Fashion Channel Market Segmentation Essay
Fashion Channel Market Segmentation
One of TFC’s glaring strengths is that it specializes in fashion-oriented programming. The company is dedicated to fashion programming 24/7, meaning it is in a position to influence the market. Secondly, TFC appeals mostly to women between 35 and 54. The company’s viewership in the segment is 45% compared to 42% and 40% for Lifetime and CNN respectively. This category has the largest number of viewers and at the same time, one of those segments that is able to attract premium pricing. In addition, the company operates under the basic cable package. The package has more than 80 million subscribers in the U.S meaning that a large number of people have access to the channel.
Conversely, TFC faces several weaknesses. Firstly, the company has not fully diversified its operations; it only specializes in fashion related programming. This could spell doom for the company, especially if the current trend is an indication of the future. Moreover, there is a section of the top management that is reluctant to accept change in the organization. The implication is that Dana’s recommendations may fail to get ratified for fear of the unknown. Thirdly, the satisfaction level of TFC’s customers is on the decline. The company is quickly losing customers to the two major competitors, and there are fears that the trend is sustainable. The other major weakness is that the organization has not segmented its market. The company ought to segment its market in order to benefit from the premium fee charged for the highly valued demographics.
There are a number of opportunities available for TFC in its external environment. To begin, advertisers are ready to pay a premium for higher rating as well as defined demographic programming. Channels with higher rating are able to charge more for advertising meaning that TFC can gain additional revenue if appropriate strategies are developed to help increase its overall market rating. Secondly, there is a more room for the company to increase its market size. Fashion specific programming is continually gaining prominence among viewers in the U.S. market. In addition, viewer’s demand on network content and ad is directly related to the cost of advertisement. The company can thus increase its ad revenue through marketing strategies aimed at increasing viewership.
One of TFC’s predominant threats is its two chief competitors: CNN and Lifetime. The two are constantly eating into the TFC’s major revenue base, and may even force the company out of the market. The second threat is that TFC is only entitled to $1 per subscriber. This is quite a small portion that cannot fully sustain the company’s operations. Besides, there is a threat that TFC may get dropped from the basic cable platform if subscribers satisfaction fails to improve. This may mean total loss for business. TFC’s Central Strategic Issue
The company appears to lack a clearly defined business strategy. The company’s product-market focus is vague. For instance, TFC has not segmented its market into different segments. Alternative Strategic Promotional Courses of Action
There are a number of marketing courses of action at TFC’s disposal. The first one, and perhaps most important, is market segmentation. The company should divide its market into different segments and concentrate on maximizing the revenue for the segment of choice. According to the data provided in the case, a combination of Fashionistas (scored 23.1M) and Shoppers/Planners (scored 42.35M) segments appears the most economical alternative for TFC. The two categories of customers are highly involved in matters related to fashion and are thus a suitable target for the company. There is also economic benefit involved if the company opts to back the strategy.
Firstly, an admixture of the two segments yields a high profit margin (39%) in comparison to any other alternative. Besides, the alternative will trigger an increase in overall rating by 20%. There is a potential rise in the company’s rating from 1.0 to 1.2 consequently leading to increased revenue. In addition, this segmentation has the highest percentage of viewers 50% (=35% + 15%). The large number of viewers in two segments is thus suitable for the company, especially given that it entirely specialize in fashion programs. The problem with this alternative is that there is an increment in programming expenditure by $20 million.
The second alternative is broad-based marketing. This involves treating the entire market as a single group typified by customers with shared needs. The advantage of this strategy is that it is quite profitable at least in the short-run. Its adoption is likely to earn the company a net profit of more than $40 million (=$94.9 – 54.6). In addition, the approach does not attract incremental programming expenditure. On the other hand, the broad-based alternative will deny TFC the opportunity to earn premium CPM (Cost per thousand).
Alternatively, TFC can opt for Fashionista segmentation. Using 2007 as a base year, the alternative may rake for the company at least a net income of $100 million (=151.4 – 54.6). In addition, the approach is likely to boost the company’s overall rating from 1.1 to 1.2. The company will also be in a position to increase its charges from $2 to $3.5. Conversely, the Fashionista alternative will lead to an incremental expenditure of $15 million.
Decision and Implementation Plan
The new promotional plan should be positioned towards a combination of Fashionistas and Shoppers/Planners segment. Although there are a number of risks involved in this strategy, the returns are investing in the strategy. One of the greatest challenges for the company is maintaining the loyal customers while at the same time wooing new planners/shoppers and fashionistas. The company must come up with ways of ensuring that they do not lose some customers. This is achievable through evaluating the programs popular among the loyal customers and ensuring they are not disrupted by the new alternative.
The company can also benchmark with its customers to learn how they are able to attract a huge number of fashionistas. The fact that the alternative may lead to incremental $20 million expenditure presupposes that its implementation is quite expensive. Benchmarking with Lifetime and CNN can help reduce the cost. Finally, the company should devise ways to foster awareness, perceived value, and interest of its products among consumers. This can be achieved through online marketing and ensuring there is appropriate social media policy in place to avoid misuse of the marketing platform.