Situational and SWOT Analysis
The Fashion Channel is a network dedicated to fashion twenty-four hours a day, seven days a week. Since it was founded in 1996, it has successfully achieved profit growth above the industry average rate and steady revenue. TFC reaches more than 80 million households in the United States, and targets a wide variety of demographics, specifically, viewers between the ages of 35 and 54.
Impressed by The Fashion Channels’ success, other markets such as CNN and Lifetime started adding fashion related programming to their networks, becoming a threat to TFC. Currently, TFC customers’ satisfaction is low and revenues are projected to decline. The Fashion Channel must ...view middle of the document...
Assumptions and Missing Information
We can assume that the Fashion Channel will remain the sole provider of fashion programming, twenty-four hours a day, seven days a week. From viewer demographic data and competitor comparison, TFC is at the bottom compared to CNN and Lifetime. The average rating is 1.0 compared to 3.0 and 4.0 from the others. It is clear that there were no marketing strategies established within the network, which caused loss of awareness from the viewers.
In addition, advertising popularity is dramatically declining and it is projected to affect them by almost $27,000 million from the previous year. Therefore, this will cause ad sales commissions to decline as well. If actions aren’t taken soon, TFC profit margin will drop from 30% to 19%, causing a major loss of profit in the company.
Statement of the Problem: Which consumer segmentation(s) strategy would TFC target in order to increase revenue growth?
Evaluate Alternatives and Recommendation
Alternative #1: Target female segments (Fashionistas, Planners/Shoppers, and Situationalists) within the 18 to 34 year old demographic.
In this alternative, a major investment would be made on marketing, advertising and programming to increase viewers’ awareness and would increase ratings up to 20%. The average of viewers (thousand) would increase from 1,100 to 1,350 and around $18,450,000 of ad revenue would be generated for the year. However, if the current audience mix stays the same, we could forecast a decrease in ad sales of 10% to $1.80.
Financially, an increase of 3% in operating costs for the next year is forecasted, which is equal to $72 million in operating expenses. There is also an estimated expending of 15 million on marketing and strategy to create viewers’ awareness. The cost of programming will remain the same as in the current year. The total margin forecasted for this alternative will have an increase of 29% in total margin.
Based on the previous SWOT analysis, there are some benefits from this alternative. The fashion channel would increase its target audience to include the 18-34 year old demographic along with its current target of 35 to 54 year olds. In addition, specific target segmentation will be clearly defined to develop further marketing strategies. Although viewers’ ratings would increase by choosing this strategy, advertisement companies would not pay more for advertising on the network. Moreover, the threats from other competitors will remain since they will continue to penetrate premium segments that would effect TFC pricing advertisements.
Alternative #2: This strategy focuses more on female Fashionistas from the 18 to 34 year old demographics.
Fashionistas represent 15% of overall household viewers. This strategy might lead to a drop in overall ratings; however, this alternative will increase advertising value, and may lead to an increase in CPM from $1.80 to $3.50.
Financially, if the average CPM increases to $3.50, it will generate $115...