June 2005

1
Using Information to Increase Efficiency and
Profits Dominique Raccah Publisher and
CEO Sourcebooks, Inc.
June 2005
2
Optimizing Business Processes with Marketplace
Information

• Developing Advances
• Tailoring Time and Resource Allocations for
  Marketing Programs
• Optimizing Inventory
• Decreasing Returns

Focus on business processes that have greatest
potential for increasing profitability
3
Developing Advances

• Authors Previous Sales
• Gauge opportunity
• Assumption that market is always there to be
  expanded
• Category Sales Information/Share of Market Data
• Data now allows us to track and gauge sales
  results

Using data to help rationalize predictive process
4
Researching Title Positioning

• Data as a Creative Tool
• Understanding How Different Categories Work
• What are the top selling titles?
• Defining a competitive set
• Pricing
• Page Count
• Title
• Cover Style
• Timing
• Other?????
• How are newly introduced titles performing?
• Any information about the marketing driving
  sales?
• The idea is NOT to replicate successful titles,
  but to
• use data to provide insight into WHY titles are
  working.

5
Using Information to Optimize Inventory

• Goal
• More accurately match supply with demand
• Decrease unsold inventory
• Focus on 2 kinds of inventory decisions
• Reprints
• First Printings

6
Sourcebooks Reprints Results 2003

• Only reporting about 70 of our list
• 104 new titles in this part of our list in 2003
• 111 reprints
• 1 every 2.3 working days
• 63 different titles
• Of those 111 reprints5 problematic (or less than
  5)
• Significant improvement over 2002

7
What Data Can We Use to Better Manage Reprints?

• Wheres the demand coming from? (i.e., who
  specifically needs the reprint?)
• Why do we need the reprint? (e.g.,Valentines
  Day)
• What is current risk/inventory on hand in
  channel?
• Review sell-in/sell-thru information (weekly
  sales results) for each account including
• Barnes Noble Bookscan
• Borders
• Waldenbooks
• AWBC/Books-A-Million
• Amazon
• Ingram ipage
• Baker Taylor TitleSource II
• AMS

8
Other Information We Can Use to Better Manage
Reprints

• Reorder planning with accounts (both bookstore
  non-bookstore)
• Modeling different types of books
• Peak titles
• Build titles
• Seasonality
• Gauging publicity/marketing effects

9
Summary Reprints

• Every printing provides more information that
  allows you to better model marketplace
• Simplest assumption stable marketplace
• Usually not true for books
• Seasonality
• Promotions
• Other marketing effects
• Saturation
• Competitive product
• Model marketplace during sales season
• Use sales model to forecast what reprints might be

10
Sourcebooks First Printing Results 2003

• Again only reporting 70 of our list
• Spring 200357 titles
• 10 of which were problematic (or about 17.5)
• Fall 200347 titles
• 3 of which were problematic (or about 6)

11
Our ExperienceFirst Printing Is Riskiest

• At every printing you have more information that
  allows you to better model marketplace
• Axiom of risky decision-making that the point of
  maximum risk is when information is minimal
• Print less/plan for reprints
• Work with printers to decrease print cycles
• Print smarter

12
Last Printing Is the Most Expensive Printing

• You dont know its the last printing
• Marketplace shifts unpredictably/model is no
  longer appropriate

13
Summary Using Information to Optimize Inventory

• Print less
• Benchmark appropriate level of inventory for
  trade book publisher
• Months of StockInventory on-hand/past 12 months
  sales
• Inventory Days on handInventory value/Accounts
  receivable
• Inventory TurnInventory value/past 12 months
  inventory cost of goods
• What are industry-wide Best practices?
• What is your inventory target(s)?
• Feed information into decision-making both first
  printings and reprints
• Use marketplace information to turn off last
  printing

14
Using Marketplace Information to Decrease Returns

• Sourcebooks returns 2003 down 25
• Much of this decline can be attributed to the
  effects of marketplace input on inventory
  management
• Cant make these decisions in a vacuum
• Use the information in conjunction with your
  customers

15
Using Marketplace Information to Decrease Returns

• Analyzing/Managing Customers Inventory on
  Ongoing Basis
• Ship less upfront
• Assess sell-through and marketing
• Ship more often
• Work closely with vendors to improve reprint
  cycles
• Leads to more backlist-oriented program/more
  build-oriented strategy

16
Using Marketplace Information to Decrease Returns

• Working closely with our customers is KEY
• They know a lot about their data and what is
  going on in their market
• More accurately match supply with demand
• Where you need it effects of regionality
• When you need it effects of seasonality
• Do the research before we approach the customer

17
Using Marketplace Information to Increase
Efficiency and Profits

• Analyzing/Managing Customers Inventory on
  Ongoing Basis
• Using information to work more closely with our
  customers
• More accurately match supply with demand
• Goal is to serve our customers and the
  marketplace better

18
Using Marketplace Information to Increase
Efficiency and Profits

• Optimizing Business Processes with Marketplace
  Information
• Rationalize predictive processimpact advances
• Optimize inventory both on hand and in channel
• Implications for marketing, operations,
  production, sales
• Decrease returns
• Focus on Business Processes with Greatest
  Potential for Increasing Profitability