearly define the third scenario as our focus. Implementation The largest challenge associated with this new marketing plan will be to keep our loyal consumers while also attracting the factionists and planners/ shoppers. In order do this we need to review past ratings from television shows, and find new time slots for these shows that are not in prime spots for the new programming. It is important to keep this in mind because although women aged 18-34 because of the CPM benefits, our past market currently makes up 67% of our total audience. We should study the plans of CNN and Lifetime, specifically their Fashion Today and Fashion Tonight shows. If we can gain a better understanding how they target women aged 18-34, and more importantly how their total audience of 43% comes from the premium CPM audience, then we could put ourselves in a more advantageous position amongst our competition. Lastly, we must find other ways to improve consumer interest, awareness, ND perceived value of The Fashion Channel. In order to do this I recommend a further plan to build brand recognition. This idea will build consumer loyalty and also bring our fans more emotionally connected to our brand and our company. I am proposing a plan that I anticipate will take about 6-8 months to roll out. Once we begin this new plan it will take another year to carry out the plan. I am proposing that we pick 12 destinations throughout the United States that are in the most popular fashion markets (Los Angles, New York, Chicago, etc.. ), and also base it on our most attached regions based on TV ratings. We will then come up with themes based on the locations and get our audience involved in our brand and show. Within six to eight months we should be able to pick out locations and venues for audience themed shows. We will be able to use our current programming to promote the upcoming audience experience which will not drastically change our incremental advertising expenses. I believe this plan coupled with the third scenario which will be rolled out incrementally, will provide the plan for The Fashion Channel moving forward.