The Fashion Channel - SWOT Analysis, Consumer and Market Data - Example

The Fashion Channel Case Study of the of the submitted Table of Contents Important Facts of the Case 3 SWOT Analysis 4 Strengths 4 Weaknesses 5 Opportunities 7 Threats 7 Recommendations on the basis of SWOT Analysis 8 Interpretation of Consumer and Market Data 9 Recommendation 12 Role of Change Agent 12 References 13 Important Facts of the Case “The Fashion Channel” is a victorious cable TV network and it has been founded by two entrepreneurs in the year 1996, one of them being the CEO, Jared Thomas. The channel aired updated fashion entertainment programs, features and broadcasting, 24×7. The channel was fully devoted to fashion and its major viewers were women of 35-54 age groups (Stahl, 2007). Earlier, “Fashion for Everyone” was the tagline of TFC. Revenue of $310.6 million was earned by TFC in the year 2006 out of which their profit earning target only through advertisements was of $230 million (Stahl, 2007). TFC was the market leader in programs related to fashion till 2006 and its most popular show in 2005 was "Look Great on Saturday Night for Under $100" (Stahl, 2007). In the year 2006, TFC realized that channels like CNN and Lifetime are becoming their competitors by telecasting fashion related broadcasts which are growing more popular than TFC. This competition was majorly affecting TFC by taking away their ad revenue. Senior vice president of advertising sale, Norm Frazier recommended that in order to raise the ad revenues, TFC either has to reduce their ad pricing by 10% or increase its audiences by upgrading and innovating quality ideas and contents for its fashion related programs (Stahl, 2007). According to studies, it was seen that USA has 110 million families using cable networks and the average TRP of TFC was around 1.0 which meant that 1,1,00,000 audiences were viewing TFC programs at any point of time (Stahl, 2007). Advertisements were slotted under 30 seconds and 60 seconds totaling a 6 minutes of national ad time for every half an hour of program which meant 2,016 minutes of ad time in a week (Stahl, 2007). The network based ad unit prices were dependant on a lot of factors which the advertisers monitored, like the number of audiences, competitive trends and the viewers characteristics such as age, standard of living and demographics (Stahl, 2007). The amount an advertiser paid for an advertisement was expressed as CPM which meant cost per thousand. The two main sources of revenue for TFC was ad revenue and cable affiliation charge. Most of the U.S households subscribed to cable networks through local cable affiliates of a larger multi-system operator also known as MSO. Such organizations are under multi annual contracts with networks receiving amount per channel received per household. The local cable operators of the MSO were responsible for marketing and distributing the cable service to the viewers in local markets contracted under their franchises. Two types of channels were available one was premium channel and the other was basic channel. TFC was under the basic channel package; as a result, customers received it with the basic subscription. SWOT Analysis Strengths The Fashion Channel was the first ever channel broadcasting solely programs about fashion and enjoyed its monopoly from the time it was launched (Stahl, 2007). Fashion changes every hour therefore, style experts are just available one click of a button at your living room, is a great advantage for the viewers without having to spend huge money on fashion consultation. TFC is an exclusive entertainment channel specializing in up to date fashion news, entertaining broadcaster and is dedicated to its viewers 24 hours a days and 7 days a week. It has created a niche for itself by giving a broadcasting coverage to 80 million U.S households who are subscribing to cable television networks. The Fashion Channel has a viewer base of dedicated audiences who are very loyal to the channel with an average view of 1,100,000 people watching the programs at any point of time. It has very high revenue and profit growth which is above the industry average standards from the foundation of the channel (Stahl, 2007). The main target customers are women with age ranging from 35-54 years. This is the age group where the income level of the viewers are high and they can afford fashion, hence, interest towards programs related to style and clothes would appeal them more, increasing loyalty towards the shows broadcasted in the channel (Stahl, 2007). Market penetration is highest for the channel as it is included in the basic subscription package, thus, availability at a nominal rate and to every household subscribing to cable networks. The CEO, Jared Thomas has come up with an increased budget of $25 million for strengthening its integrated marketing communication strategies to compete in the competitive market (Stahl, 2007). The Fashion Channel (TFC) appointed Dana Wheeler for the senior vice president, marketing position for strategizing and implementing the competitive strategies as she had a strong background in the advertising industry. Weaknesses TFC have never focused on choosing its marketing strategies wisely and delve into factors like segmentation, targeting, positioning and branding. According to the recent Alpha research study, the channel is deteriorating on its customer satisfaction levels since new competitors like CNN and Lifetime have come up with innovating fashion programs targeting different customers segments other than only women, age ranging from 35 to 54 years. It is also becoming less attractive and lucrative for the cable affiliates who are now more satisfied and magnetized towards the upcoming high rated channels like CNN and Lifetime. In order to stay forward in the competitive race to gain higher market share and achieve high market growth, TFC has to contend against networks in purchasing or gaining ratings and demographically target new audiences as well as fight against other fashion programs telecasted by the upcoming channels. Though the management team of The Fashion Channel is conscious about the need to change, but is not adapting to modify since it has not amended its strategies from the time the channel was founded. TFC is facing a dilemma between the need to renovating strategies and the risk of renovation since it might dissatisfy its existing audiences in order to target and position itself for its new customer base, based on the demographics and the ratings (Hawkins & Mothersbaugh, 2009). Viewing time of the channel being 24 hours X 7 days makes the fashion programs monotonous and redundant. The exclusivity of the programs and the excitement of the viewers start reducing. There is no emotional connect built with the channel since these are programs on styles, fashion and viewers connect only for updates and new trends. The channel does not cater to the diversified viewers market and only concentrates on fashion related entertainment. TFC is generalizing its viewership by claiming its marketing strategies as “Fashion for everyone". Opportunities TFC can reinforce its competitive position and gain higher market share thereby securing its position as the market leader. The Fashion Channel can initiate higher growth by focusing on the loyal untargeted segments. By increasing its average rating, TFC can have the opportunity to increase its ad pricing as well as escalate its network fees which would initiate to its profit growth (Hawkins & Mothersbaugh, 2009). There is more scope of increasing viewership by reinventing fashion entertainment broadcasts which are fresh and new to the audiences. This leads to increased views per advertisement and network content thereby increasing advertisement charges which may hold profitable to the channel. Threats TFC might dissatisfy its distribution channel and current viewers if it tries to change its competitive marketing strategies by targeting new audiences. The Fashion Channel is facing increased competition from CNN and Lifetime due to its obsolete branding and positioning. The channel is under the basic subscription package, which as a result receives $1 per subscriber as opposed to its competitors growing higher in viewer ratings and climbing up the ladder of profit to position itself in the premium subscription package segment (Stahl, 2007). Cable network operators might opt out TFC even from their basic subscription package if there is no improvement in the customer satisfaction levels. CNN and Lifetime are main threats to The Fashion Channel and are taking away potential viewers. They are exceeding in their horizon of knowledge than The Fashion Channel in areas like awareness, value, and interest. The Fashion Channel is catering to two different target viewers, men and women, whereas, CNN and Lifetime is concentrating more on particular target audience therefore increasing their scope of growth and providing tailored fashion programs targeted to either men or women (Stahl, 2007). Recommendations on the basis of SWOT Analysis Firstly, The Fashion Channel must improve its competitive strategies in order to secure its position as the market leader against CNN and Lifetime. It must change its theme "Fashion for Everyone" as it creates an ambiguity over its target viewers and a confused positioning by not creating a niche for itself. Therefore, revamping its branding strategies would help the channel acquire larger viewer base. Secondly, the focus should be on increasing its viewer’s ratings and maintaining exclusivity. Telecasting programs throughout the day for years may become monotonous and boring. Therefore, coming up with latest trend alerts and style updates may pump up the viewership. The channel should come up with shows that would blend with different demographics and age groups therefore targeting and satisfying its existing loyal viewer base of age groups 35-54 years as well as attract the younger generation ranging from 18- 35 years hence acquiring new audiences and increasing its ratings. Thirdly, building emotional connect with the viewers is very important. By organizing travel shows around the world, showcasing world fashion may increase ratings of the channel, thereby; the channel can escalate Ad prices and network fees to earn larger profit margins (Hawkins & Mothersbaugh, 2009). Interpretation of Consumer and Market Data The two biggest threats for TFC were CNN and Lifetime as their viewer’s ratings were higher than The Fashion Channel. The channel’s rating was 1.0 as compared to the ratings of its competitors which were much higher. The Alpha Research showed that TFC faced an additional competitive challenge in its attractiveness to cable associates. A survey performed on the basis of 5 point Likert scale analysis, it was analyzed that TFC achieved a 3.8 rating on viewer’s interest, as compared to CNN which received 4.3 score and Lifetime scored a 4.5 with the help of the new fashion programs launched. On the basis of awareness, TFC was rated at 4.1, while CNN and Lifetimes had scored 4.6 and 4.5 respectively. TFC had an estimated score of 3.7, whereas, CNN and Lifetime was rated 4.1 and 4.4 respectively on its perceived value (Stahl, 2007). These ratings were affecting TFC’s ad revenue which were concerning the higher management as their market share were going down as compared to the competitors. The primary viewer demographics ranges 35-54 years old women as their target audience and TFC needs to attract viewers from the age group 18-34 years who may constitute to a higher ratings of the channel resulting in charging more from ad buyers for the new consumers. The reason for the revenue and market share depletion of TFC was due to lack of proper segmentation, positioning and promotional strategies. The channel was coming up with plans of targeting and segmenting the market so that they can approach the right audiences with adequate information and message (Stahl, 2007). TFC needs to focus on the right viewer acquisition which would yield proper return to the channel. To achieve greater viewer retention and acquisition, they need to concentrate not only on demographics but also on consumer behavior, attitudes and needs. For this market survey and analysis, the company engaged a research based company GFE associates who surveyed viewers about their perception and attitude towards fashion and TFC as a method to recognize the needs that the channel served. The research firm then performed cluster analysis on viewers with common attitude and needs and came up with 4 unique groups of audiences for their channel namely the Fashionistas, Planners & Shoppers, Situationalists, and Basics (Stahl, 2007). Factual Analysis of the Segmentation Options According to the survey, Dana Wheeler proposed three scenarios in front of the CEO, Jared Thomas and then they evaluated these options to come out with the most suitable proposition out of these three. The recommendation on which scenarios to choose would be based on 3 questions. Firstly, how the proposal would impact viewer’s rating? Secondly what would be the CPM advertising revenue potential? And thirdly, the competitive advantage of TFC over its current and potential threats. Scenario1: It is based on a broader appeal to implement a cross segment strategy, focusing on Fashionistas, Planners & Shoppers and Situationalists with viewer base primarily women aged 18-34. Pros: The rating would be boosted from 1.0 to 1.2 creating more awareness to all clusters followed by a decrease in the broadcasting expenses and would track the initial TFC mission of revenue growth (Stahl, 2007). Cons: Since the channel lacked ability on targeting specific segments, there would still remain high competition from CNN and Lifetime, thereby decreasing the CPM by 10%. Scenario 2: Focus on the single segment approach concentrating on Fashionistas and spending $15 million on program broadcasts. Pros: There would be a significant increase in total revenue and ad revenues and a CPM boost as this segment of females having age group 18-34 years is the most interested group relating to fashion programs. It would strengthen the value of the viewers and provide a competitive edge to TFC. Cons: Fashionistas is the smallest segment making it risky to target only this age group as the existing viewers would be dissatisfied and the average rating would decrease by 20%. An incremental program expenditure of $15 million dollar would be incurred by the channel (Stahl, 2007). Scenario 3: Targeted on the dual segment approach focusing on both, Fashionistas and Planners & Shoppers groups spending $20 million on programming. Pros: There would be a boost in rating by 20% and a CPM increase by 25% ($2-$2.5) as it concentrates on dual targeting covering almost half of the U.S household having female viewers and 25% of them being in the age group 18-34 years (Stahl, 2007). Cons: TFC’s would incur $20 million on investment and programming expenditure. Recommendation After a careful study on the pros and cons of the three scenarios, it could be suggested that Dana Wheeler should recommend the third option as the Fashionistas has the highest interest in fashion, while, the Planners & Shoppers is the largest in terms of cluster size. This combination would enhance TFC’s potential to the fullest in competing with the fashion-oriented and regular programming thereby increasing its rating and generating high revenue growth. Role of Change Agent Dana Wheeler should minimize the presence of change by highlighting on programs attractive to both the clusters, the Fashionistas and the Planners & Shoppers. She should emphasize on the minimization of risk by targeting both the segments instead of giving importance to one segment and should try and implement new branding and promotional marketing strategies to combat the revenue loss from current method of business plans. She must also keep in mind not to deprive the existing viewer base by proposing new programming plans that still appeals the audiences in the age group of 35-54 years. References Hawkins, D., & Mothersbaugh, D. (2009). Consumer behavior building marketing strategy. New York: McGraw-Hill. Stahl, W. (2007). The Fashion Channel. Retrieved from http://www.ardiansyahzein.com/SEMESTER%201/MARKETING%20MANAGEMENT/CASE%20STUDY/Fashion%20Channel.pdf Read More