The Fashion Channel

Dana Wheeler faced the tough challenge of developing a marketing segmentation strategy that targeted the right type of audience while also offering advertisers an attractive mix of viewers. She knew that The Fashion Channel did best with females aged 18-54 but not all of these viewers were considered the most engaged audience, especially compared to CNN: Fashion Tonight and Lifetime: Fashion Today. After reviewing consumer and market data, Dana developed three options in an attempt to increase revenue and mitigate risks to the channel.

The first option would target a broad segment based on the attitudinal clusters of Fashionistas, Planners & Shoppers, and Situationalists. This segment would target the largest size of viewers, roughly 80% of TFC television households. As indicated by the Ad Revenue and Financial calculators (see attached tables), the expected outcome of option 1 would be a ratings increase from 1.0 to 1.2 and a decrease in CPM, or the price an advertiser would pay to have their ad seen. To support Dana’s second option, targeting only the Fashionista segment, The Fashion Channel would need to spend an additional $15 million for programming but could expect CPM to increase from $2.00 to $3.50. While this would yield the highest CPM possible, ratings would decrease 20% from 1.0 to 0.8. Finally, with the third option, which targets both the Fashionistas and Planners & Shoppers, TFC could anticipate a 20% ratings increase from 1.0 to 1.2 and an increase in CPM to $2.50. In order to realize the benefits expected in this third option, The Fashion Channel would need to spend an additional $20 million on programming. However, this would result in the highest revenue amount of $427.5 million as well as yielding the highest margin percentage.

If The Fashion Channel chose option 1, the primary benefit would be that the company would not need to expend additional programming dollars to increase ratings. However, with this option, Dana Wheeler...