The Fashion Channel Analysis
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Define the segmentation scenarios considered by Dana Wheeler and discuss the pros and cons of each scenario.
The first scenario focuses on a broad segment of the market (Fashionistas, Planners and Shoppers, and Situationalists), representing 80% of households. This segment is slightly female dominated (53%), participates in fashion on a regular basis, enjoys shopping, and is interested in product value. The main advantages are a better alignment with the current TFC strategy, a rating increase by 20%, and low incremental programming expenses. However, the main drawbacks are keeping a very broad positioning and a continued risk of competition, especially with CNN. Also, a CPM decrease to $1.80 would result in a decrease in NI Margin compared to 2006.
The second scenario targets the Fashionistas segment, which represents 15% of households and it is primarily comprised of females between the ages of 18-34. This group has enough purchasing power and enjoys shopping, fashion, and staying up to date with fashion trends. The benefits of this scenario are targeting a small segment of the market, which would appeal to advertisers to sell content, an increase in the average CPM by 75% to $3.5 and in net income by 62% to $151.5 million. Yet, it would imply reducing ratings by 20%, facing new programming investments of $15 million, confronting high disruption from TFC Management, and potential competition from Lifetime.
Finally, scenario 3 focuses on a dual market, the Fashionistas and the Shoppers/Planners, representing 50% of households. This group is mainly composed of females (55%), customers between 18 and 34 years of age, and 6% of households with income higher than $100,000. Customers are fashion-oriented and enjoy shopping. The main advantages are an increase in ratings by 20% and CPM by 25%. Also, by targeting these two segments, TFC will fit the needs of cable providers as it targets the right audience and differentiates itself from the competition. However, this scenario would suppose a high level of opposition from Management and a need for investing an additional $20 million on programming investment.
What is the expected financial outcome of each targeting scenario?
Financial outcome:
Personal analysis from Business Case Exhibits:
3. Based on your analysis, make a final recommendation to Dana Wheeler. What segment(s) should the Fashion channel target? Why?
I recommend targeting the dual market of Fashionistas and Shoppers & Planners from the third sce-nario because it would result in a better financial performance compared not only to the market situa-tion in 2006, but also to the remaining two scenarios.