The Fashion Channel Case

Summary of the Case 

Overview 

The Fashion Channel (TFC) is a very successful company that has achieved and maintained the maturity stage of this business cycle. The company rose to this position on a very specific strategy that involved not specializing at all. Being the only channel focusing on the fashion industry, the company created a wide net seeking to catch any customer category that they could get. The strategy worked quite well due to the absence of competition and the company grew to acquire a viewership tantamount to 1% of the entire US viewership. This seemingly small fraction entails over a million viewers and was enough to raise the revenue of the company into hundreds of millions. Being happy with their strategy, the board held on to it religiously and plateaued at that stage. Unfortunately, some competition has come to the market creating a genuine risk that TFC might get into the decline stage and peter away. 

Major Challenges, Problems, and Limitations 

TFC does not have any direct viewing customers and relies on cable companies to reach its viewers. This relationship is not only crucial but also fundamental to the operations of the company. The channels rely on ratings and viewer satisfaction to determine whether or not to retain a company like TFC. Whatever changes the company makes, it has to ensure that it does not fall under the specific standards set by the channel companies as that would be the fastest way out of business (Kim & Mauborgne, 2014). Another major challenge is that it is impossible for the wide net cast by TCF to work effectively for all viewers. Currently, it seems to be working best on female viewers over 35 years of age. This is among the viewer group that attracts the lowest revenue rates. The final limitation is cost. Any idea that Dana Wheeler will come up with to change the market will cost the company yet its revenues are already reducing. 

Competitors 

TFC does not have direct competitors who focus in fashion on a full-time basis, 24 hours a day, and seven days a week as it does. This is both good news and bad news for the company. Most of its competition comes from channels that focus on a different content but has now ventured into the fashion market. Channels such as CNN and Lifetime have ventured into the fashion industry with limited but extremely efficient programming. Further, at any one time, there is always some minor channel that is hosting a fashion programme. These channels may not be considered a direct threat but their combination is whittling away TFC’s viewership (Kim & Mauborgne, 2014). 

Product Offering 

TFC offers two things to its two main stakeholders. First, the company offers informative entertainment on fashion matters to its viewers. This is meant to capture and retain the attention of its viewers on a regular basis within its 24-hour programming. Being a cable channel, TFC gets paid to be viewed thus creating its first main revenue channel. Within these programs, TFC creates advertising spaces which it then sells to its second group of stakeholders; the fashion industry players who pay to advertise to TFC’s viewers. This creates TFC’s second main revenue stream which is also its largest and the main focus of this case study analysis. 

Category(s) Preferred by Advertisers 

Most products in the fashion industry are specific to a certain demographic group. Therefore, no advertisers will pay based on a general viewership but rather on a very specific market segment. The market segment that gets the highest ratings are men and women between the ages of 18 and 34. This group has a higher chance of getting advertisers and also attracts a higher rate for every 1000 viewers than any other. 

Question Two 

Analysis and Juxtaposition of the Pros and Cons of Each Segmentation Strategies 

Wheeler finds herself caught between the current segmentation strategy that has been known to work and indeed has gotten TFC to its maturity stage and innovative new strategies to take the company to the new level. It is worthy of notice that the issue of segmentation strategy is currently a matter of survival for the company. Remaining with the current strategy might cause the downfall of the company but changing it might as well lead to the same. 

Strategy One 

The first strategy is the old strategy that the company has been using with great success, the same having been indicated above as the casting of a large net. This entails creating the kind of programming that does not discriminate against any segment of viewership but seeks to attract all. Therefore, any number of available viewers can watch TFC with the segmentation being determined by external forces such as competition and viewer preferences. For years, this strategy has served TFC quite well and the board seems determined to retain it. 

Pros and Cons 

This strategy is bound to attract the highest viewership in term of numbers. Most TV viewing is done at home and mainly by family units which are mixed demographically. A viewership that does not discriminate is good for family and stands greater chances for family viewing. One of the revenue streams of TFC is based on viewership and comes from the channel companies. The higher the number of viewers in this category, the higher the channels payments hence this strategy guarantees highest payments in this revenue stream. Further, the need for research and survey is minimized since there is no specialization (Katz, 2016). 

The main disadvantage of this strategy lies in the fact that advertisers, the largest revenue source for the company are very selective. Advertisement revenues are based on a careful balance between the quality and quantity of viewers. Research done by TFC has shown that the kind of viewers who attract the highest revenues are not normally attracted by general viewing. Therefore, under this strategy, the advertising revenues will be diminished. With this being the larger source of revenue with the highest potential, this disadvantage bypasses any other advantages that this strategy might have. Further, this strategy has only worked because there was no competition. With the advent of stiff competition, there is a high chance that it would no longer work leading to more revenue losses (Katz, 2016). 

The Second Strategy 

The Second strategy is a slight variation of the first strategy that incorporates borrowing from its more successful competitors CNN and Lifetime Channels. This entails casting a wide net of customers but with compartmentalization. Through research, TFC can find out which demographic segment of the viewers are most likely to be attracted at what specific time and by what content. TFC would then spread out its content that is targeted at different viewers and at different times. The basic idea is still to have a general viewer attraction but not in a lump sum. 

Pros and Cons 

Advertisers, the highest source of revenue prefer to advertise to a certain segment only. This strategy would enable targeted advertisers to select to which target group they wish to advertise, thus enhancing revenues. Different advertisers would get different groups of targeted viewers at different times allowing for a wider advertiser range and, therefore, higher revenues. Further, in the case the strategy works as expected, the viewership per household will not be interfered with and might even appreciate, leading to higher channel revenues or in the very least non-reduction of the same (Katz, 2016). 

However, this is an experiment that might or might not work. The inverse is also possible that instead of attracting segments of viewers, the programming will lose the attention of all. This would create trouble to the cable owners with adverse ramifications for TFC. It could also reduce all major revenue channels. Further, this would require a high investment in the development of new programs as well as in research, evaluation, and monitoring (Katz, 2016). The new investment comes with no guarantee of a definitive return. 

The Third Strategy 

The third option and also a favorite of Wheeler is the specialized segmentation strategy and entails an absolute overhaul of the old strategy. The general idea is to replace the traditional large net to a specialized net that seeks to attract a very specific viewership. The specific viewership to the targeted is the ladies who have both a special interest in fashion and fall between the ages of 18 and 34. This means that all programs, as well as advertising, will be targeted at this particular group. 

Pros and Cons 

The single lady between the ages of 18 and 34 is among the most influential members of the society. They include the young adult daughter, the girlfriend, the young wife, and the independent woman. They, therefore, have a high level of influence in the households they live in. This is positive for channel subscription as well as an ability to choose which channel they want to watch. Further, this is a narrow and predetermined viewer segment which will lead in ease of preparing relevant content for them, both in advertising and marketing (Katz, 2016). Finally, women between 18 and 34 years are the market segment that attracts the highest rates per thousand viewers from advertisers. These rates are several times the rates of some viewer groups and even with lower viewer numbers, revenues are bound to increase. 

The Recommendation Dana Wheeler Should Give 

Principle Option 

The first option would be to go for a complete overhaul of the system, based on the third scenario outlined above. The survey conducted and attached as Exhibit 2 show that more viewers consider TFC as a bad source of fashion content at 10% against those who consider it as the best at 90%. The competition is already winning the war and it is time to shift gears. This transformation involves focusing the entire channel of female viewers who fall under the Fashionista group at the expense of all the others. The channel would then make programming specifically for this group and also market adverts only for the same. The name Fashionista is derived from a report marked in the Case Study as Exhibit 3, which is a report from GFE associates who are experts in marketing research. They indicate that the Fashionista group is a specific group of television viewers who have a great interest in fashion matters. This group is a minority, being only 15% of all viewers but they have the greatest propensity for viewing television at 140 points. Further, this is high earnings with 30% of them earning over US$ 100,000 annually. Finally, they mostly fall under the 18 – 34-year brackets with 61% of them being women. According to exhibit number 1, TFC is only getting 30% of this target group but when Lifetime Channel dedicates a program to this group, it averages 43% of the group. CNN has been getting 27% of this group for their channel. 

From the perspective of advertising, this specific group attracts a very high interest among advertisers who are also willing to pay a higher price for adverts targeted at them. Further, advertisements that reach an audience with a higher purchasing capability attract much higher fees than those who reach a relatively poorer group. The targeted group for this recommendation is the female Fashionista who both fall on the right age for the highest possible advertising revenues with an added balance because of purchasing power. Great advertising revenues can be made from this option. It is highly possible that due to the segmentation strategy, the viewership numbers might reduce. However, based on the quality of the viewership, the revenue generated from advertising will be high enough to even cover the losses in channel subscription fees. According to Exhibit 4, advertising revenues are almost three times as much as affiliate channel revenues. If the advertising revenues increase by as little as 20%, they can cover up to 40% loss of revenue for affiliate channels. Finally, it is easier to prepare relevant content when the target viewer is specialized. This is bound to enhance the channel ratings. 

Alternative Proposal 

The alternative proposal can either be option one or option two as indicated above. Option one is the current system which has operated well but without competition. Now TFC has attracted a large competition from smaller channels as well as two large channels some of whose ratings such as CNN and Lifetime is better than TFC. If this persists, TFC will be eclipsed by its competition leading to a possible collapse. This leaves only the second scenario outlined above. This entails developing programming sessions for different program groups as outlined based on an analysis of exhibit 1. This is a demographical classification of viewership that reflects how different groups react to different programs. For example, the very same Lifetime fashion program attracts twice as many men as women. The numbers also reduce exponentially when it comes to age. Most of these people still watch the other programming by Lifetime channel. This means that TFC can develop programs for different market segments alternately. They will then sell the alternate advertising spaces alternatively to different advertising markets. This is a safe bet since it stands a chance to retain most of the viewership and most of the advertisers. The specialization will, however, increase viewership leading to higher subscription revenues. Further, specialized advertising will also attract higher revenues. 

Identifying Market Segments and Targets 

Individual versus B2B Segmentation 

TFC is not an ordinary business when it comes to segmentation. Most businesses have to consider only one line of market segmentation based on their customers. This is because most companies make products then sells them to customers to make a profit. TFC’s main production activity is making television programs for channel TV networks. This amounts to about 30% of the company’s revenue according to Exhibit 5. The rest of the revenue comes from an exponentially different source being advertising. These create two alternative markets that require two different kinds of segmentation. For the viewers, the segmentation falls mainly under the category of individual customer segmentation. For advertisers, it mainly entails B2B segmentation. There is a very delicate interdependence between the two market areas for TFC. Without viewers, there are no advertisers and without advertisers, TFC loses its main revenue source. 

TFC cannot be able to focus on the two market divisions and give them equal attention, thus its first strategy is to decide which market division to prioritize. The best market division to prioritize, based on the company’s revenues as reflected in Exhibit 5 is the advertisers. This must, therefore, take the first priority. A good market segmentation must begin with the advertisers. Among the best means for B2B segmentation are firmographics which are the corporate version of demographics (Cho, 2016). In this segmentation, TFC will look at which market segment cluster is most suitable and beneficial for the future of B2B itself. Indeed, B2B finds itself in the same scenario that Google’s YouTube found itself in recently. Major advertisers which include some of the largest companies in the world threatened to pull out of YouTube unless it applies a heightened level of censoring on its content (Solon, 2017). YouTube looked at its earnings and realized that losing the larger advertisers would be expensive but higher censuring would alienate a larger market segment. YouTube elected to retain the larger market segment, lost some of its largest customers but is still extremely profitable. TFC must choose a specific cluster on advertisers and focus on it. 

For example, TFC can select to work for powerful multinationals in the fashion industry. These are large companies who will have massive contracts for tens of millions of dollars. The power companies will, however, be looking for a partnership where they also have a say in the content just as in the Google’s case. Another scenario can be to get a cluster that involves several small players in the fashion industry. Their contracts may be small but of a high volume. They will also not seek to be too controlling over how TFC conducts its affairs. However, the ability to please so many B2B clients might also be a challenge for B2B (Cho, 2016). The main determinant facts between which clusters to take must be availability and profitability. It is then based on the B2B segmentation that TFC will conduct its individual segmentation for the viewers. This will not be based on what the viewers want but whom the advertisers want to be targeted . Demographical segmentation is, therefore, the best means to achieve this. TFC will select the target group that their selected B2B customers want then seek to get them at any cost (Cho, 2016). 

How to Implement TFC Should Implement the Recommendations Made 

As indicated above, there are two levels of implementation. The first relates to the viewership and the second, to the advertising. Implementation must begin with the advertising section as it is the most important. The first decision is to decide on B2B segmentation. TFC must determine between a few larger players or several smaller regional players. This means deciding whether to fight it out with larger players such as CNN and Lifetime or smaller players such in the region for the all-important advertising business. Considering that TFC is a national player itself, it stands a better chance dealing with the larger players than the regional ones. The right choice would be to rely on larger contracts from major players who will pay for advertising that covers the entire market (Belch et al, 2014). Within this group, TFC must select the kind of players willing to advertise to its selected market of lady Fashionista. This target individual customer group is among the most marketable for fashion products. Finding advertisers for them will, therefore, not be too hard. It must be noted that what TFC sells to its advertisers are viewers and to be able to meet its obligations, TFC must have the kind of viewers that the customers want to advertise to. TFC must, therefore, invest exponentially in developing targeted programs that will attract the female Fashionista between 18 and 34 years. This will take research to arrive at what this group would want to watch. The same will be followed by the extensive development of the said content. Finally, a massive marketing campaign should follow this including a fresh launching of the channel to mark a departure of the channel from broadcasting to a broad range of viewers to a wider one (Belch et al., 2014). The last phase will be to enter into long-term agreements with the corporate clients for advertising space in the new market. Since this is a fresh venture that might involve many contingencies, care and attention must be made to ensure minimized liability for the company in the case the venture falls into unforeseen contingencies. 

References 

Belch, G. E., Belch, M. A., Kerr, G. F., & Powell, I. (2014).  Advertising: An integrated marketing communication perspective . New York: McGraw-Hill Education 

Choe, J. M. (2016). The development of a framework for the classification of types of B2B Ec strategies.  International Journal of Business and Society ,  17 (2), 183-200 

Katz, H. (2016).  The media handbook: A complete guide to advertising media selection, planning, research, and buying . New York: Taylor & Francis 

Kim, W. C., & Mauborgne, R. A. (2014).  Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant . Harvard business review Press 

Solon, O. (2017, March 25). Google's bad week: YouTube loses millions as advertising row reaches US . Retrieved October 14, 2017, from https://www.theguardian.com/technology/2017/mar/25/google-youtube-advertising-extremist-content-att-verizon