Marketing Management II (MARK 301)

Assignment #3

“Evaluation of Alternatives” and “Recommendation and Rationale”

Ariana Pineda Tomé

Student ID: 40171402
Professor Adam Di Stefano
 Section 1: Identification & Evaluation of Alternatives

Alternative #1: Broad Appeal

PROS CONS
- No incremental costs for programming (we can - Competition may continue to penetrate the
maintain our average CPM of $1.80) premium segments and erode TFC’s pricing
ability

- Broadest target customer base (80% of total) - It is not possible to sustain current prices if the
mix stays the same; a drop of 10% or more might
be needed

- Increment in average rating (20%) and average - The expected rating boost might not occur
viewers (220 thousand)

Alternative #2: Single-Segment Focus (Fashionistas)

PROS CONS
- Stronger presence of the most lucrative market - Smallest market segment, represents only 15%
segment (women aged 18-34), potentially of the total market
increasing ad premiums

- Audience value towards ads would strengthen - Reducing the current customer base (34-65) for
the niche segment of fashionistas will cause a
drop of 20% in rating

- Niche programming and marketing is possible - CPM has a projection to increase by $1.70

- Requires a significant shift in strategy, which

could lead to challenges in leading due to
management's resistance to change

- An estimated additional spending on the

programming of $15,000 per year
2.1
 Alternative #3: Dual-Segment Focus (Fashionistas + Shoppers and
planners)

PROS CONS
- Broader customer base (50% of the total) - CPM has a projection to increase by $0.70

- Two valuable segments, easy to cater to as a - An additional $20 million on programming would
group and maximize ad revenue from both be necessary to ensure both segments are being
addressed

- An increase in rating of 20% - Could lead to a dilution of the marketing

message if not managed carefully

- Takes advantage of TFC’s decent survey ratings - Requires a shift in strategy, which could lead to
challenges in leading due to management's
resistance to change

Section 2: Decision Criteria

Decision Alternative #1: Alternative #2: Alternative #3:

Criteria Broad Appeal Single-Segment Double-Segment
Market Segment MODERATE HIGH HIGH
Attractiveness

Revenue Potential HIGH HIGH VERY HIGH

Execution Feasibility HIGH MODERATE MODERATE

Promotion Cost LOW HIGH VERY HIGH

TV Ratings HIGH LOW HIGH

➔ These criteria are selected to ensure that the recommendation is not only
strategically sound but also practically feasible, with a clear focus on
financial outcomes and market positioning.
 Section 3: Recommendation and Rationale

Considering the Fashion Channel SWOT analysis and decision criteria, I

recommend choosing strategy #3: Double-Segment Focus (Fashionistas +
Shoppers and Planners). Alternative #3 yields the highest profitability with a
margin of 39% compared to alternative #1 & 2 (19% & 37%) and the highest net
income, $168,870,00. This approach takes advantage of TFC’s existing
strategies, such as its current 75% market penetration and readiness to invest in
massive advertising, while addressing its main weakness: the lack of precise
market segmentation. With this approach, they would be targeting the premium
segment (females between 18-34), making competition to CNN and Lifetime.
They will be able to increase customer loyalty, which in the long run might lead
them to spend less on marketing. It permits the corporation to segment with
minimum risk because it is broader than alternative two but narrower than
alternative one, meaning that it would not be a drastic change from the current
situation for management to implement. This dual focus covers the strong
interest in fashion and shopping mentioned in the survey, tapping into TFC’s
most enthusiastic viewers.
APPENDIX
 Exhibit 4: Ad Revenue Calculator

REVENUE CALCULATOR Current 2007 Base Scenario 1 Scenario 2 Scenario 3

TV HH 110,000,000 110,000,000 110,000,000 110,000,000 110,000,000

Average Rating 1.0% 1.00% 1.2% 0.8% 1.2%

Average Viewers (Thousand) 1100 1100 1320 880 1320

Average CPM* $2.00 $1.80 $1.80 $3.50 $2.50

Average Revenue/Ad
Minute** $2,200 $1,980 $2,376 $3,080 $3,300

Ad Minutes/Week 2016 2016 2016 2016 2016

Weeks/Year 52 52 52 52 52

Ad Revenue/Year $230,630,400 $207,567,360 $249,080,832 $322,882,560 $345,945,600

Incremental Programming
Expense NA NA $15,000,000 $20,000,000
 Exhibit 5: TFC Estimated Financials

FINANCIALS 2006 Actual 2007 Base Scenario 1 Scenario 2 Scenario 3

Revenue

Ad Sales $230,630,400 $207,570,000 $249,080,000 $322,880,000 $345,950,000

Affiliate Fees $80,000,000 $81,600,000 $81,600,000 $81,600,000 $81,600,000

Total Revenue $310,630,400 $289,170,000 $330,680,000 $404,480,000 $427,550,000

Expenses

Cost of Operations $70,000,000 $72,100,000 $72,100,000 $72,100,000 $72,100,000

Cost of Programming $55,000,000 $55,000,000 $55,000,000 $70,000,000 $75,000,000

Ad Sales Commissions $6,918,912 $6,230,000 $7,470,000 $9,690,000 $10,380,000

Marketing & Advertising $45,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000

SGA $40,000,000 $41,200,000 $41,200,000 $41,200,000 $41,200,000

Total Expense $216,918,912 $234,530,000 $235,770,000 $252,990,000 $258,680,000

Net Income $93,711,488 $54,640,000 $94,910,000 $151,490,000 $168,870,000

Margin 30% 19% 29% 37% 39%

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