Tfc Market Data

1. How would you interpret the consumer and market data if you were Dana Wheeler?

By looking at the data, I will be able to identify certain market segments that make up the most important customer base. Since TFC revenue model is largely setup around ads and CPM multiplier, TFC can position itself differently depending on the target market segments. As per the case, the most profitable social groups that the advertisers are looking for are female audience from 18 to 34 years of age and male viewers from all ages. From the data, we can see that competition is doing better than TFC in those areas, since Lifetime is focusing on the young female demographic group, while CNN is highest of the three in the general male group.

However, TFC was positioned as niche channel focusing on one type of industry; yet it still catered to a wide range of demographics offering a comprehensive fashion programs for almost everyone. Using the data, TFC found that there are four main segments that make up the overall customer base. Those segments are: the Enthusiasts (Fashionistas), the Planners/Shoppers, the Situational shoppers and the Basic viewers; where those accounted for 15%, 35%, 30% and 20%; respectively. By knowing the segment, what they represent to both TFC (and more importantly advertisers) and how we can position ourselves using them, we can build a better revenue model using the segment power of each group in a way that can reach our goals of: boosting ratings, increasing the CPM revenue potential and using this to distinguish TFC from the competition.

2. What is the expected outcome of each of the targeting scenarios? (Complete both the Ad Revenue and Financial calculators to fully understand the financial impact of the scenarios.)

First there is the base case, which will result in a forecasted decrease in ads profits by 10% reaching $207 million in 2007 thereby decreasing total revenues by around 7% to reach $289 million and also decrease margins by around 42% to reach 19% of total revenue after the original 30% in 2006. However, the other three scenarios have different and more favorable outcomes. The first scenario focuses on three out of four segments. The financial outcome of this is an increase in total profits by 6.45%, reaching a forecasted $330.7 million matched by a minimal increase in net income (1.3%) but a 5% lower margin. The second is scenario focuses on the Fashionistas. This is approach expected to yield an increase in profit by 30% reaching $404.5 million and an increase in margin by 24.2% to reach $151.4 million or 37% of revenues. The Third scenario focuses on the Fashionista and planner/Shopper segments and is expected to yield a 37.6% increase in profits reaching $427.5 million, and an increase in profit margin by 30.9% and a net income of $168.9 million or 39% or revenues.

3. Develop a factual analysis of the segmentation options, and evaluate the pros and cons of each.

Base option: If TFC did not make any changes, there is a risk that the CPM will go below $2.00 reaching $ 1.8 because of losing appeal to the cable networks as well as market share; this will cause a decrease in the original profits. As a result TFC plans to avoid this scenario using the actual three scenarios. Pros: the stable rating of 1.0% and covering all markets without specialization. Cons: expected decrease of average CPM to reach $1.8, increase in overall costs and marketing costs resulting in decrease in sales and narrow margins. There is a possible loss of customers to competition on both the short run and the long run.

First option: in this scenario TFC will focus on the first three segments. Pros: By focusing on the main viewers that collectively account for 80% of the total viewers, TFC is expected to increase the average ratings by 20% (to become 1.2%) yielding a total profit of $330.7 million and margins of 29% for that period. There are no additional investments in programming or custom advertising, aside from what the management announced in marketing expenses.

Cons: Although there is an increase in average rating