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Forward planning

The supply chain is changing and the centre of gravity is moving away from the publisher and to the retailer. This seismic shift necessitates a fresh approach from circulation teams. Here Ian Love looks at what magazine publishers need to do to stay ahead of the game.

By Ian Love

"The dogmas of the quiet past are inadequate to the stormy present…….As our case is new, so must we think anew and act anew" Abraham Lincoln

Circulation teams across magazine publishing face a retail landscape that has changed rapidly over the last five years and is set to change even more rapidly over the next five. The shift is increasingly from a business environment where the supply chain wrapped itself around the needs of the publisher, to one that will increasingly wrap itself around the needs of the retailer.

These changes are having a fundamental impact on how circulation teams across our industry need to be structured, recruited, trained and supported through information systems. These are not matters of small adjustments but of adopting a whole new focus for activity that not only handles the demands of today but also prepares for the even more demanding environment of tomorrow.

The major retailers are focused on one thing only, the success of their business in fiercely competitive markets. They will be interested in your magazine or magazines only if it and you are helping them achieve that goal. They are motivated by:

* Revenue and market share growth
* Profit growth
* Customer service, for this read very high levels of on shelf availability.

For the retailer this means a planned approach via range reviews, annual business plans; commitments to trade spends by period by title at least six months in advance; commitments to availability; and a requirement to do things their way to reduce their operating costs.

For circulation teams these heightened demands focus attention in three principle areas.

* Trade Marketing
* Volume planning
* Planning and Execution

To ensure that the publisher’s magazine portfolio gets the best possible exposure to its customer, while ensuring the best possible commercial agreement with the retailer, these highly interdependent areas must be managed in concert. This can only happen if the teams are equipped with the right skills, are working in appropriately designed processes and are supported by effective information systems.

Trade Marketing

Spending on trade promotions, their number and their complexity have all ballooned over recent years and the highly competitive magazine market combined with the growing influence of large assertive retailers will ensure that trend continues.

The need, therefore, is to ensure that money is not spent unnecessarily and that when it is, it is spent wisely.

The first challenge is to move from a title or issue approach to a portfolio approach. As a publishing company you need to be able to leverage the total weight of your business with a retailer. To do this you need to understand:

* The total trade spend across all titles by retail account.
* The actual and projected revenue by account.

You can then talk sensibly to a retailer about what you can bring to his business. However, this on its own is not enough.

There also needs to be an understanding of what return you are making on the spend by title by account and by channel. If you can get more additional copies sold per pound spent in retailer A versus retailer B does your planned spend reflect that.

However, things will change and within weeks these plans will be challenged by events. Circulation teams will need to be able to make complex decisions, at pace, about reallocating spends. If these are to be informed decisions then the required information must be at the decision maker’s fingertips.

Volume Planning

Significant as trade promotional spending is becoming it is still dwarfed by the publishers’ investment in Sale or Return.

The pressure for increased availability by retailers combined with the high level of promotional activity makes ensuring "the right copy in the right place at the right time" an increasingly difficult task that needs to be informed by an understanding of:

* Seasonality by title and retailer
* Predicted promotional uplifts by promotion type, by title and by account
* Minimum quantities to fill promotional fixtures
* Location of promotional fixture: how many of what type by store
* Cost of availability improvement in wasted copy by title by retailer

These complex interdependent decisions need to be carried out for each title for each promotion and then the sum of them checked to ensure the numbers add up to the predicted national demand and target sales efficiency.

The significant commercial implications attached to these decisions requires a close understanding of the title and portfolio strategy as well as the supporting trade activity. Only Circulation teams working close into the publisher can take ownership for these complex decisions.

Planning and Execution

"If you have always done it that way, its probably wrong" Charles Kettering

The execution of the above needs to recognise the dynamic reader focused approach of the magazine industry. Publishers must not feel that a portfolio approach and central planning of retail activities prevents them from doing what they must to be successful but that it helps and supports them while delivering profitable sales at retail.

These new circulation teams will be teams of specialist volume planners and Trade Marketing professionals.

The Volume Planners will:

* Understand how to support a high numbers of complex promotions with the appropriate amount of copy.
* Forecast national sales levels.
* Identify and respond to seasonality by title and outlet.
* Calculate appropriate sales efficiencies for a title given its run on costs and commercial objectives with regard to profit and volume growth.
* Quantify the commercial cost by account of delivering higher availability.

The Trade Marketers will understand the commercial drivers at retail and can:

* Plan and direct promotional and non-promotional spending so as to maximise impact informed by and awareness, by retailer, of return per pound spent.
* Provide the sales teams with the winning argument based on driving the retailer’s category performance.
* Use the publisher’s portfolio, category or brand strength, to protect the profit made from trading with a given retailer while driving the required volume performance.

These skills are not naturally found in the news trade where the emphasis has until recent years been on wholesale. People with these skills are to be found working in the trading departments of the major retailers or in similar roles for major branded manufacturers; or, in the case of Volume Planners to have a statistics or economics background. Information systems also have an important role to play.

In both cases the people that are brought into these roles also need to be sensitive to the culture found in magazine publishing and be able to work with it while still bringing their new skills and approaches to the party.

Information systems

The way work is conducted needs to focus on automating as much as possible, embedding the knowledge of how to do things with in the systems and focusing the attention of highly skilled people on the commercial and exceptional issues.

The supporting information systems should provide clear requirements for action for all involved in the process, both in side and out side the publishing company. The status of all activities should be clear to all involved with escalation paths when things stall.

For heavily promoted issues the total trade promotion and volume plan will need to be understood before selling into retail begins. Volume planning tools need to provide the ability to model the effects of the proposed trade marketing activity to ensure copy is not over invested in one channel or account leaving others starved of copy or that expensive promotions are inadequately supported by copy.

These systems should link seamlessly with wholesale systems giving details of individual wholesale supply quantities together with outlet-by-outlet supply figures to ensure the publishers’ retail and promotional strategies are effectively executed right through the supply chain.

Finally, systems should allow the budgeting process to produce volume; revenue and trade spend budgets by portfolio, by title by account by month. This allows the sales team to talk to a retailer about the contribution the whole of the publisher’s business makes to the success of that retailer.

Relationship with the distributor

While the large publishers may have the scale to invest in this kind of infrastructure what does it mean for smaller publishers more reliant on their distributor?

Publishers’ circulation teams must take ownership of these issues and redefine what parts of the process they will undertake and what part the distributor should undertake. This will vary dependent on the circumstances of the publisher.

However, this cannot happen unless the distributors are able to provide the infrastructure in terms of clear, open and accountable processes; improved access to information and new tools and expertise in the area of volume planning and trade marketing.

Publishers need to demand of their distributors the services that are required by the changing shape of magazine retailing in the UK. However, they will also have to reconcile themselves to increased levels of investment or find themselves unable to face the future with confidence.

As the magazine supply chain increasingly wraps itself around the needs of the retailer publishing companies need to think anew about how they structure, resource and support their newsstand circulation effort.