Once profits are lowered, the investment, improvement and competitive capabilities will also suffer demises. Similar to the previous case, a resolution could only be possible through the attraction of more viewers. "Wheeler knew that in order to hold or increase price it would be crucial to attract a critical mass of viewers who were interested in the network's content and were also attractive to advertisers" (Stahl, 2007).
3.
In order to achieve the established desiderates of increasing the popularity and competitiveness of The Fashion Channel by making it more appealing to wider customer palettes, the senior vice president of marketing has identified three possible scenarios. The first sees a segmentation of the customer-based with the aid of traditional techniques. The second focuses on Fashionistas (smallest in size but the most intensive), whilst the third possibility sees a combination of two categories -- Fashionistas and shoppers / planners. Each of these scenarios reveals both advantages as well as disadvantages. In this order of ideas, the broad-based segmentation has the primary benefit of promising 20% increases in ratings (from 1 to 1.2) as awareness and popularity of the television channel would continually increase through the development and implementation of marketing, advertising and programming strategies. On the other hand, the limitations rely in that the endeavor has limited to none abilities to protect the organization against the threats of intensified competition. Additionally, it is possible that the CPM will register a 10% decrease, which is more than the expected growth in ratings can cover.
The second possible alternative sees the focus on Fashionistas and has the primary advantage of addressing an intense and highly responsive segment. "It was smaller than the other segments, representing only 15% of...
Wheeler estimated that this strategy could deliver a rating of 0.8" (Stahl, 2007). Finally, the combined approach of Fashionistas and planners / shoppers is based on the financial theory of portfolio diversification. Otherwise put, by addressing a combined target market, the company will be able to maximize gains and minimize risks. More specifically, Wheeler believed that the combined approach would stand the possibility of increasing ratings to 1.2, while a simultaneous increase of $2.50 would be registered for CPM. The disadvantage relies however in the significantly higher costs of this approach as it would require an additional $20 million.
5.
Of outstanding regards is the fact that the third alternative requires an additional $20 million in investment money, but it is however promising to generate significant and sustainable revenues. Yet, a detailed financial analysis reveals that the actual return is a negative one, at least in the first year of operations. The same is true for the first alternative, the second scenario (the focus on Fashionistas) being the only one to reveal profits from the first year. Yet, this implies few changes to the current way of conducting business. In other words, despite the negative net profits of the endeavor, the recommendation is that the company follow the third scenario, which will generate favorable returns in the years to come and will increase the company's popularity, strength, recognition and competitive edge. In positioning itself, the Fashion Channel must consider the new types of audiences it strives to attract.
Reference:
Stahl, W., 2007, The Fashion Channel, Harvard Business School Publishing,
