The Fashion Channel Case Study

The Fashion Channel Case Study

The Fashion Channel (TFC) is feeling competition from CNN and Lifetime in its core business.  To better compete and maximize ROI for their shareholders, they should shift their target marketing from women 35 to 54 years of age to the more desirable target of women 18 to 34 years of age.   For TBC, revenue is based on advertising ($230.6 MM in 2006) and cable affiliate fees ($80 MM in 2006).

Of the 3 scenarios outlined below, the recommendation is to select Scenario #3 that targets 2 viewers segments, which have large concentrations of the desirable 18 to 35 year old segment.  This scenario has the largest return of the 3 along with a greater margin.  By targeting more than one segment, TFC mitigates some risk of a single target segment.  It also seems unlikely to negatively impact the relationship with cable providers.  

TFC developed 3 possible marketing scenarios targeting the 3 of 4 basic groups of Fashionistas, Shoppers, and Planners.  We decided the “Situationalists” were not worthy of much effort.   By looking at the strategies, the target markets, expected revenues and costs, we can best plan what TFC should do.

The basics outlined in the case are as follows:

Scenario #1 – Broad Appeal = targets all 4 segments and increase awareness and viewing ratings by 20%.  Ad sales forecast would decrease by 10% due to a drop in the CPM to $180.

Scenario #2 – Fashionistas = Focus on the single most desirable target segment but also smaller segment.  This would lead to an estimated overall 0.8 drop in ratings but an increase in the CPM to $3.50.  This would also require new programming of $15 MM.

Scenario #3 – Fashionistas & Shoppers/Planners – Targeting of the most involved viewers.  It would drive ratings to 1.2.  The CPM would increase to $2.5 but would require and additional spending of $20 MM.  

Appendix 1

To better decide which strategy to take, a basic revenue and financial statement was developed.  It takes into account overall costs and changes in revenues.