Companies advertising on BBC however will have limited power as although there are many broadcasters that are reliant on commercial income; BBC is one of the largest in the UK and does not rely completely on this. Therefore, the BBC has a greater say in setting prices for advertisers sometimes making advertises pay large amounts for airing their products.
Threat of Suppliers (Bargaining Power):
Suppliers bargaining power can be both quite high and low depending on how we look at the BBC. This depends on the experience and reputation of the supplier. BBC is the biggest commercial channel in the UK and so suppliers will want their programs shown on this channel. However, the reputation and experience of suppliers also plays a major role. Suppliers will have offers from all BBCs major and minor competitors thus increasing their bargaining power. In this case the BBC will have to pay more for their services. This point is illustrated to great effect by the football highlights show. A few years back ITV lost the right to show highlights of Premiership football matches (known as The Premiership) to the BBC’s Match of the Day program. This was due to the BBC outbidding ITV. The Football Association (FA) being the supplier held out for the highest bidder.
On the other hand, other competing channels popularity attracts established stars that want to be associated with them. This point is illustrated by Michael Parkinson’s defection from the BBC to ITV as the high bargaining power of the supplier meant that Michael Parkinson could demand more money that ITV was offering.
The power of less reputable suppliers will be greatly reduced due to the fact that they will not have as many broadcasters fighting for their product. This will mean that BBC can dictate terms more because the supplier will want to be shown on such an established channel and will go to great lengths to get their product shown.
Competitive Rivalry:
Looking at the UK television market alone I can see that there is a lot of competition and alternative channels that will affect the profitability of ITV. Obviously, ITV’s main rival is BBC. This rivalry is best illustrated by the flagship shows of both broadcasters. These are the soap operas of Eastenders for the BBC and Coronation Street for ITV. When outsiders look to see which broadcaster id outperforming the other, they often look at the viewing figures for these two programmes. At the minute ITV is coming out on top. Each broadcaster is always trying to outperform the other by coming up with better storylines. This will mean that extra money is spent on the programs to get the best writers and the best actors. This will cost more money and therefore lower profitability. However, the extra audience figures that this will generate will increase profitability.
Looking at bit wider, I can see that a major rival will be Sky. This broadcaster is backed by a wealthy owner and provides a wide range of services, including specialised movie channels, sports channels and entertainment channels. These channels are only available via digital TV. ITV has both terrestrial and digital channels. However, the Government plans to make all broadcasting digital within the next 10 years. This will mean that Sky, BBC and ITV will all be competing in the same market. This will mean that future profitability will be negatively affected due to the increased choice that will be forced on all TV customers. Digital also provides competition from other smaller channels such as Bravo and MTV, but these channels are specific to one area of broadcasting and will not affect the profitability of ITV too much.
Introduction:
Market segmentation is the process of classifying a into distinct subsets (segments) that behave in similar ways or have similar needs. The BBC uses age as a major form of segmentation in an attempt to increase consumer satisfaction as well as profitability through lower marketing costs. It takes a look at some key audiences that range from children to over 55s. They identify two key aspects in this study:
- How do they live their lives?
- How do they use TV, Radio and New Media?
The study is broken in to 4 different segments, these include:
- Children
- 16-24 year olds (the youth)
- 25-54 year olds
- Over 55s
Children
Looking at the segment that involving Children shows that this market is as large as around 12 million children under 16 year-olds in the UK (19% of the population.) But with falling birth rates and an ageing population this proportion is in decline.
Children now grow up in a more ethnically diverse society with more children from ethnically diverse backgrounds than any other age group.
As far as to listening to the radio is concerned, mainstream pop music stations are the common choice (eg, Radio 1 or Capital FM). Speech-based radio stations like Radio 4are rarely listened to.
Just over 7 in 10 children aged 5-16 can connect to the internet at home, via either a computer, a games console or a television.
Based on this data the BBC has been able to incorporate media that are essentially less British to cater to the increasing number of children coming from ethnically diverse backgrounds. Furthermore, the falling birth rates may lead to a smaller segment of this population using the BBCs service which could lead to lower demand for children’s shows/ services in the long run. The high internet usage too has spured on more New Media sourced entertainment and services such as more online games and puzzles for children online, all of which have given it a competitive edge over competitors such as ITV.
16-24 year olds
There are around 7 million 16-24s in the UK (11% of the population). This number is slowly declining – in 1971, they accounted for 13% of the population.
The Young are better educated than ever before. The number of people pursuing further and higher education has more than doubled in the past 10 years.
This segment now doesn’t watch a great deal of TV. On average, watching 15.9 hours per week – and this figure is in decline. Gaming and online activities are new competition for the TV.
Listening to the radio is an important activity for young people despite the huge uptake in Mp3 players. This usually continues throughout the afternoon and tails off in the evening.
Internet radio listening is most common amongst the Young.
5-24s use the internet more than any other age group. Usage dips between 6pm and 7pm when young adults generally watch TV instead. (Hollyoaks and the Simpsons on C4).This age group is most likely to download News on their mobile phones - over a third of 15-24s claim to do so regularly.
From here the BBC gained vital information about the times to air their shows and broadcast music on the radio that is more up to date with the times and “new age” to meet with the demands of the youth. It features better show times than other competitors, however it still requires improvement and more implementation from this study to compete with ITV for this segment.As gaming is now starting to compete with the number of hours people spend watching television, more gaming shows and game reviews could help improve this statistic. The greater levels of education emphasise the increasing demand for intellectually stimulating television and once again we can see a strong rise in the number of New Media users via the internet, something the BBC has already gone through great lengths to incorporate in their business strategy.
25-54 year olds
There are over 8 million 25-34 year-olds who make up 14% of the population. This number is projected to remain stable for the next 20 years. TV viewing is highest amongst over 55s but 35 - 54s account for 35% of all TV viewing.
Big Brother (Ch4), Comic Relief (BBC ONE) and the X-Factor (ITV1) were the most popular programmes amongst 25-34s in 2005
Reality TV, dramas and comedies do well with this age group. Programmes such as Lost, Little Britain, Eastenders and Big Brother is often a good representation of the lives of the 25-34s find programs relating to religion, debate, politics and classical music less interesting.
Radio 1 is the most popular station amongst this age group, the average age of a Chris Moyles' breakfast show listener being 28 years.
35-54s are heavy radio listeners. They listen to just over 22 hours per week - that's more than average. (RAJAR Q4 05 - Q1 06)
Like most of the population 35-54s tend to listen to the radio in the mornings. The peak listening time is between 7:15am and 9:30am. Listening in the car peaks between 8:00 and 9:30am
This category of people is one that is large for the BBC and according to the study should remain so for the next 20 years. The introduction to more reality shows on to this network might be beneficial as it would raise viewer numbers. Less religious and political shows from BBC 1 and BBC 2 have helped raise their ratings and make them more competitive than ITV as shown below.
Over 55s
More than a quarter of the population are over 55 (approximately 15.5 million). In the future, this group will grow to just over a third of the population.
The older you are the more TV you consume. 65-75 year-olds watch the most TV – 36 hours per week.
They are heavy BBC Radio listeners. On average, they spend 16.5 hours a week listening to BBC Radio - a whopping 39% above the average. BBC Radio accounts for almost three quarters of all their radio listening (71%).
People aged over 55 amounts to the largest audience for the BBC and one that is most loyal to the station, positively this is a segment that is set to grow even bigger in the future. This is an important category for the company, one which concentrates mainly on the television and radio services the most. Improvements in these services have made it a more popular choice than competitors ITV and this gap is one that is set to increase even further as this study is implemented in the BBCs marketing strategy. It has importantly catered to this segment while not to losing customers in trying to gain popularity amongst younger audiences.
Conclusion:
Overall market segmentation gives us a clear view of our target audience and lets us analyse their behaviour making it easier to predict their wants. This in turn helps companies provide better service to their customer leading to greater satisfaction and profits. This has played a key role for the BBC and has helped give it a competitive edge over rivals such as ITV which earlier shared a greater market share in some many of the segments.
REFERENCES:
BBC.CO.UK (2004a) History of the BBC, ,
BBC.CO.UK (2007) Annual Report 2007-08, , .
Clarke, S. (2004) Is divestment the solution to the BBC Worldwide problem? Campaign (UK), 34, pp. 13-15.
Deakin, S. and Pratten, S. (2000) The new competition in broadcasting: trick or treat? Institute of Economic Affairs, pp. 27-31.
Porter, M.E. (1980). Competitive strategy: techniques for analysing industries and competitors. New York: Free Press.
Porter, M.E. (1985). Competitive advantage: creating and sustaining superior performance. New York: Free Press.
(used for Graphs)
