The Fashion Channel Group Written Assignment

The Fashion Channel Group Written Assignment

1. Briefly describe TFC’s customers. Make sure to think of all customer types TFC has. (10 pts)

An average 1,100,000 people are watching TFC at any point in time. Most of TFC’s customers are women ages 35-54. TFC has four groups of viewers: Fashionistas, Planners & Shoppers, Situationalists, and Basics.

Fashionistas

Fashionistas constitute the smallest group of viewers (15%). They consist of mostly females with a high degree of interest in fashion and a higher income level than the other groups of viewers. Fashionistas believe fashion is entertaining, they anticipate trends, stay up to date on new trends, enjoy shopping, and they develop fashion expertise to share.  

Planners & Shoppers

Planners & Shoppers are the largest group of viewers (35%). They are characterized by participating in fashion on a regular basis. Furthermore, they think fashion is practical, and they are interested in value. More than half of this group are women.

Situationalists

Situationalists are the second largest group of viewers (30%), and they only participate in fashion for specific needs. This group includes both females and children in households.        

Basics

Basics constitute 20% of the cluster and include both men and women who have an unengaged involvement in fashion.

2.  Describe some of TFC’s direct, indirect, and potential competitors. (10 pts)

Direct competitors         

TFC’s direct competitors would include other fashion channels or specific fashion programs on TV networks. Direct competitors could be CNN Style, Lifetime’s fashion programs or E! Entertainment because they offer corresponding services on the same platform.

Indirect competitors

TFC’s indirect competitors use different platforms (e.g. online media) to share similar fashion content. Indirect competitors could be fashion bloggers, YouTube fashion channels, magazines, or other fashion websites.

Potential competitors             

Potential competitors have not yet entered the TV channel market but could easily do so. Potential competitors could include Vogue, ELLE or other brands offering fashion content.

1. What is the expected outcome of each of the targeting scenarios? Complete both the Ad Revenue and Financial calculators in the enclosed Excel file to answer this. Note that the 2007 base numbers relate to the assumption that no segmentation happens and TFC will have to drop ad unit pricing (average CPM) to $1.80 (page 6). The Mktg & Advert number in Exhibit 5 is $60 million in each year after 2006. (30 pts)

We emailed our spreadsheet on October 11th.

1. Consider three pros and three cons for each of the targeting scenarios. What scenario would you recommend and why? (20 pts)

The Fashion Channel introduced three targeting scenarios. The first targeting scenario includes targeting the Fashionistas, Planners & Shoppers, and Situationalists attitudinal cluster because they include the premium segment of women, ages 18-34. A pro of this scenario is TFC expects viewing and awareness of this channel to increase and produce a rating boost of 20%. In addition, no incremental programming costs are associated with this targeting scenario; whereas, scenario two and three require significant incremental programming costs. Another pro of scenario one is it includes targeting a premium demographic of women ages 18-34, which can increase advertising sales and CPM (Cost Per Thousand).

However, there are cons associated with targeting scenario one. For instance, a wide multi-cluster strategy may not produce a different enough audience to avoid the 10% decline in CPM forecasted by Ad Sales. In addition, scenario one yields the lowest projected ad sales due to the decreased CPM of $1.80. Last, of the three scenarios, scenario one yields the least estimated net profits and profit margins.

The second targeting scenario was to focus marketing and advertising efforts on the Fashionistas attitudinal cluster. A pro of this strategy is that they are targeting a premium demographic of females ages 18-34. Also, this strategy estimated CPM to increase to $3.50 because the audience includes young females interested in fashion, which are valuable to advertisers. In addition, this strategy yields significantly higher ad sales and net profit than scenario one.

A con associated with this strategy is that it might lead to a drop in viewers and ratings because the fashionistas segment is the smallest of the four segments, and it represents only 15% of households. Dana Wheeler from TFC estimates that this strategy will result in a 20% decline in average rating to .8. Another con is that they need to develop new programs to attract this target audience. Wheeler estimated that they will need to spend an additional 15 million dollars each year on programming under this strategy. Last, net profit and ad sales under scenario two are lower than in scenario three.

The third targeting scenario includes targeting two attitudinal clusters, Fashionistas and Shoppers/Planners. A pro of this strategy is an estimated increase in average rating to 1.2 because TFC is targeting two segments simultaneously. In addition, CPM is expected to increase to $2.50 from targeting two segments. Another pro of this strategy is that it yields the highest amount of ad sales and net profits of the three scenarios.

A con of this strategy is TFC must invest in additional programming to attract these segments which will cost 20 million dollars each year. Another con of this scenario is CPM is lower than in scenario two since they are not solely targeting young women fashionistas, a valuable segment. Also, because the two targeted segments do not target males it allows competitors, like CNN, to enter the market and target this segment.

1. Assume Wendy Styles is a 28 year-old fashion TV viewer whose fashion channel attitudes are based on the following attributes and their weights: content’s artistic quality = 6, trendiness of featured fashions = 5, prime time lineup = 4, variety of celebrity fashion shows = 3, relevant advertised products = 2, and availability of other news content = 1. The table below describes Wendy’s perceptions of several competing networks on these dimensions:

What channel will Wendy choose under the following decision models (show your work):

(a) Expectancy-value (i.e., multi-attribute) model

(b) Conjunctive heuristic (minimum cut-off point for all attributes: 3)

(c) Lexicographic heuristic

What is the implication of the results in (a) through (c) for The Fashion Channel? (20 pts)