The Fashion Channel

1. What Segmentation scenario is likely to produce higher revenues?

To estimate the impact of each segmentation strategy on the company’s revenue you will have to estimate the financials of the company using the spreadsheet included in Part 1B following scenarios:

• 2007 Base: No segmentation; drop in ad unit pricing (average CPM).

• Scenario 1: Broadly targeting 3 groups (excluding Basics); increase in ratings, decrease in ad unit pricing (average CPM).

• Scenario 2: Fashionista target: drop in ratings, increase in ad unit pricing (average CPM).

• Scenario 3: Fashionista and Shopper/Planner targets; increase in ratings and increase in ad unit pricing (average CPM).

Answer – As per the assumptions the various segmentation scenarios are discussed herewith. In Multi segments scenario after increasing the rating and decrease in unit price, the ad revenue per year has increased comparatively to the current scenario. And as per the financial projections, the net income has decreased compared to the actual of 2006 and margins are also lesser to 24% but both have increased compared to 2007 base. Similarly In one segment scenario, the net income has increased and so is the margin to 33% by decreasing the average rating and also increasing the average CPM. But in the two segment scenario, the net income has increased but the margin has decreased by increasing the average rating and also the average CPM. In all the scenarios the ad sales has also changed and varied like in comparison to the 2007 Base, the ad sales has increased. On concluding the net incomes and the margins the various assumption have been made in respect to the following – 2% growth in the affiliated fees, 3% growth in cost of operations, 3% growth in the add sales revenue, 3% growth in the SGA etc. So in the nutshell, one segment scenario the income also increasing and the margins are also escalating, so it is recommended to go for one segment scenario....