The Fashion Channel
After reviewing firm and market data pertinent to the Fashion Channel, Dana Wheeler compiled four distinct market segments that the channel appealed to. These were fashionistas 15%, planners + shoppers 35%, situationalists 30%, and basics 20%. These are also listed in decreasing order of involvement in fashion. Currently the marketing strategy of TFC involved almost no segmentation and used the original plan that brought TFC much success by appealing to the largest and most broad viewer base possible. Due to increasing competition from non-dedicated fashion networks i.e. (CNN, Lifetime) it was decided a new marketing strategy must be implemented in order to remain the leader in fashion programming both by ratings and advertising revenue.
Wheeler designed ...view middle of the document...
80. This approach would also no require any additional programming costs because of its multi-segment strategy. This strategy is projected to decrease the profit margin from 30% to 29%.
The second scenario is the more targeted approach that focuses on the smallest, but highest involved in fashion segment, the fashionistas. Fashionistas account for only 15% of total viewers so a ratings decrease to 0.8% However this segment is also provides the highest value to advertisers and could increase CPM to $3.50. This would also require additional programming of $15 mil to satisfy the fashionistas’ demand. This scenario is projected to increase profit margin from 30% to 37%.
The third and final scenario Wheeler proposed was to dual target the fashionista and planners + shoppers segment, who together make up 50% of the viewing population and represent the two segments most involved with fashion. This is projected to increase ratings to 1.2% and CPM to $2.5, but also increase additional spending on programming by $20 million. This option is projected to increase the profit margin from 30% to 39%.
After reviewing the data from Wheeler’s projections and suggestions I would make a suggestion that TFC take option three, the dual segment targeting approach which targets fashionistas and planners and shoppers. This approach in contrast with the other two scenarios would increase both CPM and ratings because the viewers targeted makeup 50% of the viewing population and also they are the most interested in fashion. This leads to the 9% increase in profit margin projected by Wheeler’s model. When compared to the other scenarios this is the most palatable because it not only boasts the highest increase in profit margin but also it is the only scenario that is projected to increase viewers and average CPM which will lead to the most future growth.