Harvard Business Review – the Fashion Channel Essay Example

network, the network realized that it had to make changes. However, there was a concern that these changes could disappoint cable subscribers and potentially lead to a loss of distribution support. In addition, Wheeler had plans to create a segmentation strategy that would utilize various marketing tools, such as traditional and internet advertising, public relations, and promotions, to effectively reach target consumers with integrated positioning messages. TFC was projected to earn $230.6 million in advertising revenue in 2006.

The advertising industry's business model was established on the goal of attracting a diverse audience of both male and female viewers, as measured by ratings. TFC's Ad Sales team sold advertising spots to various consumer marketers, providing them access to these viewers. Wheeler was aware, thanks to industry studies, that in 2006, US consumer advertisers had spent nearly $20 billion purchasing slots on cable networks like TFC. Consequently, competition for ad revenue was consistently intense across all networks. Moreover, Wheeler had concerns regarding advertising pricing. The network determined ad unit prices based on several factors that were also monitored by advertisers, such as the number of viewers, the characteristics of the audience, and overall competitive trends. These prices were expressed as CPM (cost per minute), representing the amount an advertiser would pay for an impression or moment of viewing.

Networks with older audiences or lower family incomes had lower advertising rates. However, advertisers were willing to pay higher rates to reach certain groups, specifically men of all ages and women aged 18-34. The TFC Ad Sales team could increase CPM pricing by 25% - 75% by boosting ratings in these valuable demographic groups. By attracting a large number

of avid viewers, TFC had the chance to increase its advertising revenues.

Cable affiliate fees, which generated $70 million in 2006, were the second largest source of revenue for TFC. These fees were obtained through multi-year contracts signed with large multi-system operators (MSO), which specified the amount the networks would receive for each household that received the channel. The fee earned by TFC was relatively low compared to others in the industry due to its specialized niche content. Maintaining a high level of satisfaction among affiliates was crucial for TFC. However, there was not much room for growth in cable affiliate revenue as TFC had already reached maximum penetration among available cable options and opportunities to increase fees were limited.

Two major competitors of TFC, CNN and Lifetime, had higher ratings compared to TFC. While CNN and Lifetime scored well, TFC only managed to generate consumer interest in viewing. These ratings are taken into consideration while determining the payment to be made to each network and also in deciding where to position the network within their consumer offerings. The cable operator had to provide service packages that would appeal to home consumers and justify the monthly cable fee. Wheeler believed that TFC needed to enhance consumer interest, awareness, and perceived value. She also suggested that TFC could succeed in the market if it focused its marketing programs on the appropriate consumer segmentation.

Wheeler is also worried about consumer research. TFC possesses documents that include the key points of a nationwide consumer field study conducted by GFE Associates, a market research firm. GFE Associates had to organize the results into attitudinal clusters. To accomplish this, they utilized a sophisticated

statistical correlation program to analyze how consumers answered all 100 questions and identify patterns. The report indicated the existence of four distinct groups of viewers: Fashionistas, Planners & Shoppers, Situationalists, and Basic. Wheeler also identified several potential multi-cluster schemes.

Wheeler had presented three alternatives to the company as the best ideas for increasing TFC advertising and ratings.

Alternative 1:

Target a cross segment of Fashionistas, Planners, Shoppers, and Situationalists. By investing in a significant marketing and advertising campaign, along with programming, it is reasonable to expect an increase in awareness and viewership of the channel, resulting in a 20% boost in ratings. However, Ad Sales predicted a 10% decrease in CPM to $1.0 if the current audience mix remained the same. Implementing a broad multi-cluster strategy might not yield an audience different enough to avoid this potential decline.

Alternative 2:

Concentrate more on targeting the Fashionistas.

This paragraph highlights the importance of targeting the highly valued 18-34 female demographic, which represents only 15% of households. While focusing on this segment may result in a drop in viewers, it also strengthens the audience's value to advertisers and may lead to an increase in CPM.

Alternative 3 :

The suggestion is to focus on two segments: the Fashionistas and the Shoppers/Planners. This dual targeting strategy aims to increase average ratings over time to 1.2, potentially achieving a CPM of $2.50.

For this scenario, she would need to allocate an extra $20 million towards programming in order to cater to both segments. After evaluating all the options for improving TFC ratings and attracting advertisers, our recommendation is that TFC

should prioritize customer intimacy by creating programs that viewers want to watch. This approach has the potential to increase ratings and generate profit. Among the three scenarios mentioned, the third option - focusing on the Fashionistas and the Shoppers/Planners - emerged as the best alternative.

The combination of both clusters would attract more advertisement buyers. With a total size of 50%, TFC can still focus and attract many viewers. Although the cost is substantial, the result would drive their ratings up to 1.2 with a potential CPM of $2.

TFC needs to attract more consumers by enhancing their programs to be both current and engaging. By staying up-to-date with the latest trends, TFC can better meet the demands of their customers.