The Fashion Channel
Problem Definition
TFC had been losing its program viewers since the beginning of 2006 because more and more of its competitors realized the success of fashion-related programs, so they were adding such programs in their own networks. To maintain its profitability and position in the industry, the company needed to make a change to its previous “broad viewer” strategy and focused on specific segmentation.
External Situation Analysis (See Appendix 1 for full listing.)
Competition among networks for ad was fierce. In the free market with hundreds of networks, any special programs that were more attractive to viewers would be imitated by other networks, just as CNN and Lifetime did. As a result, initiating networks shrank advantages. Moreover, since market was price-oriented, networks competed on prices, squeezed costs and reduced margin. Consequently, TFC was extremely difficult to become distinct from other networks. Besides, TFC would face the situation of becoming unpopular channel and being dropped from basic channel portfolio if it could not reverse to growth.
The expenses spent on clothing among different demographic groups varied. Programs preferred by young and wealthy women could bring much more return to advertising companies and value a premium CPM, while TFC’s strategy of board audience was out of this social trend.
Price formation process had become more value-return oriented due to the implementation of complicated analysis of segmentation characteristics. Realizing this phenomenon, TFC should urgently call for modification of current marketing strategy.
Internal Situation Analysis (See Appendix 1 for full listing.)
Some members in management team resisted to a strategic change because they are concerned about the consequence.
The changes in offerings was both costly and risky. It might disappoint current audiences and lose distribution support, while attract fewer new highly valued audiences. In this case, TFC would lose both its rating and CPM while significantly increasing programming expense.
SWOT Table (See Appendix 1.)
Strategic Alternatives (See Appendix 2 for Pros/Cons of each alternative.)
Alternative one: maintaining TFC’s basic approach to “broad audience”, including Fashionistas, Planners& Shoppers, and Situationalists, while simultaneously strengthening marketing promotion and improving programming. Compared to other options, this one was less risky because it would remain current audience and distribution supplier. If implemented, marketing and promotional campaigns would probably achieve successful result to some extent, bringing new audiences and awareness. Alternative 1 would expect to generate more net income than 2006(see Appendix 4 for detailed information).
Alternative two: changing marketing strategy by concentrating more exclusively on the most highly valued group Fashionistas. This strategy conformed to social trend development. The Fashionistas would definitely turn to TFC for its flexible time and well-designed programs. And this scenario would expect to bring a breakthrough in revenue and net income (see Appendix 3 and 4).
Alternative three: changing current marketing segmentation to approaching two highly valued groups- Fashionistas and the Shoppers/ Planners. It split the difference between the above two alternatives, both lowering risk and changing segmentation. It targeted 50% of all the audiences. Besides, programs for Fashionistas and Shoppers/Planners might be similar because they were all interested in fashion and shopping. It will generate the highest profit among all the alternatives (see Appendix 4).
Recommendation
I would recommend Wheeler to take scenario 3. This alternative avoided the risk of big failure by targeting the top 50% people with highest interest in fashion and shopping. Most importantly, by analyzing the expected revenue and expenses, alternative three would generate the highest net income. I recommend Wheeler
