Paper 1

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The Fashion Channel:

Strategic Marketing Alternative Analysis

Huddleston, Joseph
Jachino, Jared
Larson, Eric
Nguyen, Aerie
Rotherham. John

Situation Analysis
The senior management team at The Fashion Channel has to decide what customer segments/clusters to direct their new marketing strategy in order to increase company revenue. The company operates in a very niche market of TV content and is beginning to face stiff competition from new fashion programming on CNN and Lifetime. The Fashion Channel needs to focus on how it can increase their market share of fashion programming while at least maintaining or increasing its satisfaction level. Maintaining or increasing this satisfaction level is important for keeping its affiliates satisfied, who ultimately decide whether to carry the channel’s content or not. Since it would be difficult to raise the fee charged to its affiliates the two primary factors that impact could impact revenue were increasing advertising revenue and increasing viewership/ratings. These two factors are center around which set of customers The Fashion Channel will direct its new marketing strategy.
Alternative 1: Target – Women, particularly the premium 18-10-34 year-old demographic
Description
This alternative targets at all segments that include women aged between 18-34
Delivering a ratings boost of 20% (from the current 1.0 to 1.2)
Decreasing CPM Ad price to $1.80
No additional cost for investing in new programming
Advantage
- Net income will reach $40,268,068 more compared to 2007 base net income, with a profit margin of 29% (Appendix 1)
TV Rating increase 20% (1.0 to 1.2)
Reaching all 100% women from 18-34
No additional cost for investing in new programming
Disadvantage
CPM decrease 10% ($2 to $1.8)
That means that they will not change the current business strategy, thus the current situation won’t get any improved. It also means that their competitors, CNN and Lifetime, will continue to getting the premium CPM
Alternative 2: Target– the Fashionistas
Description
This segment was strong in the highly valued 18-34 female demographic, represents 15% from total households
Driving the ratio to 0.8
Increasing CPM Ad price to $3.5
Investing in new programming costing additional $15 million
Advantage:
Net income will reach $96,855,744 more compared to 2007 base net income, with a profit margin of 37.5% (Appendix 1)
CPM increase 75% ($2 to $3.5)
Targeting 30% of US TV Households, of which females are 61% of viewership, 30% have income greater than 100k and 50% are between 18-34.
Target group is HIGHLY concerned with fashion and finds it as entertainment.
Disadvantage
Cost $15 million for new incremental programming
Very target specific marketing plan with a smaller segment therefore would lead to a drop in viewers
TV Rating decrease 20% (1.0 to 0.8)
Average viewer decrease from 1100 to 880
Alternative 3: Target two segments – the Fashionistas and the Shoppers/Planners
Description:
Driving rating to 1.2
Increasing CPM Ad price to $2.5
Investing in new programming costing additional $20
Advantage:
Compared to 2007 base date (can be found in the excel spreadsheet), it will generate almost $114.2 million more in terms of net income ($168.8 - $54.6 million), and a profit margin of 39% (Appendix 1)
TV Rating increase 20% (1.0 to 1.2)
CPM increase 25% ($2 to $2.5)
Targeting 50% of US TV Households, of which 61% female and 50% of them are 18-34 age. Thus it helps reduce the risk of focusing on one target group.
Disadvantage
Cost the most to operate compared to other alternatives - $20 million cost for new incremental programming
Possibly lose loyal customers if they are not included in these segments. Thus the rating could be reduced.
Suggested Solution
After analyzing and reviewing our three alternatives, we have decided to pursue Alternative #3, setting our marketing target on two different segments, the “Fashionistas” Segment and the “Shoppers/Planners” segment. The Fashionistas segment is very
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