The Fashion Channel Case

The Fashion Channel – Case Discussion Questions:

1. Why is The Fashion Channel interested in undertaking an STP analysis and implementing the resulting strategy?

The Fashion Channel (TFC) is looking to implement a new segmentation, targeting and positioning strategy because of the increasingly challenging market environment it finds itself in at this time. With the company looking to strengthen its competitive position by spending more than $60 million on a major advertising, promotion and PR campaign – a 33% increase over 2006 – the STP analysis and implementation strategy will be crucial to ensure that the funds are deployed effectively and that it sets them up for sustainable long-term growth.

There are a number of factors that have accelerated Dana Wheeler’s decision, beginning with the increasing competition the channel is facing. As evident from the case, this loss of market share in terms of viewership numbers, has been a result of TFC’s traditional strategy to not segment its target audience, and instead, appeal to as ‘broad a group as possible’ under the “Fashion for Everyone” theme. Without a dedicated STP strategy, TFC has not been able to establish a sustainable competitive advantage or brand loyalty, and given the significant lack of their points-of-difference, it has been easy for emerging rivals to replicate its offering.

In particular, well-established cable networks such as CNN and Lifetime have launched fashion-related programming that is gaining significant traction amongst advertisers and viewers. In fact, as highlighted by TFC’s Senior VP of Ad Sales, Norm Frazier, both the networks had been successful in attracting ad dollars because of the particular segments they were able to reach effectively – specifically, younger female viewers on Lifetime, and male viewers on CNN. This is especially threatening because both channels have higher ratings – 3.0 and 4.0 respectively – and Lifetime already has a higher percentage of viewers (43%) in one of the segments most coveted by advertisers – viewers aged 18-34 – compared to 33% of TFC’s audience in this segment.  

Given this scenario, TFC’s revenue model is under threat due to fierce competition for advertiser dollars and they face the prospect of needing to drop advertising prices on their channel by 10% if changes are not made in terms of their performance. With this and the viewer attrition, an STP analysis would go a long way towards establishing an attractive and targeted mix of viewers, which reach the segments of interest to advertisers.

As a result, since it is only possible to attain a premium CPM by specifically reaching a large number of highly valued viewers, and given the growing competition from bigger networks for ratings, an STP analysis and a dedicated segmentation strategy would put TFC on a trajectory towards growth by helping them build a sustainable competitive advantage.