Summary of the Case
The Fashion Channel (TFC), a successful cable TV network channel 24 hours a day and 7 days a week, exclusively dedicated to fashion. Founded in the year 1996.
It reached almost 80 million American households who were subscribers to cable and satellite (110 million TV households in the United States. Of these, approximately 70 million were paid to a cable TV service). According to the demographic core survey, their public was composed of women between ages 35 and 54.
In 2006, other channel companies began broadcasting fashion spaces in their channels.
It was facing an escalated competition from the cable channels CNN and Lifetime, which the survey Alpha research study on customer satisfaction showed TFC was not performing well. Leading to the risk of being offered in less appealing packages, which could mean it would be seen in fewer households.
Secondly, TFC had no particular segment of viewers. Their marketing strategy was directed to the widest possible group to achieve the highest levels possible audience. With their motto: "Fashion for All." So, TFC had grown without any detailed segmentation strategy, brand or positioning.
This lack of direction of target market, made it difficult to know which marketing action plan to take, which could also obstruct the growth of the company.
Based on the customer and market data, TFC largest and current customer base are females between the age of 35 and 54 (representing 27.45% of the viewers). While, their ideal targeting groups are slightly younger females from the age of 18 to 34, which they only make up for 20.13% of the viewers. Generally, this group likes to follow the way celebrities dress. Information about discounts in fashion stores and fashion recommendations are valued as well by this age range. However, it should be noted that their income might be lower compared to other age ranges. On the other hand, male viewers could also represent an interesting customer base for the channel. Males nevertheless, focus more on new designs, and brands. Different to young females, males can be less sensitive to price.
Unfortunately, TFC has the lowest market share with only 1.1M households (representing 1% of the market share). Besides, the biggest customer bases for Fashion Today are females ranging from 18 to 34 years old representing 27.09% of their viewers. They represent a big threat for TFC as the later might profit by targeting this age range in the future. On the other hand, Fashion Tonight from CNN especially targets male customers. Therefore not surprising, males represent 45% of their viewer’s base. Both Fashion Today and Fashion Tonight also have a larger customer base than TFC, which are 3.3M and 4.4M respectively.
In order to change the current situation, Jared Thomas, founder and CEO The Fashion Channel, hired Dana Wheeler, which came up with three alternatives:
First, is to preserve a multi-segment of Fashionistas, Planners & Shoppers and Situationalists. The advantage of this scenario is the increase in net income partially because no incremental costs would be incurred. At the same time, TCL could also target the 18-34 age groups. However, the (CPM) will be $0.2 lower than 2007. Also, in this scenario, no clear targeting group would yet arise.
The second situation is targeting the segment of Fashionistas. The tighter segmentation will put the company in a disadvantage situation with a 0.8% decrease of its market share (0.88M). It also requires an incremental cost of $15 million.
Finally, the risk exists that a large part of the current viewers wants might not be met by this differentiation as programs might be seen as to “professional” or “distinct.” However, buying power in this group is high and (CPM) will go up to $3.5 resulting