(1) Dana Wheeler, responsible for the marketing strategy at The Fashion Channel, found herself in a tricky situation;

where she should try and interpret market and consumer data. The market clearly shows signs of TFC s leader position eroding; before, it was the only fashionrelated channel on cable television, and thus, it would draw all viewers interested in this topic. Now, however, CNN and Lifetime have introduced their respective counterparts ( Fashion Tonight and Fashion Today ), which are serious threats to TFC s unique position. However, TFC is still a 24/7 fashion-dedicated channel, whereas the two competitors only introduced a single programming slot; yet, it is the start of possibly declining market share and thus, profits. Furthermore, these competitors are luring away profitable consumers in terms of advertising revenue: Lifetime heavily appeals to the most desirable target group of women between age 18 and 54; whereas CNN appeals to the male segment more than TFC does. Here, the market data can be interpreted to show TFC s relatively weak position: compared to Lifetime and CNN, it becomes obvious that The Fashion Channel is not a market leader in any of the segments: Male viewers are lured away by CNN, whereas more female viewers prefer Lifetime (63% over 61%). Age wise, TFC is not a leader in the younger segment of 18-34, where Lifetme scores a much higher percentage (43% over 33%), and also the viewers over age 54 do not have TFC as their preferred fashion channel: choosing CNN s Fashion Tonight instead. The only age segment where TFC has the highest viewer percentage is the group between 35-54; where TFC scores 45% against respectively 42% and 40% of Lifetime and CNN. In terms of overall rating, TFC s market penetration is lower than that of its competitors a rating of 1.0, indicating 1.1 million households; as compared to 3.3 million reached by Lifetime, and 4.4 million by CNN. Analysis of this market data shows that TFC is more of a niche channel, reaching a subset of the population reached by the competitors; as well as being in a weak position as compared to this competition, who score higher in the most desired market segments. As for the analysis of consumer data; Dana Wheeler should start off by looking at the size of the clusters. This shows that there are two relatively large segments being the Planners & Shoppers and Situationalists; the two of which have several things in common; like being people who enjoy shopping, consider fashion something practical , and are mainly interested in value. This combined group comprises almost two thirds of the total population; whereas the Fashionistas who thoroughly enjoy shopping and see fashion as their hobby get 15% of this pie; and lastly, the Basics who do not care about fashion at all are left with 10%. An interesting observation prompted from the consumer data, is that the Fashionistas group is largely composed of females between the ages 18-34: 61% and 50% respectively. Also, their income is relatively high exceeding $100k in 30% of the cases. The opposite group of Basics, however, shows a larger male segment (55%); and these extremes are balanced out for the Planners & Shoppers and Situationalists whom are closing in on a 50/50 male-female ratio; as well as a more balanced distribution over the age groups.

What this consumer data concretely means, is that there are two opposing groups: one who cares passionately about fashion and sees it as something entertaining, being the Fashionistas and the other who does not care about fashion at all and is purely interested in value the Basics. The first group mainly consists of females between 18 and 34 with higher incomes; and the second is mostly male. Then, there are two groups in the middle who either participate in fashion on a regular basis, or only participate for specific needs; this group is moderate in terms of age and gender with the specific needs group showing many respondents with children, indicating that children might cause fashion behavior to become situational. (2) Mrs. Wheeler has three segmentation options coming out of the previous analysis; the pros and cons of which are given below.

Segmentation option 1 Cross-segment broad appeal Consists of Fashionistas; Planners & Shoppers; and Situationalists. Pro: * Will not alienate any of the current viewers and will thus keep total viewer rating up, or even increase this number from 1.0 to 1.2 as the case indicates. * No need for additional spending in program development to fit a new segment as this segment is already currently being served and very middle-of-the-road . Con: * Will not increase Ad Sales, but instead decrease it to $1.80 CPM as the segment being targeted is not particularly high-aimed at (not exclusively Fashionistas, for example) instead remaining rather broad, not tempting advertisers to pay more to have their ads placed. * Competition may continue to snag away profitable segments out of this group (for example, keep on aiming at the Fashionistas who are very desired by advertisers); decreasing potential ad revenue even further.

Segmentation option 2 Full Fashionistas Consists of Fashionistas only Pro: * Targeting segment most valued by advertisers, thus will bring in most advertising revenue; up to $3.50 CPM, significantly higher than the current number. * Will target those who are seen as Fashion leaders and thus give the channel an exclusive appeal, comparable to the status Vogue magazine has for example.

Con: * Will result in alienated audiences: only targeting Fashionistas will drive away other viewers, and will thus decrease viewer rating (to 0.8 or 800k households). * Requires new programs to be introduced to the channel specifically aimed at this target segment; this process will be costly in development

Segmentation option 3 Two Segments Consists of Fashionistas and Shoppers/Planners Pro: * Will target a large enough segment to avoid losing viewer rating; in fact, might increase to 1.2 (or 1.2 million households) over time * Still is more exclusive in that in targets highly valuable segments, and thus, advertisers will be willing to pay a higher CPM of $2.50 Con: * Will be even more costly than scenario 2 when it comes to development of new programs aiming at both of these segments

(3) Having evaluated these three alternatives; we would advise Dana Wheeler to try and convince the executives that scenario 3 is the best alternative; where TFC would be aiming at Fashionistas and Shoppers/Planners. There are two reasons for this: one financial, and one marketing-wise. Financial, in that this scenario simply results in the highest net profit and profit margin: See the table below for calculations. | Scenario 1 | Scenario 2 | Scenario 3 |

Revenue(Ad Sales and Affiliate Sales)

| $330,680,832 | $404,482,560 | $427,545,600 | | $235,772,425 | $252,986,477 |

Expenses(Fixed Cost, Commissions, and Programming Cost) $258,678,368 | Net income

| $94,908,407 | $151,496,083 | $168,867,232 |

This indicates that even though Scenario 3 has the highest costs; mainly caused by the higher Programming Costs; it also has by far the highest revenue, as measured by total ad sales and television network affiliate sales. This leads to a net income of almost $170 million the highest out of the three.

The second, more strategy oriented, reason for Scenario 3 is that this is the smart way in-between the competitors and the current strategy. It does not go the most radical route by only aiming at a very small segment (Scenario 2); yet, it does step away from the strategy of one-fit-for-all (what Scenario 1 is basically still a subset of). Scenario 3, on the other hand, still targets a segment large enough to still leave room for growth in viewer ratings; while simultaneously increasing Ad Revenue as the segments targeted are more desirable to advertisers. The cost of developing programming to suit those segments needs are more than fully offset by the increase in ad revenue it will generate; plus, it will be a very smart move when looking at the competitive landscape: it will leave little room for misunderstood customers who will move to a different channel as a result of feeling mis-targeted; yet, it goes head-to-head with especially Lifetime for the valuable segment of women between ages 18 and 54. Thus, by targeting Fashionistas and Shoppers/Planners, The Fashion Channel will find itself making the best marketing decision; and lay the best foundation for the future, preparing itself for the upcoming competition by targeting the widest range of highly valued viewers.