A key factor involved in The Fashion Channel’s success as a network was its role as the sole 24/7 all-fashion network. Broad segmenting (including a wide age range for the marketing demographics) also contributed to its success, with the station experiencing steady profit growth each year since its origination in 1996. Recently, however, CNN and Lifetime created competitive programming by implementing 30 and 60-minute fashion shows interspersed within their regular show lineup. Since its inception, TFC (The Fashion Channel) has promised its followers a focus on fashion 24 hours a day, providing fashion expertise for men and women of all ages with a vision of “Fashion for Everyone.” TFC’s current goal is to maintain its market leader status with competitive ratings, advertising, and cable affiliations by adjusting its strategy in response to the new competition.
TFC’s broad base marketing strategy has proven profitable particularly for the segment of women from ages 35-54, which include 45% of TFC’s viewers. It has experienced constant revenue and profit above industry average. Even after competitors entered the market, TFC maintained its monopolistic grip as the sole 24/7-fashion network. Although, perceived consumer satisfaction is in favor of other fashion alternatives and if left unexamined could result in the increased depreciation of consumer satisfaction for TFC.
Alpha Research Study on Customer Satisfaction with Cable
Networks (Scale=1-5)
|
|
CNN
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Lifetime
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The Fashion Channel
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Consumer Interest
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4.3
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4.5
|
3.8
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Awareness
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4.6
|
4.5
|
4.1
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Perceived Value
|
4.1
|
4.4
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3.7
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Problem Statement
Even though TFC has maintained its position as a market leader, experiencing constant profit through competitive ratings, advertising and cable affiliations, undesirable market outcomes are likely to ensue if their marketing strategy is not modified. For much of its history TFC has had the advantage of being the only network dedicated exclusively to fashion and therefore early marketing plans did not necessarily need to recognize the most profitable viewer segments. Now that the fashion programming industry is growing and competition is increasing, TFC needs more than just its “Always on, fashion for everyone” strategy to retain its desired position. Given these circumstances, newly hired senior VP of Marketing, Dana Wheeler, has outlined three alternative strategies in order for TFC to maintain its market position.
From a statistical analysis of
TFC’s consumer demographics by a well-regarded market research firm, GFE Associates,
Dana Wheeler noted four different groups that made up TFC’s audience;
Fashionistas, Planners & Shoppers, Situationalists, and Basics. From her
analysis she felt that women aged 18-34 should be the premium target
demographic because of their significant influence on ad revenues and cable
affiliations.
This superior demographic is
present in all four research clusters so for her first recommendation she upheld
the broad “Fashion for Everyone” advertising approach. She assumed it would be
reasonable to expect that awareness and viewing of the channel would go up and
deliver a ratings boost of 20%. The flip-side of continuing an expansive
strategy, she postulated, would result in a 10% drop of CPM advertising
revenues since the multi-group plan might remain unappealing to the most
valuable consumer demographics; Women aged 18-34 & men. This option
generates an average rating of 1.2% and a margin of 28.7%. Although this
formula may indirectly dismiss target consumers, the viewer demographic who
made TFC what it is today (Women aged 35-54) would remain intact.
Her second recommendation, rather
than a comprehensive multi-group approach, focuses more on one particular
group, the Fashionistas. This was the group in which women aged 18-34 were most
prevalent. Though its volume smaller
than other groups, representing 15% of households, their value to advertisers
could increase CPM for advertisers by $1.50 and generate a margin of 37%. Wheeler
also recommends that an investment in innovative programming is also necessary
to appease this new, highly-valued viewership. Although, solely targeting this
relatively small niche might lead to a drop in total viewership which would
negatively affect ratings and cable affiliations. Along with the costs of
programming investment, which Wheeler estimated at $15 million per year, the
risk of decreasing viewership by alienating TFC’s most loyal viewers (Women
Aged 34-55) could come at a greater cost to the network than the ad revenue
generated from new viewer demographics.
Wheeler’s third alternative is to
target two consumer groups instead of only one or all. She recommended
targeting the Fashionistas as well as the largest group of households,
Shoppers/ Planners. Women aged 18-34 made up one quarter of the Shopper/Planner
group. This dual marketing, she estimated, would increase average ratings to
1.2% and CPM for advertisers to $2.50. This scenario would also require an
additional $20 million in programming investment to ensure that programs were
geared towards new, younger female viewers.
Recommendations
We
recommend pursuing Wheeler’s third alternative but with a slight twist. Although
Lifetime and CNN have fashion programming aimed at TFC’s target consumers group
it would be irresponsible to totally abandon the viewer demographic that
enabled TFC to post consistent revenue growth since its beginnings. As their
competitors only have fashion programming during certain time slots, it would
be most cost effective to invest in marketing and innovative programming during
these periods. Relatively sub-par programming although, could seriously damage
the reputation of TFC across new and old demographics therefore decreasing
total viewership. As well altering the “network identity” during these time
slots could repulse traditional viewership but absorb the most valuable viewer segments
from competitors and offset these losses to enable TFC to maintain its
competitiveness among fashion programming. Also, this strategy generates an
average rating of 1.2% and the highest margin of 39%.
