The Fashion Channel was founded in 1996 as the first TV cable network devoted solely to fashion. From 1996 until 2006 The Fashion Channel experienced constant growth well above the industry average. The cable channel was seen by almost 80,000,000 US households, with women between 35 and 54 years old being their most popular group of viewers. Its theme has always been “fashion for everyone”, following an undifferentiated market strategy. While this strategy has worked well for The Fashion Channel in the past that has been mostly due to the fact that it had no competition.
It’s much easier to operate with an undifferentiated marketing strategy when you’re the only one offering your product. Since that time some of the major networks have taken notice. Both CNN and the Lifetime Channel have launched fashion related programming blocks that offer stiff competition for The Fashion Channel. Because CNN and the Lifetime Channel already have a large following and have built a name for them, it’s much easier for them to attract viewers for fashion programming that it would be for smaller networks to draw them away.
Jerry Thomas the founder and CEO of The Fashion Channel , along with many of the senior management team recognized this threat. As a result, Dana Wheeler was brought in by The Fashion Channel in July 2006 as to senior vice president of marketing. Our first task was to develop a marketing strategy to stave off these competitors and help continue their success. But not all of senior management was looking for a change. Dana Wheeler was going to have to come up with a marketing strategy and convince everyone to get behind it. Some of the research commissioned by Wheeler showed that The
Fashion Channel had for unique groups of viewers: Fashionistas, Planners and Shoppers, Situationalists, and Basics, (Stahl, 2007). The two most interesting and promising segments are the Fashionistas and Planners & Shoppers. The Fashionistas, being actually a smallest size of US television viewers (only 15%), are made up of 61% female between the ages of 18 and 34, a relatively high level of income, and a very high level of interest in fashion. The Planners & Shoppers make up about 35% of US television viewers are 53% female and also have a relatively high interest in fashion on TV, (Stahl, 2007).
Wheeler had o Attract enough viewers with the content of the channel to attract advertisers and negotiate a high fee with the cable operators. In order to do that, she will need to come up with a marketing strategy to attract the type of viewer that is most likely to purchase fashion products from their advertisers. Dana Wheeler came up with three different options, (four if you count doing nothing). The first alternative would be to focus on the broader appeal across the segments of the Fashionistas, Planners and Shoppers, and Situationalists.
Instead of focusing on all of these three segments, the focus would be cross these three, but more toward the women in the 18 to 34 year age demographic. Total awareness of the channel would go up in a ratings boost could go up to 1. 2, but because ad sales forecasting a 10% drop, the CPM would fall to $1. 85. The second alternative would be to focus mainly on the Fashionistas. This may result in a drop in viewers, but the value of the audience could result in a much higher CPM. Wheeler estimated that this strategy could deliver a rating of 0. 8, (Stahl, 2007). In a CPM projected to be about $3. 0. This would cost an additional $15 million per year, creating new programming to attract and retain the interest of the segment in additional marketing to target the segment. A third alternative would be to target both the Fashionistas and the Planners & Shoppers. Her estimate showed that targeting both of these segments would drive the ratings to 1. 2 the potential CPM of $2. 50. However, it would cost an additional $20 million, $5 million more than the second alternative, to develop programming and advertising to target both of these markets. Conclusion
Based on The Fashion Channel’s estimated financials for 2006 and 2007, from Exhibit 4 and 5 in Stahl’s HBR article, I have created two spreadsheets, considered in appendix 1. The calculations indicate that continuing the undifferentiated marketing strategy would result in a 1% decline in profits. However, that goes on the assumption that the competing networks will not continue to erode the market for The Fashion Channel. In all likelihood the 1% decline is a best case scenario. The first alternative shows a 3% increase in profit margin for almost an additional $10 million, with no additional outlay in marketing or programming costs.
The second alternative, focusing mainly on the Fashionistas, projects a healthy profit increase of $70 million a year, even though it requires $15 million a year increase in marketing and programming costs. However, it ignores the possibility of alienating the substantially large demographic of the Planners & Shoppers. Retaining this demographic could improve the odds of increasing profits even further in the future. I don’t believe this could be said for the Situationalists, and Basic demographics. The third alternative would produce a net income of $ 183,867,232 a 41% margin. With dual targeting, the ratings would increase to 1. %, as in the first alternative, but due to a higher value customer the CPM has a potential of $2. 50. The strategy focusing on only the Fashionistas could bring a CPM of $3. 50, the ratings would likely fall to 0. 80 with an additional $15 million investment per year in new programming and to retain segment interest. My recommendation would be to choose the third strategy, taking the multiple segmented approach, catering to both the Fashionistas and the Planners & Shoppers. The multi segment strategy also diversifies the firm’s risk, building a strong reputation among these customer groups, (Kotler & Keller, 2009).