Case Report-1: The Fashion Channel
1) What is expected outcome of each of the targeting scenarios?
Scenario 1 :
Although average CPM decreases by .20, it gives opportunity of an increase in average rating of 1.2% with revenue $2,376 per minute from advertisements which yield advertisement revenue/year of $249,080,832. This figure is greater than current and base outcomes. This scenario brings no extra Incremental Programming Expense but with the increase of expenses as mentioned in exhibit 5, it yields $94,908,407 net income which is slightly higher than current outcome but much higher than base outcome.
Scenario 2 :
Despite the fact that scenario 2 comes with a reduction in average rating of .2% from the current year, it allows a huge increase in average CPM with $3.50 which brings advertisement revenue/year of $322,882,560. This figure is far greater than current, base and scenario 1 outcomes. With the expenses and extra Incremental Programming Expense of $15,000,000, it yields net income of $151,496,083 which is far higher than current, base and scenario 1 outcomes.
This scenario comes with the opportunity of both a higher average rating of 1.2% and average CPM of $2.50 than the current and base years which comes up with advertisement revenue/year of $345,945,600, not surprisingly higher than current, base, scenario 1 and scenario 2 outcomes. With the expenses and extra Incremental Programming Expense of $20,000,000, it yields net income of $168,867,232 which is much higher than all other outcomes. We see also the highest margin of 39% in this scenario. 2) Analyze the segmentation options and discuss pros and cons of each.
Scenario 1 :
Scenario 1 mainly targets to a cross segment of fashionistas, planners & shoppers and situationalists. Pros for this scenario include increasing awareness and viewing of the channel which over time deliver a ratings boost of 20%. But average cost...