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[answered] 1-) What are the key facts in the case? 2-) If you were Dan

Is it possible have the answer for the first question please?

1-) What are the key facts in the case?

1-) What are the key facts in the case?


2-) If you were Dana Wheeler, which segmentation option would you recommended and why? The Fashion Channel




Dana Wheeler, senior vice president of marketing for The Fashion


Channel (TFC), sat in her Chicago office and scrolled through the email


messages in her inbox. Thankfully, none required an urgent reply. She


toggled over to her calendar: no meetings for the rest of the day.


Finally, she could focus her thoughts on reviewing her


recommendations for TFC?s new segmentation and positioning




Wheeler believed that she had prepared a solid analysis; she felt


confident about the strategy she was proposing. But next week?s


senior management meeting would mark her first big presentation to


the company?s leaders since she had joined TFC, and, she admitted to


herself, she was eager to gain the support of her colleagues.


There was a lot riding on the outcome of this meeting, both for


Wheeler and for the channel. If founder and CEO Jared Thomas and his


team liked what they heard, Wheeler would move forward to


implement her recommendations. The company needed to strengthen


its competitive position and would be spending more than $60 million


in all national and affiliate advertising, promotion, and public relations


in 2007, based on these recommendations. This would be an increase


of $15 million over 2006 spending. Background TFC was a successful cable TV network? and the only network


dedicated solely to fashion, with up- to-date and entertaining features


and information broadcast 24 hours per day, 7 days per week. Founded


in 1996 by two entrepreneurs, it had experienced constant revenue


and profit growth above the industry average almost since the


beginning. Revenues for 2006 were forecast at $310.6 million, marking


another steady upswing.


The channel was also one of the most widely available niche networks,


reaching almost 80 million U.S. households that subscribed to cable


and satellite television.1 Women between 35 and 54 years were its


most avid viewers, according to its annual demographic survey. But


beyond basic demographics, the channel didn?t have much in the way


of detailed information about its viewers. Nor did it attempt to market


to any viewer segments in particular. From the beginning, in fact, Jared


Thomas had believed that TFC?s marketing messages should appeal to


as broad a group as possible in order to achieve the highest possible


viewership numbers. Early on, the network had chosen ?Fashion for


Everyone? as the theme for its marketing programs; one of its more


popular series in 2005 had been ?Look Great on Saturday Night for


Under $100.?


TFC had clearly grown quickly without articulating any detailed


segmentation, branding, or positioning strategy. However, at the


beginning of 2006, the network realized that other networks were


taking note of its success and beginning to add fashion-related


programming to their line-ups. TFC was facing competition that could


provide meaningful choices to both viewers and advertisers. By June


2006, these new competitive dynamics had prompted Thomas to


rethink his approach to marketing. At the quarterly executive meeting


that month, he told his senior team: ?It?s time for us to build a modern


brand strategy and secure The Fashion Channel?s position as the


market leader. I want to use marketing to lay a foundation for future


growth.? At the same meeting, Thomas had announced plans to


sharply increase TFC?s investment in advertising and to hire an


experienced marketer to develop marketing and brand-building


programs to support TFC?s continued growth.


Enter Dana Wheeler, in July 2006. Wheeler had a strong background in


marketing for packaged consumer products as well as broad


experience in the advertising industry. Thomas expected that Wheeler would draw on these strengths to help TFC build on the momentum it


had created to date and stave off any competitors trying to make


inroads. Still, he and some of the other members of the leadership


team felt an urge to resist change. The network had been highly


successful to date and no one wanted to ?break something that isn?t


broken.? Wheeler?s Plans


Wheeler turned back to her computer, opened up the slide-deck


presentation she had created, and started reviewing it. As she began


to page through the materials, she was thinking about the trends in the


advertising marketplace that Norm Frazier had been talking about in


the sales forecasting meeting this morning.


Frazier, senior vice president of Advertising Sales, had warned that TFC


might need to drop the price for a unit of advertising next year by 10%


or more if the network did not make some changes in its performance.


He mentioned that both Lifetime and CNN had launched fashionspecific programming blocks that were achieving notable ratings


(Exhibit 1). Frazier was a high-energy salesman who had personally


built the strong ad sales performance of the channel. He was justifiably


worried. Wheeler had left that meeting acutely aware that next week?s


executive session wasn?t coming a moment too soon.


Wheeler knew that in order to hold or increase price it would be crucial


to attract a critical mass of viewers who were interested in the


network?s content and were also attractive to advertisers. The key


would be targeting the right viewers and offering advertisers an


attractive mix of viewers when compared with what competitors were


offering. Wheeler believed she had good market data that would give


her insights into the options for identifying the right segments for TFC.


At the same time,


she knew that the network needed to maintain its overall audience


ratings with the cable consumers and the cable affiliate distribution


network. If the network changed its offerings in a way that


disappointed too many cable subscribers, it could risk losing its


distribution support.


Wheeler clicked to the slide that outlined the marketing tools in her arsenal, and then clicked to a slide near the end of the presentation


that revealed an aggressive implementation schedule. Her plan was to


build a strategy for segmentation, and use it as a base to employ all of


the marketing tools? traditional and internet advertising, public


relations and promotions?to reach the target consumers with


integrated positioning messages. She also knew that it would take time


to create and launch all the elements of a well-integrated marketing


program and that there was no time to waste.


She moved back a dozen slides or so, opening the ones that


summarized TFC?s revenue stream from advertising sales and the


slides that considered its revenue stream from cable-affiliate fees.


Thomas and the rest of the senior management team knew this data


as well as she did, she assumed. Everyone felt that advertising was


TFC?s primary growth opportunity. She wanted to think about her key


messages one more time to ensure her recommendations would


support building revenues as aggressively as possible. TFC?s Advertising Revenue Model


First, she reviewed TFC?s advertising revenue model. TFC was on target


to generate $230.6 million in 2006 from advertising. The advertising


business model was built on attracting a mix of male and female


viewers on a regular basis as measured by ?ratings? (the percentage of


television households watching on average during a measured viewing


period.) Across the entire schedule, TFC?s average rating was 1.0. With


110 million television households in the United States, this meant that


on average 1,100,000 people were watching at any point in time. 2


TFC?s Ad Sales team sold access to these viewers via advertising spots


(30 or 60 seconds in length) to a variety of well-known consumer


marketers ranging from cosmetics companies to brand name clothing


designers and automobile manufacturers. There were usually six


minutes of national ad time in each half hour of programming, 24


hours per day for a total of 2,016 minutes per week. Wheeler knew


from industry studies that, in 2006, U.S. consumer advertisers spent


almost $20 billion buying spots on cable networks such as TFC.


Because there were several hundred cable networks competing for


viewers and the related ad dollars, competition for ad revenue was


always fierce across all the networks. While competition was intense for advertising overall, TFC remained


the only network dedicated to fashion programming 24 hours per day,


7 days per week. This set up an interesting competitive dynamic. TFC


needed to compete against a broad range of networks for advertising


revenues. For these networks the ad buyers would be most interested


in buying ratings and demographics, and less interested in specific


programming subjects. At the same time TFC competed against other


fashion- oriented programming that would appeal to advertisers who


specifically wanted to participate in that programming context. The


strong fashion programming blocks on Lifetime and CNN represented a


double-edged competitive challenge. And if successful, more networks


would likely copy the concept, skimming more viewers and ad dollars


from TFC.


Dana reminded herself about the conversation she?d had with Norm


Frazier about advertising pricing. The network based ad unit prices on


several factors, which advertisers also monitored, including the


number of viewers (ratings), the audience?s characteristics (age,


demographics, and lifestyle), and general competitive trends. Prices


were expressed as CPM (cost per thousand), which represented the


price that an advertiser would pay for an ?impression,? or moment of


viewing.3 The ad market was dynamic because of the relatively fixed


supply of advertising on traditional television networks. Market pricing


moved up and down frequently, as advertisers developed new


campaigns that required television support. And, in recent years, the


advertising buying process had become very sophisticated, with many


buying agencies and clients using combinations of surveys and


?optimizer? programs to analyze the demographic and psychographic


characteristics of audience groups and then establish pricing


parameters that fit the audiences various networks delivered. The


output of these programs would be a recommended advertising


placement portfolio for a specific product campaign.


Networks were increasingly evaluated on their ability to deliver specific


target groups. Generally, networks whose audiences were older or had


low family incomes commanded lower rates for advertising. Advertisers


would pay a premium CPM to reach certain other groups; in 2006,


these were men of all ages and women aged 18-34. By increasing the


ratings in highly valued demographic groups, the TFC Ad Sales team


could achieve CPM pricing increases from 25% to 75%. By attracting a large number of highly valued viewers, the network had the


opportunity to substantially grow its advertising revenues. Cable Affiliate Fees


Wheeler next turned to the slides that dealt with the cable affiliate fee


revenue stream. Cable affiliate fees, which were on track to bring in


$80 million in 2006, were the second source of TFC revenue. Most U.S.


households subscribed to cable television through local affiliates of a


large cable multi-system operator (nationally, Comcast, Time Warner,


Cablevision, and Cox were the largest). Consumers paid a monthly fee


for a basic lineup of channels and incremental fees for premium


channels and on-demand programming. TFC was positioned as a basic


channel, so most consumers received it automatically when they


signed up for basic cable service.


Large multi-system operators (MSO) would sign multi-year contracts


with networks that specified the fee the network would receive for


each household that received the channel. The local affiliates of that


MSO marketed and distributed the service to consumers in all the local


markets for which they held a franchise. For TFC, this negotiated


subscriber fee averaged $1.00 per subscriber per year. The fee was


paid entirely on the basis of carriage and did not go up or down as


viewership changed. The TFC fee was at the low end of the industry


range, reflecting the specialty niche content of the network. ESPN, and


other networks that appealed to large numbers of households, charged


the highest fees. Wheeler knew that the cable operators and affiliates


carefully monitored customer satisfaction with network offerings and


would threaten to drop unpopular channels. There were case studies of


networks causing viewer outcry from unpopular changes.


Consequently, it was important for TFC to maintain its general


satisfaction level and keep the affiliates happy. Because TFC was


widely distributed there was not much upside in affiliate revenue,


though, and the general goal for both parties was to maintain a good




Wheeler closed the slide deck entirely. As far as cable affiliate revenue


went, there wasn?t much to be done, she thought. The network had


already achieved virtually full penetration of available cable


households and there was limited opportunity to raise fees. Wheeler


knew that the two key levers to drive revenue growth would be (1) increased viewership (ratings), and


(2) increased advertising pricing.


She pulled out a legal pad and wrote: ?Deliver quality audiences, as


demanded by advertisers? across the top in large print. Competitive Threats


The phone rang, breaking her concentration. ?Dana,? boomed Norm


Frazier. ?I?m running to a client meeting but just wanted to connect


with you. I wanted to say, in the meeting next week, I hope we?ll be


able to talk about how to pitch TFC against the new fashion content on


CNN and Lifetime. Lifetime is taking away a lot of ad buys from me


because they?re attracting younger female demographics. CNN is


starting to deliver some great numbers on men. Both of these


segments can be sold for a premium CPM, so we need to do something


to draw these viewer groups back. If you want to talk before the


meeting, just let me know.?


Wheeler shook her head, understanding his impatience, but frustrated


just the same. Still, this might be an opportunity to build consensus.


?I?m on it, Norm. And thank you for the offer. I might take you up on it.


My goal is to be able to come out of next week?s meeting ready to take


action immediately.? They hung up, and Wheeler turned once again to


her notepad, jotting down key points about the competitive landscape.


She picked up a folder and pulled out a summary of a recent Alpha


research study on customer satisfaction with cable networks. The


study showed that TFC was facing additional competitive challenges in


its attractiveness to cable affiliates. On a scale of 1 to 5 (with 5 being


the highest possible score), TFC had achieved a 3.8 rating on consumer


interest in viewing, while the two competitors with new fashion


programming had scored higher: CNN had scored 4.3 and Lifetime a


4.5 On awareness, TFC had scored 4.1 while CNN scored 4.6 and


Lifetime a 4.5. On perceived value TFC was at 3.7, CNN






rk, and also where they would include the network in their consumer


offerings. The cable operator needed to offer service packages (often


called tiers) that would appeal to the home consumer and would justify


the monthly cable fee. If a network underperformed the averages, it risked being offered in less appealing packages, which could mean it


would be seen in fewer households.


While TFC had generally scored above the midpoint, these data


suggested that it was lagging two key networks that were now offering


competitive programming. To Wheeler this indicated a need for


marketing initiatives to improve consumer interest, awareness, and


perceived value. Change would upset some viewers who liked the


network?s current programs and probably some TFC employees as well,


but change would have to come.


She thought back to her final interviews with Jared Thomas, before he


had offered her the position at TFC. ?TFC can win in the market if the


channel builds its marketing programs around the right consumer


segmentation,? she had told him. ?First, you have to identify the


customer groups that are most worth the effort to pursue. You can use


market research not only for demographic data but also to study


consumer behavior and attitudes?how viewers use the network, what


they value, and what needs they have.


?It?s likely that there?s a core group willing to become very loyal to our


network. These viewers have an emotional connection to TFC. We can


find them and market to them so that we have the building blocks to


create the brand loyalty that is hard for a competitor to take away.?


Thomas had agreed, but confessed to being worried about viewers?


fickleness. ?It?s easy to spend a fortune pursuing viewers who won?t


stay with you,? he had cautioned. ?There?s an obvious risk in targeting


only some of our customers. Some viewers could quit watching us and


our ratings would decline.?


She wondered what the management team would say when she


presented her research and recommendations. They?d been at the


network for several years and been buoyed by the growth that had


been achieved with the something-for-everyone strategy. She expected


there would be concern about doing anything that put revenue at risk,


even in the short term. Attitudinal Research Findings


Wheeler flipped open another folder on her desk to review the most


recent consumer research reports that she?d commissioned. She removed two documents, which contained the highlights of a national


consumer field study that had been completed in the previous month


(Exhibit 2) by GFE Associates, a well-regarded market research firm.


The researchers had asked a national panel of consumers more than


100 questions about their attitudes toward fashion and TFC as a way to


understand the needs that the network served.


Attached to the data highlights was a second document (Exhibit 3)


which GFE Associates had prepared compiling the results into


attitudinal clusters. To create these clusters they had run the answers


to all 100 questions through a sophisticated statistical correlation


program to analyze patterns in the way consumers had answered. GFE


Associates then constructed profiles for clusters of consumers who had


common attitudes and needs. The report suggested four unique groups


of viewers: Fashionistas, Planners & Shoppers, Situationalists, and


Basics. While the segments varied in size, Wheeler quickly noticed that


the smallest?the Fashionistas?had a high degree of interest in


fashion. Wheeler also perceived several possible multi-cluster


schemes, each of which would need to be judged according to


? How the scheme would impact the quantity of viewers (ratings);


? What the CPM advertising revenue potential would be;


? How TFC could be differentiated from current and future competition.


Most of the male interest occurred in the Basics cluster?the least likely


to be engaged with TFC content. Wheeler had already concluded that


it would be unwise to pursue additional male viewers only. Instead, she


felt, TFC segmentation and positioning should be targeted at women,


particularly the premium 18-to-34 year-old demographic. She turned to


a summary of the research on women. Since there were women aged


18 to 34 in all of the clusters, Wheeler first considered maintaining a


broad appeal to a cross segment of Fashionistas, Planners & Shoppers,


and Situationalists. By investing in a major marketing and advertising


campaign as well as programming, it would be reasonable to expect


that awareness and viewing of the channel would go up and could,


over time, deliver a ratings boost of 20% (from the current 1.0 to 1.2).


However, Ad Sales was forecasting a 10% drop in CPM to $1.80 if the


current audience mix stayed the same? and a broad multi-cluster


strategy might not deliver an audience different enough to avoid that


fate. And there was always the risk that the competition would continue to


penetrate the premium segments and further erode TFC?s pricing


ability. An alternative to a broad, multi-segment approach would be to


focus more on the Fashionistas. This segment was strong in the highly


valued 18-34 female demographic. It was smaller than the other


segments, representing only 15% of households, and so targeting them


might lead to a drop in viewers?but it would also strengthen the value


of the audience to advertisers, with a likely increase in CPM. Wheeler


estimated that this strategy could deliver a rating of 0.8. Ad Sales had


given her a projection of a $3.50 CPM for an audience stronger in the


younger, female-oriented Fashionista segment. In addition to targeting


this segment in marketing programs, Wheeler expected that it would


be necessary to invest in new programming to attract and retain the


interest of this segment. She estimated that she would need to spend


an additional $15 million per year on programming under this scenario.


Wheeler was also interested in a third alternative scenario that


targeted two segments?the Fashionistas and the Shoppers/Planners.


She estimated that a dual targeting would drive average ratings over


time to 1.2 with a potential CPM of $2.50. For this scenario she would


need to spend an additional $20 million on programming to ensure that


there were selections aimed at both segments. Wheeler knew that her


recommendation would have to show how her plan would increase TFC


revenue and also quantify risks if the plan disappointed. She had


created a revenue calculator spreadsheet to calculate the impact of


ratings and CPM increases on potential TFC ad revenues (Exhibit 4).


Now she opened up a new worksheet and prepared to look at the


financial impact of these choices (see Exhibit 5 for TFC 2006 and


2007 estimated financial statements). She would need to be prepared


for many questions from Thomas and the other members of the


leadership team. While everyone was aware of the changing


competitive landscape, they really had not yet faced a decision about


making real changes in order to stay ahead. Dana expected a vigorous




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