Pros: Firstly, this segmentation focuses on the cluster audience, also aim to maintain the 18-to-34 year old female, who are the main targeting audience of TFC, and could give return to the advisor; because of their ability of purchasing and their desire of make/dress up. So the focusing of this scenario does not miss the main customer by the broad appeal based audience segment. Secondly, it increases the rating from 1. 0% to 1. 2%. The increase could be interpreted as more audience watching THC at a same timing; this shows the support of increase opportunity of the advertising information attached to more customer.
Meanwhile, it could help the TFC increase the advertisement price by argue that the advertising effect is increasing in TFC lead to the competition in advertiser. Cons: Obviously, the disadvantage under this scenario is the 10 percent drop of CPM, although it could make a higher advertisement revenue compare to the current one. The worse of the decrease is that TFC may not get enough viewership to maintain the 1. 00 dollar subscribe fee.
This is not only the chance to increase the probability that TFC’s competitor join the CPM competition, it may also lead TFC lose the chance to make growth in revenue while the viewership is one of the key points in the TFC revenue model of growth. Fashionistas segmentation Pros: It is easily to find out the higher net income in this segmentation compare to 2007 base, the result of nothing doing with market segment (151. 4 million dollar compare with 54. 6 million dollar, nearly 100 million dollar in gap). Another valuable improvement is the Fashionistas segmentation scenario increase the CPM increase (from 2. 0 dollar to 3. 50 dollar). The reason of the CPM increase is that the Fashionistas segment is mainly targeting in the Fashionistas, the highly engaged in fashion, have the thinking and enjoy attitude of fashion. The character of more female (61 percent), higher income (means stronger ability in purchasing), younger (18-to 34) and efficiency (140 in average viewer index) group of audience enhance the strength of advertising. In addition, because of the Fashionistas special program, TFC could increase its awareness; this may lead the increase rating in future.
Cons: Discuss in “size”, this group of audience is so “skinny”, only got 15 percent in the Fashionistas segment. The direct impact is the “rating” fellow down to 0. 8 percent, the lowest one compare to the whole three candidate scenarios. Discuss in “expenses”, the programming fee should add another 15 million dollars because of the “professional” audience. In this scenario, TFC should create more specific programs for the specific cluster audience, this may not so attractive for the potential “green hand fashion” customers.
Consequently, the “professional” program could not have some change; this could lead the miss of continually attractive advertiser. Fashionistas and the Shopper/Planners segmentation Pros: The two absolutely advantages of this scenario should be the highest advertising revenue (345. 9 million dollar) in compare to the three scenarios and the 2007 base; the rating increase from 1. 0 percent up to 1. 2. The wide range of targeting audience directly affects the enlarging of audience group. The CPM also increases from 2. 00 dollar to 2. 0 dollar. As the two revenue growth key point, more viewer and higher Ad prices, this scenarios are all qualified. The mix segmentation audience cluster catch half household viewing and market to the advertiser, the efficiency of the advertising feedback potential in these clusters are shown by their gender (female), age (younger) and attitude in fashion (higher engage in fashion even shopping). One more benefit should be the newly comprehensive fashion program could gain more view from the potential customers. Cons:
The largest disadvantage should be the expensive additional fee in programming. Because of the targeting scattered in two customer segment group, there should be more program for them to make sure the only half of customer in the cable market. There still much more competition from competitor provide more specific targeting program. Answer 2 As shown by the exhibit 4 and 5, the expected outcome of each of the targeting scenarios is as the following: Scenario I could get a net income as flat as last year’s, even with the increase of most generation operation fees.
Without the additional investment, this scenario tries to use getting more audience (increase rating) and sale more advertising (decrease price) to make revenue growth. Scenario II try to get more income with risky investment in additional programming fee and more narrow specific audience targeting. This could make TFC more professional and make the advertising information more efficiency. Scenario III expect the revenue growth by increase the viewer and sale more advertising even in high prices. The expensive programming investment was flatted by the larger group of audience subscribe fee and higher advertising price sale.
Answer 3 Decision The fashion channel should choose the marketing plan focus on the Fashionistas and the Shopper/Planners segmentation. Even this scenario calls for the highest additional programming fee (20 million dollar), the highest returns (net income estimate in this scenarios in 2007 should be 168. 9 million dollar, 180 percent of 2006’s) should bring the first the reason why should choose this scenario. The income is 8 times of the risky additional investment, 39 percent of revenue. How efficiency of the investment transfer into benefit!
As the analysis in the revenue model, the two most important points is increased viewership (rating) and increased advertising pricing. On the first hand, the Fashionistas and planners/shoppers cover up to about 50% of cable user or TV audience, shown by the exhibit 3. In this audience cluster, these younger (18-to-34) female audience share 50 percent and 25 percent in market segmentation of Fashionistas and the Shopper/Planners. The wide range targeting strategy makes the rating increase 0. 2 percent, means 220 more audience watching TFC at a same time point.
On the other hand, the CPM also will increase 50 percent (from 2. 00 dollar to 2. 50 dollar) under estimate of this scenario in 2007. The advertising sale revenue is 150 percent of 2006, the highest in the three scenarios (345 million dollar). Because of the more specific targeting, advertising would pay a premium CPM to reach them (female 18-to-34 who have thinking and enjoy attitude was represented by the Fashionistas and the Shopper/Planners segmentation). What is more, the last scenario got the highest margin. This shows the efficiency of the TFC operation in the investment.
It could be read as the higher the better performance of the organization. In the competition of the advertiser-searching, the higher margin could be help TFC seen as more credible. Answer 4 The arrange of discussion and meeting First, introducing the problem TFC faces—the revenue growth target, targeting specific group of audience, the CNN and Lifetime competition, risk in additional investment. Secondly, understand each data. No matter the current situation, the revenue model, the estimate model, and interpret these meaning. Thirdly, make sure the marketing objective. At last , compare three scenarios.