Intelligence and insights Jonathan Nowell

BISG Conference February 2004 Slide 1


Intelligence and insights

Jonathan Nowell


What is significant about this information?


Agenda – Intelligence and insights

Nielsen BookScan and information in the book supply chain

Data or intelligence?

BookScan at work Growing Sales Supply chain efficiencies

Conclusions


Information and the book supply chain

Identifying &describing books

Identifying &describing books

Finding booksFinding books

Orderingbooks

Orderingbooks

Measuring &analysing book

sales

Measuring &analysing book

sales

ISBN agencyEditorial

ISBN agencyEditorial

Nielsen BookData,Bowker,Ingram,

B&T

Nielsen BookData,Bowker,Ingram,

B&T

Wholesalers,TeleOrdering

Nielsen BookNetPubNet/Easy

Wholesalers,TeleOrdering

Nielsen BookNetPubNet/Easy

NielsenBookScan

NielsenBookScan

Book

supply chain

Book

supply chain


Intelligence and insights – data?

Data – information – intelligence

Intelligence improves decision-making on tactical and strategic levels

Key learning Information in context – e.g. Publisher’s Lunch Don’t publish by numbers – e.g. Vernon God Little, Strange

Incident … Employ analysts – e.g. Random, Harper … Be ambitious – e.g. set high returns reduction targets


BookScan – The context …POS data – ISBN, volume, time, price

Territory Panel Coverage of the retail book market

Panel size USD Millions pa

Estimated total retail book market

US 70% (Publisher estimate) $7.4bn WiP to size

Australia 90% $0.8bn $0.9bn

Ireland 65% $0.1bn $0.2bn

New Zealand N/A N/A $0.1bn

South Africa 80% $0.2bn $0.2bn

UK 95% $2.6bn $2.8bn



Growing Sales (the right promotional mix) Harper Collins, Australia

Strategic (genre analysis) Simon & Schuster, US

Supply Chain Efficiencies (Inventory and sales data)

Time Warner, UK


Brian Murray, CEO at HC, Australia

How does Harper Collins, Australia use BookScan?

BookScan Data + HC analysis = Improved Decisions

1 Planning Decisions

2 Reprint Decisions

3 Marketing and Publicity Decisions

and Who benefits?


1. Planning Decisions

Before BookScan

Decisions based on• own list of books, • own experiences,• warehouse shipments

Publisher’s retail knowledge and awareness limited

After BookScan

Decisions based on • broader market,• actual sell through,• rate of sale,• true backlist,• RRP and ASP,• sales by channel

Publisher’s retail knowledge and awareness improved


Case Example: Planning for The Hours

BookScan data:• 7 film tie-ins from 4 publishers• Week by week sales, RRP, ASP

Analysis:• Weekly sales potential of 2000-6000 units in key week• A 2-4x increase in peak week• Sales continue for at least 3 months after film

Implications:• To achieve this velocity 15,000 had to be in the market• Needed to print 20,000• Market only ordered 10,000 units on sub


2. Reprint decisions

Before BookScan

Decisions based on • warehouse shipments,• outstanding backorders,• “feel” of the market

Reprints dangerous financially; when Publishers did reprint it was usually too late and the

quantity was not optimal

After BookScan

Decisions based on• sell-through percentage,• unsold stock in market,• projected new orders,• forecasted retail sales,• sales strength by channel

Reprint frequently with confidence to maximise “hot” titles


Case Example: Bride Stripped Bare

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1) Initial Print 15k

2) Serial and Feature newspaper coverage

3) Sell Through = 50%; Reprint 10K

4) What more can we do?



4) What more can we do to drive this book?

• What if we had another $30K to spend on marketing?

• Can we get more publicity?

• Do our booksellers have enough stock?

• Do we have enough stock?

• How long does it take to reprint?

• How many could sell over the next 4 weeks?

HC Decision: Immediate author tour if we can book TV



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1) Confirm TV interview

2) Book 4 day author tour

3) Extend marketing effort 8 weeks

4) Sell Through = 60%; Reprint 15K



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1) Publicity impact = 4 times increase

2) Sell through 80%+

3) Reprint 25K



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116K in print

65K sold through retail

25K unsold in retail

70% sell throughSome stock outs


3.Marketing Decisions

Before BookScan

It’s impossible to measure the effectiveness of marketing spending

• author tours, publicity• festivals• print advertising• TV advertising• radio

Publishers spend $25-$50M pa on marketing efforts

After BookScan

It is still difficult, but possible to measure the effectiveness of some spends

It is possible to predict sales increases within a range

Publishers should re-focus spending on marketing efforts that lead to measurable sales increases for booksellers


Preliminary Analysis

Author Tours less effective, often too costlyTV, Print, Radio Ads usually too costly to make impactNewspaper Serial less effective, timing an issue

Talkshow TV, Radio difficult, limited control but effectiveNewspaper feature difficult, limited control but effective AW Weekly selection difficult, limited control but effectiveOprah difficult, limited control but still works!Film Tie Ins difficult, limited control but effective

Bins, POS to be determined






Time Warner, UK


SAT Weekly Sales by Top Publishers Aug2002-Aug 2003

Nielsen BookScan sales

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2,000

4,000

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/02

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Week Ending

Bo

oks

So

ld

(519,011 books sold by top publishers this period)

Test TestTestTestTestTestTest


AP Total Weekly Unit Sales by Top Publishersin Comparative Subjects*

2003

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Week Ending

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Test

Total Books Sold in these Subjects - 260,289Sales include current and prior editions

*Subjects Include: Bio, Calc, Chem, Econ, Phys, Stat, US Gov&Pol, US

Source: Nielsen Bookscan

(Publishers include: Kaplan, TPR, Barron's)






Time Warner, UK


Rebecca units by week

-2,000

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week ending

Uni

ts

Distributed units

TCM sales

This is a straight plot of weekly distributed copies and weekly sales out figures. It doesn't show much !

Possibly your distributor couldn't cope with the trade demand at this point and so distribution slipped and then picked up again. Alternatively, some retailers could have been quick to order following the Big Read publicity and others didn't react until a week later.


Rebecca

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week ending

Cum

ulat

ive

units

Cum. distribution

TCM Cum.

This shows cumulative (lifetime) data for both distributed copies and sales out units. Where the lines are parallel it means that sales out are being exactly balanced by distriubted copies in. The distance between the two lines indicated the amount of stock in trade.


Rebecca sales Vs Stock

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week end

units

TCM sales

Stock in trade

Stock in trade can be calculated each week by taking the opening stock in trade and adding week one distributed copies minus week one sales out to re-calculate stock in trade that week (see graph data sheet). This graph shows the stock in trade each week vs the sales out each week. The distance between the two lines shows the potential for returns if sales suddenly slumped.

You can see that in the latest week, stock is already reducing whilst sales are still accelerating, which is what you want in order to eat up the huge stock in trade explosion that occurred due to the Big Read publicity, but you clearly don't want the ratios to drop to a level where sales demand can't be met.


Rebecca stock ratios

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week ending

ratio

Weeks stock at current weeks sales

Stock to sales ratio

Here I have played about with some ratios. The RED line is taking the current weeks sales and dividing it into the stock to calculate how many weeks of stock you have in the trade.

The BLUE line divides stock by sales to get a straight ratio. The way I think of this is that with a ratio of say 5 (as at end of May) when a copy of Rebecca was sold you had four others on a shelf somewhere (not necessarily the shop where the sale was made from as this data is at market level).


Rebecca and The Big Read

Conclusions build up a history of "similar" titles (e.g. HB Fiction Branded

Author) to forecast the required inventory to sales ratios

• Leading to better decisions on re-prints or promotions and better matching of inventory to demand.

• Improved returns estimates (how much) stock is actually in the trade and is this increasing or decreasing


Rebecca and The Big Read

Conclusions

Improve the inventory position prize or PR beneficiaries (Rebecca). Intelligent supply chain management "push" copies into the trade in the knowledge that returns are unlikely

Build in exception reporting. In the case of Rebecca the distribution and sales lines are running parallel and about 15% - you might build variance parameters of 10% and 25%


Conclusion – if you are not using BookScan intelligence in the following areas…call us!

Spotting the bestseller Catching the high flyer Managing the core stock Merchandising Growing sales Knowing market share Monitoring seasonality Reducing returns Negotiating currency New title subbing Planning Marketing Regional analysis

Inventory management Store distribution Timely reprints Validation Cost reduction Genre sizing Product definition Author acquisition Agent negotiation Imprint acquisition Gap analysis Format selection Price point analysis


David Young’s big wins …

1. Bye, bye bullshit - it's impossible for anyone in the industry be they agents, publishers or authors to inflate sales statistics. We know a great deal more about our industry as a result.

2. Rate of sale out of stores - previously we relied on anecdotal information and reprinted in reaction to orders placed rather than sell through.

3. Reliable bestseller lists that can be run at classification level



The cost of returns to the trade Every book returned costs both the retailer and the publisher

In 1998, the UK book trade part funded a project by KPMG to estimate the costs of returns to the Booktrade

Back in 1998, the conclusion arrived at was that for EVERY book returned it cost the…

RETAILER - £0.50 or $ 0.92 PUBLISHER - £1.00 or $ 1.80 TOTAL COST TO TRADE - £1.50 or $ 2.70 per book

Assuming that the costs within the USA are comparable, what do you think the paybacks would be for each 1% drop in the US returns rate?


Cost of returnsbased on the volume sales picked up by BookScan USA during 2003

For every 1% drop in the US returns rate, the trade could bank…

Publishers… $15.2 millionRetailers… $7.5 millionTotal trade… $22.7million

For a publisher with a 5% market share this is worth

$0.75million

For a retailer with a 5% market share this is worth

$0.38million

If the US could mirror the UK and drop returns by 7% over 5 years, it would be worth…

$5.25 million a year to the bottom line for a medium (5% share) publisher

$2.6 million a year to the bottom line for a medium (5% share) retailer

AND THE WHOLE TRADE BENEFITS !

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Intelligence and insights Jonathan Nowell

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