THE FASHION CHANNEL

Case Study

Cristian Rodríguez | Maria Santamaría | René Pfister | Isabel van der Walle I Santiago Riveros
STARTING POSITION
The Fashion Channel

Dana Wheeler enters to develop marketing and

TFC was a successful cable TV network brand-building programs to support TFC’s
dedicated solely to fashion 24/7 growth
TFC must change its performance, if not they
Revenues for 2006 were forecast at will face at least a 10% drop in price for a unit
$310.6m
of advertising
Growth without any detailed segmentation, TFC had achieved a 3.8 rating on consumer
branding, or positioning strategy interest in viewing, behind its competitors

TFC was facing competitive dynamics that Dana knew that the channel had to build its
could affect their market share marketing programs around the right consumer
segmentation in order to win the market

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SWOT ANALYSIS
STRENGTHS: WEAKNESSES:

● TFC was the first 24/7 fashion channel ● No target audience → “Fashion for Everyone”.
● Only channel that broadcasts 24/7 fashion connected to ● Most of the management is unwilling to change to new
information and news. strategies
● TFC operating in a niche market ● Low average rating and low number of household viewers
● Low advertising fees and large number of viewers on as compared to competitors.
basic cable network ● No positioning of the chanel and segmentation
● TFC is the favorite channel of 15% of the cable ● •Neither positioning nor segmentation of the channel
customers
● A budget of $60 million is proposed for marketing
changes

OPPORTUNITIES: THREATS:

● New focused advertising strategy ● Competitors like CNN and Lifetime → attracting
● Identification and better segmentation of the target more viewers
groups ● Lack of reputation and awareness, which leads to
● TFC could increase ratings and number of household
viewers by realizing the new strategy
loss of market share and has a negative impact on
revenues and audience

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 CLUSTER
Comparison

Basics Fashionistas
• Fashion: Disengaged (50) • Fashion: Highly engaged (140)
• Demographics: • Demographics:
• Female 🡪 45% 15% • Female 🡪 61%
20%
• Male 🡪 55% • Income >$100 k 🡪 30%
• 18-34 years old 🡪 50%

Situationalists Planners & Shoppers

• Fashion: Participate for specific • Fashion: Participate on regular
needs (105) basis (110)
• 35% • Demographics:
Demographics:
30%
• Female 🡪 50% • Female 🡪 53%
• Children in HH 🡪 45% • 18-34 years old 🡪 25%
• 18-34 years old 🡪 30%

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 ANALYSIS
3 Scenarios

Scenario 1 Scenario 2 Scenario 3

Cross segment
Fashionistas, Planners & Fashionistas Fashionistas; Planners &
Shoppers, Situationalists Shoppers

Rating of 1.20% Rating of 0.80% Rating of 1.20%

Increase of 20% Decrease of 20% Increase of 20%

CPM $1.80 CPM $3.50 CPM $2.50

Decrease of 10% Increase of 75% Increase of 25%

Additional investment: Additional investment: Additional investment:

programming programming programming
$0 + $15 Mio. + $20 Mio.

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 REVENUE & NET INCOME
3 Scenarios

$450,000,000 $427,545,600 45% 2007 Base:No Targeting

$404,482,560 Scenario 1: Cross Segment
$400,000,000 39% 40%
37% Scenario 2:Fashionistas
Scenario 3: Fashionistas & Shoppers /
$350,000,000 $330,680,832 35%
Planners
$310,630,400
30%
$300,000,000 $289,167,360 29% 30%

$250,000,000 24% 25%

Focus on: Scenario 3
$200,000,000 20%
$168,867,232 Highest Margin: 39%
$151,496,083
$150,000,000 15% Highest Net Income: $169 Mio.
$93,711,488 $94,908,407
$100,000,000 10%
$69,640,339
$50,000,000 5%

$0 0%
2006 2007 Base Scenario 1 Scenario 2 Scenario 3

Total Revenue Net Income Margin

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Social media users in the United States by age group

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 RECOMMENDATION
• Social Media
– As the target group is younger (~18-34), highly visual sites such as Pinterest and
Instagram are a strategic option for TFC.
– These pages can have a positive effect through pins and posts and would get the
message across to fashionistas, buyers and planners

• Partnerships with fashion blogger and fashion websites

– By cooperating with fashion websites and fashion bloggers, TFC is able to inform those
customers who invest a lot in fashion directly with news about new programmes

• Digital Video Advertising

– This advertising channel enables targeted advertising

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 RECOMMENDATION
By Wendy Stahl

•The Scenario 3 will allow to get the highest margin and net income, key
points to persuade the member of the leadership team.
•Segmentation will give TFC the growth they are expecting, allowing to
concentrate the networks on the target: the key viewers.
• Invest in digital video advertising
• Strong social media campaigns
• Build up partnership with fashion blogger and fashion websites

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 APPENDIX 1
Table Exhibit 4

Exhibit 4: Ad Revenue Calculator

Ad Revenue Calculator        
  Current 2007 Base Scenario 1 Scenario 2 Scenario 3
TV HH 110'000'000 110'000'000 110'000'000 110'000'000 110'000'000
Average Rating 1.0% 1.00% 1.20% 0.8% 1.2%
Average Viewers (Thousand) 1'100 1'100 1'320 880 1'320
Average CPM* $2.00 $1.80 $1.80 $3.50 $2.50
Average Revenue/Ad Minute** $2'200 $1'980 $2'376 $3'080 $3'300
Ad Minutes/Week 2'016 2'016 2'016 2'016 2'016
Weeks/Year 52 52 52 52 52
Ad Revenue/Year $230'630'400 $207'567'360 $249'080'832 $322'882'560 $345'945'600
Incremental Programming Expense   $0 $0 $15'000'000 $20'000'000
          

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 APPENDIX 2
Table Exhibit 5

  2006 Actual 2007 Base Scenario 1 Scenario 2 Scenario 3 Assumptions

Exhibit 5: Financials          
Revenue          
Ad Sales $230'630'400 $207'567'360 $249'080'832 $322'882'560 $345'945'600 Insert scenario results from revenue calculator
Affiliate Fees $80'000'000 $81'600'000 $81'600'000 $81'600'000 $81'600'000 Grows 2% per year with population
Total Revenue $310'630'400 $289'167'360 $330'680'832 $404'482'560 $427'545'600
          
Expenses          
Cost of Operations $70'000'000 $72'100'000 $72'100'000 $72'100'000 $72'100'000 Grows 3% per year with inflation
Cost of Programming $55'000'000 $55'000'000 $55'000'000 $70'000'000 $75'000'000 Add incremental programming expense
Ad Sales Commissions $6'918'912 $6'227'021 $7'472'425 $9'686'477 $10'378'368 3% of ad sales revenue
Marketing & Advertising $45'000'000 $45'000'000 $60'000'000 $60'000'000 $60'000'000 Reflects increased spending of $15M
SGA $40'000'000 $41'200'000 $41'200'000 $41'200'000 $41'200'000 Growing with inflation 3%
Total Expense $216'918'912 $219'527'021 $235'772'425 $252'986'477 $258'678'368 Spreadsheet calculates automatically
          
Net Income $93'711'488 $69'640'339 $94'908'407 $151'496'083 $168'867'232 Spreadsheet calculates automatically
Margin 30% 24% 29% 37% 39% Spreadsheet calculates automatically

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 SOURCES
https://www.audienceproject.com/blog/key-insights/new-stu
dy-instagram-climbs-the-ladder-tiktok-has-a-long-way-to-go/

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