The Fashion Channel †Case Study

The Fashion credit line Case Study Exercise 1 What is expected outcome of from each one of the targeting scenarios? (complete both the Ad gross and Financial calculators to fully understand the fiscal impact of the scenarios) Exhibit 4 Ad revenue Calculator TV HH Average Rating Average Viewers (thousands) Average CPM1 Average tax revenue/Ad Minute2 Ad Minutes/Week Weeks/Year Ad Revenue/Year Incremental Programming Expense 1 Revenue/ kB Viewer 2 Calculated by multiplying Average Viewers by Average CPM Current 2007 Base Scenario 1 110,000,000 110,000,000 110,000,000 1. % 1% 1. 2% 1,100 1,100 1,320 $2. 00 $1,80 $1,80 $2,200 $0 $0 2,016 2,016 2,016 52 52 52 $230,630,400 $0 $0 $0 $0 Scenario 2 110,000,000 0. 8% 880 $3,50 $0 2,016 52 $0 $15. 000. 000 Scenario 3 110,000,000 1. 2% 1,320 $2,50 $0 2,016 52 $0 $20. 000. 000 Exhibit 5 TFC Estimated Financials for 2006 and 2007 Revenue Ad Sales Affiliate Fees heart and soul Revenue Expenses Cost of operations Cost of Programming Ad Sales Co mmissions Marketing and Advertising SGA Total Expense top Income Margin 2006 Actual 2007 Base Scenario 1 Scenario 2Scenario 3 Assumptions Insert scenario results from revenue calculator Grows 2% per year with population $230,630,400 $207,567,360 $249,080,832 $323,882,560 $345,945,600 $80,000,000 $310,630,400 $81,600,000 $81,600,000 $81,600,000 $81,600,000 $81,600,000 $81,600,000 $81,600,000 $81,600,000 $70. 000. 000 $72,100,000 $55. 000. 000 $55,000,000 $72,100,000 $55,000,000 $7,472,425 $60,000,000 $41,200,000 $72,100,000 $70,000,000 $9,686,477 $60,000,000 $41,200,000 $72,100,000 $75,000,000 $10,378,368 $60,000,000 $41,200,000Grows 3% per year with swelling Add incrementa l programming expense 3% of ad sales revenue Reflects attachd spending of $15M Growing with inflation 3% Spradsheet calcuates automatic eithery Spradsheet calcuates automatically Spradsheet calcuates automatically $6,918,912 $45,000,000 $40,000,000 $6,227,021 $60,000,000 $41,200,000 $216,918,912 $113,300,000 $1 13,300,000 $113,300,000 $113,300,000 $93,711,488 30% $54,640,339 19% $94,908,407 $151,496,083 $168,867,232 29% 37% 39% Exercise 2 Analyze the segmentation options and treat pros and cons of each.Broad-Based Marketing Pros When we comp are the Net Income of the base 2007, the broad-based Marketing segment exit deliver almost $40,000,000 more than. as well as by the investing in a major marketing and advertising campaign the Average Rating result ontogenesis from 1% to 1. 2%. A nonher avail of this segment is that it does not need any additional costs of programming, like the other both segments. Cons A disadvantage of this segment is that the competition would continue to penetrate the indemnity segments and further erode TFC? s pricing ability. In addition to that the sightly out CPM willing decrease $0,20 in comparison to the Current CPM.Fashionista Segmentation Pros An advantage of this segment is that the Net Income in comparison to the Net Income of the Based 2007 wi ll increase by almost $100,000,000. It is also strong in extremely leverd 18-34 distaff demographics. Because of this the CPM will decrease to $3. 50 because of strengthen the value of the audience to the advertiser. It is also strong in passing valued 18-34 female demographics. Cons To attract and retain the interest of this segment it is necessary to invest in new programming. This would mean they would have $15,000,000 more spending per year on programming. other disadvantage it is smaller than the other two segments and represents only 15% of househ gagas, this groundwork lead to a drop in the viewers of the other clusters. Another disadvantage is that the average Rating will decrease from 1. 0% to 0. 8%. Focus on the Fashionistas segment This segment was strong in the highly valued 18. 34 female demographic New programming are necessary to attract and retain the interest of this segment Spend 15$ million on programming Focus on Fashionistas, Planners and Shoppers and Situa tionalists Focus on Women aged between 18-24Fashionista plus Planners/Shoppers Segmentation Pros An advantage of this segment is that the Net Income will increase more than $100,000,000 in comparison to the Net Income of the 2007 Base. Also the CPM will increase to $2,5 because of a dual targeting. In addition to this the average Rating will increase from 1% to 1. 2%. Cons To ensure that in that location were selections aimed at both segments Wheeler needs to spend $20,000,000 more on programming. Because of the determination only on this two segments it can be that the fall of the loyal viewers of TCF will decrease.Exercise 3 If you were Dana Wheeler, what would you recommend and why? If I was Dana Wheeler I would recommend TCF that they should adopt Scenario 3. However, Scenario 3 has a hardly a(prenominal) disadvantages. For example the possibility to lose some loyal viewers and moreover TCF has to spend $20,000,000 more on programming which means investing a lot of money for them. But in my opinion, in Scenario 3, the benefits exceed the disadvantages. On the one hand through this Scenario the Net Income will increase more than $100,000,000. In addition to that the CPM will increase to $2,5 and the verage Rating will increase from 1% to 1. 2%. On the other hand 50% of all US Television Households consist of Fashionistas and Planners/Shoppers. In these two markets the 18-34 year old female audience represents 50% and 25% of the cluster respectively. TCF should therefore increase the advertising revenue. The Scenario 3 is better than the Scenario 2 because Scenario 2 only focuses on the Fashionistas and doesn? t include Planners/Shoppers which are also important to consider. Target at Fashionistas and the Shoppers/Planners Spend 20$ million on programming