The memorandum recommends TFC to target two segments- the Fashionistas and the Shoppers/Planners. This is the most profitable decision since it would increase the rating to 20%, CPM to 25% and margin to 37%.
In order to generate a revenue of $230.6 million, TFC has to increase viewership ratings and advertisement pricing. The two segment approach increases the spending by 20 million which is risky. However, the findings suggest that TFC will earn the highest profitability with this approach (refer to Appendix). At present TFC’s rating is low compared to CNN and Lifetime, the new strategy will target the age group of 18-34. While targeting this new segment the channel will have to be tactful and avoid losing their most loyal viewers of age 35-54.
TFC can invest in promotional activities through various social media, fashion shows and free vouchers, free consultations etc. Heavy promotions will be costly but the company will connect with the viewers and create loyalty. At present, the competition from CNN and Lifestyle is extensive but, TFC also has the strength to fight back. With the comparative advantage of the channel being aired 24/7, TFC can air programs according to the different age groups at different peak times.
The organization will undergo through various changes which may not be favored by others since the channel already caters to 80 million households. The strategy is to opt for detailed segmentation, branding and positioning that will make TFC stronger in front of the competitors. TFC has to get back the viewers from CNN and Lifetime. There are two other options available to the channel as a contingency plan.
Scenario 1, suggests to target a larger segment of Fashionistas, Planners/Shoppers and Situationalists (refer to Appendix). This strategy will increase the ratings and keep the costs low but, the CPM will still be the same and there will be no segmentation of the market. Eventually, the competitors will target the potential audience and TFC will fail to differentiate its market segment. The limitations of approaching this plan is that the CPM would decline by 10%.
Scenario 2, recommends to adopt a multi-segment approach which targets the Fashionistas. This segment represents only 15% households and may lead to loss of other potential viewers. The small segment would generate the highest CPM but the lowest rating and is not as profitable as the two-segment approach.
With two- segment approach the channel will target a different segment where teenagers and women are more conscious about fashion. Promotional activities of 20 million will pay off if TFC organizes fashion shows in major shopping malls, tours and CSR. Use of Facebook, Pinterest, and Instagram will attract the younger customers who are more active in social media.
Thus, the findings show the best strategy for the channel is to target the Fashionistas and Planners/Shoppers because TCF will reach the margin of 40%. TFC has to target this age groups, also retaining its existing viewers. This will minimize the risk of the plan failing and also target a greater segment.
TFC’s rating in context of viewers, perceived value and awareness is declining compared to its competitors.