The Fashion Channel
Dana Wheeler, senior vice president of marketing for The Fashion Channel (TFC), sat in her Chicago office and scrolled through the email messages in her inbox. Thankfully, none required an urgent reply. She toggled over to her calendar: no meetings for the rest of the day. Finally, she could focus her thoughts on reviewing her recommendations for TFC's new segmentation and positioning strategy.
Wheeler believed that she had prepared a solid analysis; she felt confident about the strategy she was proposing. But next week's senior management meeting would mark her first big presentation to the company's leaders since she had joined TFC, and, she admitted to herself, she was eager to gain the support of her colleagues.
There was a lot riding on the outcome of this meeting, both for Wheeler and for the channel. If founder and CEO Jared Thomas and his team liked what they heard, Wheeler would move forward to implement her recommendations. The company needed to strengthen its competitive position and would be spending more than $60 million in all national and affiliate advertising, promotion, and public relations in 2007, based on these recommendations. This would be an increase of $15 million over 2006 spending.
TFC was a successful cable TV network- and the only network dedicated solely to fashion, with up-to-date and entertaining features and information broadcast 24 hours per day, 7 days per week. Founded in 1996 by two entrepreneurs, it had experienced constant revenue and profit growth above the industry average almost since the beginning. Revenues for 2006 were forecast at $310.6 million, marking another steady upswing.
The channel was also one of the most widely available niche networks, reaching almost 80 million U.S. households that subscribed to cable and satellite television.1 Women between 35 and 54 years were its most avid viewers, according to its annual demographic survey. But beyond basic demographics, the channel didn't have much in the way of detailed information about its viewers.
Nor did it attempt to market to any viewer segments in particular. From the beginning, in fact, Jared Thomas had believed that TFC's marketing messages should appeal to as broad a group as possible in order to achieve the highest possible viewership numbers. Early on, the network had chosen “Fashion for Everyone” as the theme for its marketing programs; one of its more popular series in 2005 had been “Look Great on Saturday Night for Under $100.”
TFC had clearly grown quickly without articulating any detailed segmentation, branding, or positioning strategy. However, at the beginning of 2006, the network realized that other networks were taking note of its success and beginning to add fashion-related programming to their line-ups. TFC was facing competition that could provide meaningful choices to both viewers and advertisers. By June 2006, these new competitive dynamics had prompted Thomas to rethink his approach to marketing. At the quarterly executive meeting that month, he told his senior team: “It's time for us to build a modern brand strategy and secure The Fashion Channel's position as the market leader. I want to use marketing to lay a foundation for future growth.” At the same meeting, Thomas had announced plans to sharply increase TFC's investment in advertising and to hire an experienced marketer to develop marketing and brand-building programs to support TFC's continued growth.
Enter Dana Wheeler, in July 2006. Wheeler had a strong background in marketing for packaged consumer products as well as broad experience in the advertising industry. Thomas expected that Wheeler would draw on these strengths to help TFC build on the momentum it had created to date and stave off any competitors trying to make inroads. Still, he and some of the other members of the leadership team felt an urge to resist change. The network had been highly successful to date and no one wanted to “break something that isn't broken.”
Wheeler turned back to her computer, opened up the slide-deck presentation she had created, and started reviewing it. As she began to page through the materials, she was thinking about the trends in the advertising marketplace that Norm Frazier had been talking about in the sales forecasting meeting this morning.
Frazier, senior vice president of Advertising Sales, had warned that TFC might need to drop the price for a unit of advertising next year by 10% or more if the network did not make some changes in its performance. He mentioned that both Lifetime and CNN had launched fashion-specific programming blocks that were achieving notable ratings (Exhibit 1). Frazier was a high-energy salesman who had personally built the strong ad sales performance of the channel. He was justifiably worried. Wheeler had left that meeting acutely aware that next week's executive session wasn't coming a moment too soon.
Wheeler knew that in order to hold or increase price it would be crucial to attract a critical mass of viewers who were interested in the network's content and were also attractive to advertisers. The key would be targeting the right viewers and offering advertisers an attractive mix of viewers when compared with what competitors were offering. Wheeler believed she had good market data that would give her insights into the options for identifying the right segments for TFC. At the same time, she knew that the network needed to maintain its overall audience ratings with the cable consumers and the cable affiliate distribution network. If the network changed its offerings in a way thatdisappointed too many cable subscribers, it could risk losing its distribution support.
Wheeler clicked to the slide that outlined the marketing tools in her arsenal, and then clicked to a slide near the end of the presentation that revealed an aggressive implementation schedule. Her plan was to build a strategy for segmentation, and use it as a base to employ all of the marketing tools— traditional and internet advertising, public relations and promotions—to reach the target consumers with integrated positioning messages. She also knew that it would take time to create and launch all the elements of a well-integrated marketing program and that there was no time to waste.
She moved back a dozen slides or so, opening the ones that summarized TFC's revenue stream from advertising sales and the slides that considered its revenue stream from cable-affiliate fees. Thomas and the rest of the senior management team knew this data as well as she did, she assumed. Everyone felt that advertising was TFC's primary growth opportunity. She wanted to think about her key messages one more time to ensure her recommendations would support building revenues as aggressively as possible.
TFC's Advertising Revenue Model
First, she reviewed TFC's advertising revenue model. TFC was on target to generate $230.6 million in 2006 from advertising. The advertising business model was built on attracting a mix of male and female viewers on a regular basis as measured by “ratings” (the percentage of television households watching on average during a measured viewing period.) Across the entire schedule, TFC's average rating was 1.0. With 110 million television households in the United States, this meant that on average 1,100,000 people were watching at any point in time.2
TFC's Ad Sales team sold access to these viewers via advertising spots (30 or 60 seconds in length) to a variety of well-known consumer marketers ranging from cosmetics companies to brand name clothing designers and automobile manufacturers. There were usually six minutes of national ad time in each half hour of programming, 24 hours per day for a total of 2,016 minutes per week. Wheeler knew from industry studies that, in 2006, U.S. consumer advertisers spent almost $20 billion buying spots on cable networks such as TFC. Because there were several hundred cable networks competing for viewers and the related ad dollars, competition for ad revenue was always fierce across all the networks.
While competition was intense for advertising overall, TFC remained the only network dedicated to fashion programming 24 hours per day, 7 days per week. This set up an interesting competitive dynamic. TFC needed to compete against a broad range of networks for advertising revenues. For these networks the ad buyers would be most interested in buying ratings and demographics, and less interested in specific programming subjects. At the same time TFC competed against other fashion- oriented programming that would appeal to advertisers who specifically wanted to participate in that programming context. The strong fashion programming blocks on Lifetime and CNN represented a double-edged competitive challenge. And if successful, more networks would likely copy the concept, skimming more viewers and ad dollars from TFC.