How would you interpret the consumer and market data if you were Dana Wheeler? I would first try to see if I could classify the data into various segments. The fashion channel is very popular among women. Hence, I would differentiate between the women viewers based on age, spending capacity, fashion nerdiness, etc. These will become subsets of the superset “women viewers”. Once, I determine the segments I would look for any noticeable trends in the segments that will prove profitable for the business.
For example, some of the trends in the provided market data were: 1. Approximately, 15% of the women viewers were Fashionistas who give lot of importance to fashion and follow the trends closely. These consumers will spend a lot of money on fashion because they care for it (about 50% have an income more than $100k). 2. About 35% of the women viewers were Fashionistas and Planners/Shoppers. This segment consists of a more diverse consumer base. Serving this segment will definitely increase the ratings. Q 2) What is the expected outcome of each of the targeting scenarios? SCENARIO 1: Financial and Viewership: Since scenario 1 deals with a broader segment (Fashionistas, Planners & Shoppers, and Situationalists), the viewership is expected to increase. This increase in viewership will attract more advertisement deals. Hence, the overall ad revenue might increase as compared to 2006 (will depend on the rate of CPM). -SCENARIO 2: Financial and Viewership: Scenario 2 deals with a “laser” specific single segment. The risk associated with this segment is that there will fewer people comprising it.
If this number is less than the last year’s viewership, the viewership rating will drop. However, this scenario will attract ad deals which are willing to pay more CPM rates, hence, the net revenue will increase depending on the rating (0. 8% as compared to 1% in 2006). -SCENARIO 3: Financial and Viewership: Scenario 3 is much more balanced than scenario 1 and 2. Scenario 3 can be considered as the middle of the spectrum in which scenario 1 and 2 occupy the ends. Scenario 3 is neither “laser” specific nor includes a very wide consumer base.
Hence, there are ample chances of increase in viewership (increased to 1. 2% from 1% in 2006). Together with the increase in viewership, it will attract more CPM for ad deals as compared to scenario 1 and hence the net revenue will be more than scenario 1. At the same time, this increase in net revenue might match the net revenue of scenario 3 if the increase in viewers match the deficit caused by the reduced CPM in case of scenario 3. Q 3) Develop a factual analysis of the segmentation options, and evaluate the pros and cons of each. SCENARIO 1: Ad revenue/year saw a marginal increase as compared 2007 base. Cost of programming is the lowest. Pros: Increase in the number of viewers since the channel is catering to a wider audience. Cons: Since, there is no real change in the TYPE of viewers the ad deals will not have high CPM (thus reducing the net revenue). Also, this scenario will be most prone to the loss in market share when competitors can come up with better programs. -SCENARIO 2: Huge increase in ad revenue couple with increase in cost of programming, which brought down the profit margin.
Pros: Segment consists of viewers who show high interest in fashion and hence will attract more CPM. Investing $15 million in improving the programs and related content will increase ratings. Cons: Smallest of the four segments. It is risky to target just this group since viewership depends heavily on novel and interesting programs. Money has to be invested consistently to improve program content. SCENARIO 3: Huge increase in ad revenue couple with increase in cost of programming, which brought down the profit margin.
Pros: More wider audience and dual-targeting will ensure more viewership. The CPM is expected to increase from $1. 2 to $2. 5. Cons: Additional $20 million investment on program specialization. Q 4) If you were Dana Wheeler, what would you recommend and why? I would recommend scenario 3 for the following reasons: 1) Fashionistas have high interest in fashion and planners and Shoppers will ensure improve viewership. By incorporating both the segments the fashion channel can target both fashion-oriented and regular programming. ) Fashionistas will ensure CPM boost and planners and shoppers will ensure higher rating both of which will have positive influence on net income. 3) Although, additional $20 million was invested in creating new programs, the net income and profit margin was close to that of scenario 2. 4) Focusing on two segments will remove some possible risks associated with focusing on just one concentrate segment such as low ratings, etc. 5) By choosing scenario 3 it is easy convince the present leadership to make changes in the marketing strategy as compared to scenario 2.
Q 5) Dana is filling the role of change agent in this organization. How should she manage the discussion and meeting to be most effective in leading the group to make the right decision? I think Dana should choose scenario 3 over scenario 2. Although, the margins are almost the same for both the segments, it will be hard to convince the leadership to adopt scenario 2. This is because it will be a sudden change from the BROAD marketing strategy they got used to. Once, scenario 3 starts producing better results, it will be easier to convince the leadership to adopt scenario 2.
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