Fashion Channel Case Analysis

This case write-up was for a Principles of Marketing class in the Olin Business School. It is based on a fictitious channel, called The Fashion Channel.

Background

The Fashion Channel is a network that has traditionally experienced full market share of fashion television. With the addition of competitive programming and increasing advertiser interest in targeting specific demographics, The Fashion Channel has to either undergo changes in its marketing strategy, or risk losing their advantage in the market they pioneered.

Recommendation

My recommendation has four parts. The first is to target fashionistas and planners/shoppers through TFC’s programming. The second is to conduct more market research to look into additional habits and preferences in target markets and average households. The third is to consider alternative advertising approaches that allow further advertiser integration into the network. My last recommendation is to create special programming events that will capitalize on media marketing and word of mouth advertising.

Basis for Recommendation:

Target Demographics: In my analysis of ad revenue, the most profitable option is to create programming targeting both fashionistas and planners/shoppers. This segmentation will lead to a net income of $183,867,232, compared to the current net income of $93,711,488. Programming would be focused on current fashion trends, ways to shop, and both value and luxury shopping and include the occasional celebrity focus to draw in younger demographics.

Market research: The current assembly of market research is enough to shape the future of The Fashion Channel, but not enough to dissect specifics within the fashionista and planners/shoppers segments. Further market research could look into what times different demographics watch television to see if splitting up fashionista and planners/shoppers programming into time slots would be profitable; how much of an influence celebrity presence has on ratings; whether viewers would react well to TFC switching to premium or on-demand; viewer reactions to alternative advertisement integrations; and more.

Alternative advertising: The Fashion Channel should conduct randomized control trials to determine how viewers respond to advertisements longer than 30-60 seconds, advertisement integration into fashion programming (ex: suggested buys), and advertiser-sponsored content (ex: a show looking into a specific retail company), in addition to other partnership advertising opportunities. TFC can differentiate their viewers’ fashion-watching experience and appeal for larger advertising revenues by altering the presentation of advertised content in ways that are more helpful or more engaging to the viewers.

Special Programming Events: Since TFC has been established for a while, a potential issue with TFC going forward is reluctance of the consumer to alter their perception of TFC in light of their changes. Through large-scale fashion programming events, such as coverage of fashion weeks, exclusive interviews with designers, live TV sales events with network advertiser partners, and more, The Fashion Channel can increase their viewership and call large media and consumer attention to the changes that TFC is implementing. This type of programming would also have the benefit of increased advertising exposure and free channel advertising on social media and news outlets.

Alternatives, Risks, and Assumptions:

An assumption inherent in these recommendations, especially to target fashionistas and planners/shoppers, is that the data that Wheeler collected is accurate and will remain true throughout the foreseeable future. A potential risk of these recommendations is that they are primarily cable-based. Because 33% of The Fashion Channel’s current viewers are under 34, more consideration should be given to alternative forms of programming, such as online and social media content and streaming distribution.

With the risk of losing viewers, TFC should also look into situationalist programming for non-primetime.

APPENDIX

Ad Revenue          
Category Current 2007: no action Target Fashionistas Fashionistas and planners Just additional advertising
Average Rating 1 1 0.8 1.2 1.2
Average Viewers (thousand) 1,100 1,100 880 1320 1320
Average CPM 2 1.8 3.5 2.5 1.8
Average Revenue/Ad Minute 2200 1980 3080 3300 2376
Ad revenue/year 230,630,400 207,567,360 322,882,560 345,945,600 249,080,832
Additional expenses 0 0 15,000,000 20,000,000 15,000,000
           
Estimated Financials 2006 Actual 2007: no action Target Fashionistas Fashionistas and planners Just additional advertising
Revenue          
Ad sales 230,630,400 207,567,360 322,882,560 345,945,600 249,080,832
Affiliate fees 80,000,000 81,600,000 81,600,000 81,600,000 81,600,000
Total revenue 310,630,400 289,167,360 404,482,560 427,545,600 330,680,832
Expenses          
Cost of operations 70,000,000 72,100,000 72,100,000 72,100,000 72,100,000
Cost of programming 55,000,000 55,000,000 70,000,000 75,000,000 55,000,000
Ad sales commissions 6918912 6227020.8 9686476.8 10378368 7472424.96
Marketing & Advertising 45,000,000 45,000,000 45,000,000 45,000,000 60,000,000
SGA 40,000,000 41,200,000 41,200,000 41,200,000 41,200,000
Total Expense 216,918,912 219,527,021 237,986,477 243,678,368 235,772,425
           
Net income 93,711,488 69,640,339 166,496,083 183,867,232 94,908,407

 

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