Case study Analysis: The Fashion Channel

Introduction:

“The Fashion Channel” which is a successful cable TV network and which had been started by two entrepreneurs in 1996, with up to date and entertainment features and information broadcast 24×7 which was related to fashion only.

The channel was actually dedicated to fashion only and its main audience were women of 35-54 age group. Earlier TFC’s tagline was “Fashion for Everyone”  In 2006 TFC has earned the revenue of $310.6 Mn out of which their target was to earn a profit of $230 Mn only through advertisement. Till 2006 TFC was the market leader in fashion related programs and one of its more popular series in 2005 had been “Look Great on Saturday Night for Under $100.

In 2006 TFC has realized that some of the other channels like CNN and Lifetime are following the footsteps of TFC and also they are telecasting the programs related to the fashion world, which were now started to become more popular in comparison to the programs of TFC. These channels were giving competition to the TFC directly by taking the share of its ad revenue; these channels were giving a double edged competition to TFC.

Norm Frazier, senior vice president of advertising sale, advised that in order to increase the TFC’s ad revenues either TFC has to decrease its ad pricing by 10% or to increase its viewership by improving the quality n contents of the programs.

There were around 110 Mn households in USA with cable network and TFC’s average rating was around 1.0, this meant that on average 1,100,000 people were watching at any point in time. Advertising slots were divided in two slots i.e. of 30 seconds and 60 seconds and There were usually six minutes of national ad time in each half hour of programming, 24 hours per day for a total of 2,016 minutes per week. The network based ad unit prices on several factors, which advertisers also monitored, including the number of viewers , the audience’s characteristics i.e. age, demographics, and lifestyle, and general competitive trends. Prices were expressed as CPM (cost per thousand), which represented the price that an advertiser would pay for an advertisement.

There were two main source of generating revenue for TFC and that was one by ad revenue and another was through cable affiliation fee. Most U.S. households subscribed to cable television through local affiliates of a large cable multi-system operator, multi-system operators (MSO) would sign multi-year contracts with networks that specified the fee the network would receive for each household that received the channel. The local affiliates of that MSO marketed and distributed the service to consumers in all the local markets for which they held a franchise.

There were mainly two kinds of channel were existing  and that was premium channel or basic channel and TFC was a basic channel so most consumers received it automatically when they signed up for basic cable service.

Competitive threats:                         

 CNN and Lifetime were the two biggest threats for the TFC because there ratings were also higher in comparison to TFC. TFC has rating of 1.0 throughout whereas CNN had the rating of 3.3 and Lifetime had 4.4. The study showed that TFC was facing additional competitive challenges in its attractiveness to cable affiliates. On a scale of 1 to 5, TFC had achieved a 3.8 rating on consumer interest in viewing, while the two competitors with new fashion programming had scored higher: CNN had scored 4.3 and Lifetime a 4.5 On awareness, TFC had scored 4.1 while CNN scored 4.6 and Lifetime a 4.5. On perceived value TFC was at 3.7, CNN 4.1 and Lifetime 4.4. This was resulting on their ad revenues also that was the main reason why higher officials of TFC were concerned that others were taking away their market share of ad revenues.

The reason they were found was that they  had not segmented their market they were doing it without any detailed segmentation, branding, or positioning strategy.

Now they were thinking to do a proper market segmentation so that they could  approach to the right customer with the appropriate information and message. TFC needs to identify the customer groups that are most worth the effort to pursue. Fr that they use market research not only for demographic data but also to study consumer behavior and attitudes—how viewers use the network, what they value, and what needs they have.

For this market research they hired a research company called GFE associates, The researchers had asked a national panel of consumers more than 100 questions about their attitudes toward fashion and TFC as a way to understand the needs that the network served. GFE associates then constructed profiles for clusters of consumers who had common attitudes and needs. The report suggested four unique groups of viewers: Fashionistas, Planners & Shoppers, Situationalists, and Basics.

Now according to the result of this survey , Dana proposed three proposals in front of the CEO, Jared Thomas and then  they tried to find out the most suitable option out of these three. These scenarios were like

Scenario1:
Develop a multi-segment strategy, and focus on Fashionistas, Planners & Shoppers and Situation lists between the women aged 18 to 34.

Advantages:
Through implementing various marketing tools on new target segment, the rating will increase from 1.0 to 1.2, leading to the increase in average viewers.

 Disadvantages:
Since there is no real change in viewers’ type and programming, the CPM will drop by 10% or more and competitors will continue taking its market share.

Scenario2:
Focus on the Fashionistas segment and spend $15 million on programming. (Single segment concentration)

Advantages:
This segment shows the highest interest in fashion and is strong in high valued 18-34 female demographics, which will deliver a CPM boost. With $15million on content improvement, it will attract more target consumers.

Disadvantages:
 Fashionistas is the smallest segment in four clusters. It is risky if only target at this group and the average viewers will decrease as well. It also needs additional expense to change the programming which will bring upset to subscribers and employees.

Scenario3:
Target at both Fashionistas and Shoppers & Planners clusters and spend$20 million on programming. (Product specialization)

Advantages:
Dual-targeting will ensure the average viewers and rating. It is expected that rating will grow to 1.2 while CPM will come to $2.5.

Disadvantages:
There is additional $20 million should be draw from the net income.

Recommendations:
After carefully looking at the advantages and disadvantages of the three options, It is recommended that Scenario3 is the best solution for Dana. First, the Fashionistas has superior interest in fashion while the Planners & Shoppers has the largest cluster size. The combination of them will exert TFC’s potential (professional and full-time) into full play to compete with both fashion-oriented and regular programming.

Second, the Planners & Shoppers will improve the rating, in order to attract more ad buyers and at the same time, the Fashionistas will enhance the CPM to gain more ad revenue .
Also if we calculate it in revenue term the we find from the ad revenue calculator (Exihibit 4) the total ad revenue from scenario1 scenario2 and scenario3 are $249080832, $322882560 and $322882560 so from here it is clear that Scenario 3 gives the more revenue and also  from Exihibit 5 Net income in case of scenario3 is $283867232 i.e. more than the other two options, so from here also we can derive a conclusion that  scenario 3 is the best suitable option for the TFC. Targeting at two valued groups i.e. Fashionistas and Planners & shoppers and then take the product specialization strategy to satisfy both segments is the best solution to this problem. It will create more revenues, make TFC get back market shares quickly, and maintain TFC’s leading status.

Residential Status of an Individual: Tax Planning

Residential Status of an individual is required for calculating the income tax and is coined under the Income tax act . Now the residential status of an individual in India can be divided mainly  into two parts
1. RESIDENT under sec 6(1)

• Ordinary Resident
• Not Ordinary Resident

2. NON RESIDENT under sec 2(30)

1. RESIDENT(Ordinary Resident)
For being an ordinary resident of India first of all one has two fulfill any of the following two Basic conditions under sec 6(1):

a. If the individual is in India during the relevant previous year for a total period of 182 days or more.

                                                        OR

b. If an individual was in India for a total period of 60 days or more in that relevant previous year and he was in India for a period amounting in all to 365 days of more during the four years preceding the relevant previous year.

 ALSO

After fulfilling any of the above two conditions an individual becomes resident of India but in order to become an Ordinary resident of India one has to fulfill both the following two additional conditions.

a. He has been the resident of India for at least 2 previous years out of 10 previous years immediately preceding to the previous year.

                                                         AND

b. If he has stayed in India for at least 730 days in previous 7 years immediately preceding previous year.

2. RESIDENT( Not ordinary resident)

A non ordinary resident is one who satisfies any one of the basic conditions mentioned under sec 6(1) but do not satisfies any one or any of the additional conditions.

3. NON RESIDENT
A non resident of India is one who do not satisfies anyone of the basic conditions mentioned under sec 6(1) and obviously then additional conditions have no importance. 

Solution: Air France Internet Marketing

Optimizing Google, Yahoo!, MSN, and Kayak Sponsored Search

Ø  Five French airlines merged to form Air France in 1993.

Ø  Launched its first successful flight to the United States in July 1946 between Paris and New York city after second world war.

Ø  Served 185 destinations in 83 countries and its total fleet size stood at 383 aircraft.

Ø  Air France and Netherlands-based KLM  airlines joined forces and created the SkyTeam global alliance.

Ø  Air France developed an approach to aircraft fleet management which was consists of two strategies-
1. Rationalization ( acquiring modern aircraft with similar technical Characteristics)
2. Flexibility (to adjust aircraft delivery dates or change models within a given aircraft family.)

Ø  Air France-KLM continued to grow at the end of 2006-2007.

Ø  At that time global economy grew by 4.9% while airline traffic increased by 6.6%

Ø  Air France revenue grow by 5.1% with increased passenger activity by 5% and  with 73.5 mn  passengers carried.

Travel Industry and E-Commerce:

Ø  Travel industry was one of the earliest to adopt e-commerce into their sales strategies.

Ø  This helped in easy accessibility to the customer and held huge potential for increasing businesses’ sales by vastly increasing their reach.

Ø  E-Commerce emerged as a very fast growing sales medium.

Ø  With the adoption of e-tickets, airlines were better protected from many of the logistical problems.

Ø  travel industry comprised several different types of online service providers-
1. Direct websites (Owned and hosted by the individual airlines)
2. Aggregator websites (offered service beyond flight purchase including hotel and vacation packages)
3. Metasearchers ( Kind of aggregator websites but did not offer transaction services)

Ø  Between 1996 and 2005 the number of consumers going online to research and book travel increased by 263% .

Ø  It was uniquely well suited to online purchasing when compared to other segments of the retail industry.

Ø  According to an estimation in 2005,  32.2 million households in the United States had high-speed Internet connections.

SEM (Search Engine Marketing):

Ø  SEM was a well-known method of marketing in which businesses promoted their products and services through targeted placements on Internet search engine results pages (SERPs).

Ø  This provided a highly targeted space to connect consumers to exactly what they were looking for.

SEM  mainly consists of two things-

1. SEO (Search engine optimization)
    -   It analyzes the structure and content of a business’s Web site to maximize its readability and relevance.

It mainly looks at technological part of the websites like URL address structure, Web server settings,

-       information architecture, site usability, and text content.

-       The goal of SEO was to organically improve a site’s relevancy ranking.

2. Pay-per-click or sponsored search
  -  Businesses bid on keywords for sponsored link listings consisting of a title.

  -  Charges were dependent upon the number of times an ad had been clicked on for a keyword.

  -  Cost-per-click could reduce with volume as the search engine provider determined the ad was  

      more relevant to those keywords.

Ø  The larger search engines allowed for broad, exact, and phrase keyword campaigns to allow advertisers to cast either wide or narrow nets of impressions.

Ø  Geotargeting had become easier now.

Ø  These campaigns were easily measurable due to the availability of some tracking devices on internet.

Ø  In order to improve net revenue campaign had to improve on these following things, cost-per-click reduction, increase in bookings, net revenue, revenue per transaction, return per transaction, overall performance by engine.

Media Contacts and DoubleClick:

Ø  Media Contacts was the global interactive media network of Havas media.

Ø  It provides data driven media solutions.

Ø  Media Contacts worked to form strategic partnerships with a number of research and technology providers in order to gain access to granular data sets.

Ø  DoubleClick was an internet ad service company.

Ø  The company’s main product line was DART enterprise which was a web based search syatem and was integrated with leading search engines like Google, MSN and Yahoo.

Ø  In this specialist were able to define budgets and time frames, as well as select cost per thousand, cost per click, and cost per action pricing models.

 Google:

Ø  Pursued an aggressive growth strategy through new product development, acquisitions and partnerships.

Ø  Generated revenue through
- Highly targeted advertising
- Online search services

Ø  Position of an ad is determined by CPC and CTR

Ø  Uses highly complex mathematical “black box” algorithm.

Ø  Considers more than 500 mn variables and 2bn terms.

Ø  Google Acquired Doubleclick in 2007.

MSN:

Ø  MSN did partnership with other service and content providers in order to drive traffic to MSN.com.

Ø  MSN received revenue from three key sources; Microsoft adCenter, MSN Shopping, and subscription based web service.

Ø  As late as 2006 Microsoft had relied heavily on Yahoo for search-related advertising.

Ø  It had rich customer data gathered through its Internet hosting service.

Ø  Microsoft AdCenter used PPC and CTR

Ø  Differ from Google in order to allow its advertisers to target ads to a particular customer demographic.

Yahoo:

Ø  As the predecessor of Yahoo Search Marketing, commercial Web search services company

      Overture was one of the early pioneers in monetizing the internet search traffic.

Ø  Differentiated in SEM by combining ads with content matching

Ø  Context specific content could be linked to search keywords

Ø  Yahoo’s performance was comparatively less positive

Kayak:

Ø  Differentiate itself in two ways
- As an alternative business model from aggregators
- unique technology architecture

Ø  Provided more exhaustive search including the inventory of 551 airlines and 91,500 hotels.

Ø  Its goal is to find and search every hotel on earth, which it estimates at 300,000 properties. 

Challenges and probable Solutions:

Ø  The Media Contacts team had only a short time to make sense of all of its research and determine a way to optimize future campaigns.

Ø  Use branded or unbranded keywords.

Ø  Broad or focused keywords are more profitable

Ø  Which search engine will deliver the most value

Solutions:

Ø  Using both branded and unbranded keywords can be best suitable option for Media Contacts because it appeared that using branded keywords might bring in more revenue, it was also apparent that unbranded keywords produced a larger percentage of single-click conversions.

Ø  In Internet one should try to adopt multiple strategies at a single time because in this one can easily target their customers according to demographics and can do geotargeting and in the last one should analyze that which strategy has performed well one should focus more on that strategy.

Ø  It is mentioned that typical internet tracking worked by measuring the last keyword clicked, and this keyword was credited for the sale conversion so one should try to focus more on Focused keyword strategy.

Ø  Since air France is working with all top most search engines therefore according to their target customers they should utilize the potential of search engines like on Google they can use the strategy of pay per click and sponsored search because on Google it is difficult to know about the prospective customer.

Ø  While in the case of Yahoo ,MSN and all other social networking websites one can easily advertise according to their target customer and can do the segmentation Demographically, Geogrraphically, time wise and Liking wise, so are very important aspects of any internet advertisement campaign and there are very less chances of loss of money.

Ø  One can utilize its money in a proper and most efficient way and in case of Air France they should try to do affiliation with Aggregator websites and metasearchers in order to increase its reach.

Ø  They can go for affiliate marketing also by doing partnership with other online travel booking sites and can maximize their revenue.

Changing Retail Scenario in India

Retail sector in is in booming phase because of rise in consumption and disposable income of an Indian. India is the fifth largest retail market in the world and it is expanding with a very high growth rate. More than 6 million square feet of space has been added for retail mall in first six months of year 2011 (CB Richard Ellis India) and this is because of aggressive expansion of organized retail in India also according to CB Richard Ellis India estimates overall rental values across the malls have increased by 4% to 16% in the NCR region during the first half of this year. Some of the retail giants like Future group, Aditya Birla Group, Reliance retail, Shoppers Stop etc are eagerly foraying into untapped avenues of Indian markets by making huge investment plans.

Jubilant Foodworks Ltd. Which operates Domino’s Pizza in India will invest over Rs 70 Cr in the financial year 2012 on new stores. Reliance Retail is also planning to expand its business across the country by doubling the number of stores, Aditya Birla Retail with its brand ‘More’ is going to open 12 hypermarket and 150 supermarket in fiscal 2012, Shopper’s Stop also plans to open four more hypermarkets and ten departmental stores. Along with the metro cities retailer are also focusing on expanding their operations in tier2 and tier3 cities.

After globalization, liberalization and privatization Indian market have been affected on large extent due to this only both national and international retail players entered in the Indian retail market. And specially after the allowance of FDI in single brand retail by government.

Government has permitted 51% FDI in single brand retail till now which helped a lot in impeccable growth of retail sector in India, but now according to recent news, government of India is going to permit 100% FDI in retail sector in single brand retail which will allow more foreign retail players to open their retail stores in India and which will help in the growth of organized retail sector, though it also has been claimed that after allowing 100% FDI in retail sector small traders may lose their jobs because their products or services will not be able to compete with those foreign players. From customer’s perspective they also want more options and FDI will help in fulfilling the consumer’s desire when more foreign retail players will open their stores in India this will give them access to more choice and more value proposition.

Proximity to the consumers is the major competitive advantage to the unorganized retailers and this advantage includes consumer goodwill, credit sale, ability to sell loose items, convenient timing and bargaining power to consumers

Indian Retail Industry

Retail is a concept consist of sale of physical goods or merchandise, it is the set of activities that adds value to the products and services sold to consumers for their personal or family use. Retailers buy goods in large quantity from manufacturer and sell it to the ultimate consumer.

Retail sector which is mainly divided into two sectors i.e. Organized and Unorganized.
Organized retail is when all the product and services are segregated and brought under one roof in a very proper and organized way. Organized retailers having large area and contains most of the brands under one roof on the other hand unorganized retail is like all the kirana stores where different things are sold in different shops, these shops are also known as “mom and pop shops”.

By the type of product we can divide retail industry mainly in three categories-

•   Food Products
• Hard Goods (Appliances, sporting goods, furniture etc.)
• Soft Goods (Apparel and other clothing)

 According to the marketing strategy retailers can be divided into following   categories-

a.       Department Stores: These are very large store with huge assortment of soft and hard goods.

b.       Discount Stores: These stores offers extensive assortment of merchandise at discount price.

c.       Warehouse stores: Offers products with low cost and high quality, these stores also charge membership fee.

d.      Variety Stores: Offers extremely low cost goods, with limited selections.

e.       Mom and pop: Traditional kirana stores.

f.       Specialty stores: Offers products of special and particular variety.

g.      Hypermarket: Offers huge variety of merchandise at low margin.

h.      Supermarket: Its area of operation lies between 20,000 and 40,000 square feet and these are self service stores.

i.        Malls: Has different kind of retail shops under one roof.

j.        E-tailers: offers shopping through internet.

k.      Vending machines: It is an automated machine wherein consumer drop in the money and can get the product.

Retail industry in India is one of the fastest growing industries, accounting for 22% of GDP and which contributes to 8% of total employment. Indian retail industry is of Rs18.673 billion (US$ 401 billion) [Booz & Co(India) Pvt. Ltd.]. Indian retail industry has witnessed a very rampant growth over the last few years. Retail industry in India has grown at a CAGR of 13.3% for the period FY 06-10. In India retail industry is mainly dominated by the unorganized retail sector i.e. by traditional kirana stores, there are approximately 2 million mom and pop shops in India which is a very huge proportion of total retail sector in India. Organized retail is accounted for approximately 4% only of total retail sector. Indian organized retail industry is of Rs35,000 Cr ( $7.7 bn) and which is growing with the pace of 25% -30% p.a.

Case Study Analysis: GOME Electrical Appliances Holding Limited The “TUANGOU” Challenge

This case is about a Gome electrical appliances which is a largest retail chain store of home electrical appliances , how its managing director Mr. Wong Kwongyu laid the foundation of  its success upon certain principles and strong  values which made it the largest retail chain store of electrical appliances in China. This case also discuss a new kind of buying behavior of consumers and that is “Tuangou” and how Gome Electrical appliances get effected by  this tuangou shopping.

Gome Electrical Appliances:

Ø Gome electrical appliances started by an entrepreneur Mr. Wong Kwongou in 1987 with a very small amount 30000RMB as a small retail shop in Beijing, China.

Ø Initially he traded with imported goods which were huge in demand at that time and were high margin products.

Ø With growing competition and to get the competitive edge over its competitor he adopted the policy of low price to do so he by-pass the intermediaries and started dealing directly with manufacturers.

Ø In 1996 he shifted from selling purely imported products to including domestic brands also.

Ø Gome opened its first store out of the Beijing i.e. in Tianjin in July 1999 and in Shanghai in December 1999.

Ø By the end of 2004 Gome’s Retail network spanned to 144 stores across 25 cities in China.

Ø In November 2003 Gome opened its first store outside the China in Hong Kong and n July 2004 got listed on Hong Kong stock exchange.

Ø By December 2004 its turnover reached upto RMB9.7billion.

Mission and Culture:

Ø “Competitive pricing from high volume, customer service comes first” this was Gome’s main mission statement on the basis of which they were able to get the competitive edge over its competitors.

Ø Gome’s mainly worked on two approach first set out to build a goodwill and loyalty by providing them good shopping experience and second was its competitive pricing.

Ø Gome established its strong corporate culture upon certain moral principles and values.

Ø By providing quality services to the consumers Gome tried to be the pioneer on its field and Gome also prided that it is contributing in the prosperity of society.

Ø Gome focused on keeping promises whether it has been made on any level from  superiors to subordinates, headquarters to regional offices,  or from regional offices to retail stores and it also worked on improving its credibility.

Ø Gome emphasized more on encouraging ethical practices in the organization and worked on building strong ethical organizational culture by training its employees.

Ø Gome stressed more on hiring local people and trained them in a way so that they can give high quality service to its customers and were encouraging them by giving positive and negative reinforcement.

Ø Gome emphasized more on building and maintaining its strong brand image and emphasized more on building its goodwill and for that they spent millions of renminbi.

Gome’s Strategy :

 Gome focused mainly three types of strategy and it helped them to achieve their corporate mission and gole.

      1.     Low price and low cost:

Ø Products available in Gome’s store were  priced at 10 or 15% lower than those at conventional stores.

Ø This low price strategy helped in attracting large chunk of customers and  generated a large sales volume.

Ø High sales volume helped Gome to increase its bargaining power over its manufacturers.

Ø With greater bargaining power it was able to negotiate more lower prices and it helped more price reduction in its products. It worked as a downward spiral.

      2.     Exclusive selling rights :

Ø To secure a low price and high volume strategy they started taking exclusive selling rights for certain products from manufacturers.

Ø Which helped in improving its ability to sell at low prices and generate high sales turnover.

Ø Products with exclusive selling rights accounted for 10% of total products carried.

      3.     High quality Service:

Ø Gome rolled out a large scale quality service campaign with name “Gome service project”.

Ø Thay also started so many campaigns like this to attract their customers like moneyback guarantee, complaint award, Mysterious shoppers, Shopping from afar.

Ø Depending upon the spending pattern of the customers they were invited to join as  rainbow, silver, gold,  or platinum card members.

    

TUANGOU:

Ø Tuangou is a Chinese term and can be referred as team buying or group purchase.

Ø Consumers who were unknown to each other joined together via internet and leveraged their collective bargaining power.

Ø Their were numerous websites dedicated to this tuangou only like 51tuangou.com, Shtuangou.com,  020tgw.com etc.

Ø Tuangou was the natural extention of China’s bargaining culture.

Ø Onlne shopping was not that much popular in China due to lack of trust and honesty.

Ø By the end of 2005 tuangou had become a way of life for Chinese web surfers.

Ø Now customers were able to get huge discounts on the products than the normal market price.

Retailer’s Response to tuangou:

Ø For some retailers it was a great opportunity but for some it was like a problem or threat.

Ø Luxury goods retailers adopted fixed price policy to stop tuangou otherwise they could have suffered with huge losses.

Ø Some of them were feared of aggressiveness of tuangou shoppers.

Ø Incurred losses due to lost margin but were hopeful that increased sales volume will make up this loss.

Ø Retailers were not able to focus on its regular customers.

GOME and Tuangou :

Ø Gome was the most preferred choice of tuangou shoppers.

Ø To deal with tuangou shoppers Gome launched GOME tuangou day project in which a particular day was assigned for Gome shoppers only.

Ø Gome offered some additional advantaged to tuangou shoppers like tuangou VIP card and minimum 2% discount on any product, a complimentary gift and lucky draw offer.

Ø Gome Started Tuangou Banquet which was the largest tuangou event of the year.

Consumer Behavior:

Ø From this case it is clear that tuangou is a very different kind of consumer behavior in which a consumer is a rational decision maker.

Ø Initially Chinese customers were concerned about the price only but later they started giving attention to good quality and sales service.

Ø Because of this buying pattern it was clear that consumer started to believe that anything that is low or cheap in price can not be good.

Ø This concern for consumers towards quality product in low prices encourages them for tuangou shopping.