The Fashion Channels CPM was $2.00. By increasing the ratings in highly valued demographic groups, The Fashion Channel could achieve CPM pricing increases from 25% to 75%. Competitor Information: The Fashion Channel has two biggest competitors: CNN and Lifetime. For male segment, The Fashion Channel (39%) is facing with CNN (45%).
For female segment, Lifetime is the biggest competitor with 63% while The Fashion Channel is 51%. Besides, CNN and Lifetime had higher customer satisfaction scores than The Fashion Channels in research. On consumer interest in viewing, The Fashion Channel had scored 3.8 while CNN had scored 4.3 and Lifetime had scored 4.5.
On awareness, The Fashion Channel was at 4.1 while CNN scored 4.6 and Lifetime a 4.5. On perceived value, The Fashion Channel was 3.7, CNN 4.1 and Lifetime 4.4. Fashionistas: the group had a high degree of interest in fashion. However, size of cluster is 15%, it would strengthen the value of the audience to advertisers, with a likely increase in CPM.
Thus, Fashionistas is the main group The Fashion Channel focus on. Planners and Shoppers: the group has highest size of cluster (35%). They stay up to date, enjoy shopping, and are interested in value. It would be a potential group. Situationalists: the group has size of cluster 30%. They shop for specific needs, specific situations, and fashion is both entertaining and practical.
2. The pros and cons of three primary options presented A broad multi-cluster (Fashionistas, Planners & Shopper, and Situationalists) + Pros: The Fashion Channel would be investing in a major marketing, advertising campaign, and programming, awareness and viewing would go up and rating would increase from 1.0 to 1.2. This strategy enables company to increase the number of viewers and follow the theme for marketing programs Fashion for Everyone. + Cons:
Because The Fashion Channel would not focus on specific audience, CPM would decrease from $2.00 to $1.80 and this option would have the smallest ad sales $249,080,832, net income $149,908,407, and profit margin 29%. Fashionistas segment
This strategy would focus on single group and attract highly valued viewers, so CPM would go up from $2.00 to $3.50, and revenue would increase. Ad sales $322,882,569, net income $151,496,083, and profit margin 37%. + Cons:
Because Fashionistas is the smallest cluster (15%), it is very risky for The Fashion Channel to focus on only this group. This strategy would decrease viewers and the rating would drop from 1.0 to 0.8. Besides, The Fashion Channel also would spend an additional $15 million per year for programming cost. Two segment: Fashionistas and Planners & Shoppers
The Fashion Channel would focus on two groups having highest interested fashion index (140 & 110) and having 50% size of cluster ( 15% & 35%) so it would improve both the rating ( from 1.0 to 1.2) and CPM ( from $2.00 to $2.50). As a consequence, this strategy would have the biggest ad avenue $345,945,600, net income $168,867,232, and profit margin 39%. + Cons:
This option would expense the biggest cost with additional $ 20 million. Moreover, this plan just focus on only two segments (50% households) so it discourages loyal viewers in other segments and the rating would decrease.
Based on pros and cons of those scenarios above, The Fashion Channel should choose the third scenario which is the most appropriate long-term strategy. In the first option (a broad multi-cluster), the target group is too broad causing CPM decrease from $2.00 to $1.80 and in the second option (Fashionistas segment) The Fashion Channel focus only on one smallest group (15%) causing the rating go down from 1.0 to 0.8, while focusing on two segment
( Fashionistas and Planners & Shoppers) which have highest interest in fashion and have 50% size of viewers enable The Fashion Channel to attract more viewers resulting in both the rating and CPM go up (the rating from 1.0 to 1.2 and CPM from $2.00 to $2.50). Although the third scenario expenses the highest programming cost with additional $ 20 million, it still have the biggest net income ($ 168,867,232) and profit margin (39%). Therefore, the third scenario is optimal plan for The Fashion Channel to grow revenue by increasing viewers and advertising pricing.