Managing Your Book Marketing Portfolio

Louis MayerMovie producers have developed many different channels to help offset the high cost of films.  These include theatre distribution, TV, DVD sales and rentals, and movie merchandise tie-ins (e.g. see Movie Money).  Book publishers don’t generally have seven or eight figure production costs to contend with, but they have a highly fragmented audience.  They must consider which channels are most appropriate to reach their target audience.  Managing channel risk is one key to success.  For example, retail bookstore channels offer wide exposure for a title, but sales are contingent.  Returns of up to 30% are the norm and can swamp the profitability of smaller publishers.

In addition to the traditional retail and online bookstores, new channels are now opening up to publishers.   These include:

  • Retail bookstores
  • Online booksellers
  • Libraries
  • Educational channels
  • Catalog sales
  • Non-bookstore retail
  • Non-traditional channels – e.g. gift and corporate channels
  • Book rentals
  • Serialized delivery to e-mail or mobile devices
  • Direct sales

But how should a publisher judge which channels will be most effective for the finite marketing resouces he or she has to invest?  The book channel mix should be weighted according to risk and then ranked according to reward.  In this sense, it is like constructing an investment portffolio.  Here is one suggested technique.

For the risk factors consider:

  • Access and service costs– This factor is based on the selling and marketing costs, as one would want to try here, required to establish and maintain a presence in a given channel.  Part of the cost is related to the length of the sales cycle.  For example, corporate sales often have a lengthy sales cycle with multiple decision makers invovled.
  • Contingency – This factor concerns the degree of risk associated with returns.  Retailers typically can return unsold merchandise to the publisher at the publisher’s expense.  Often the returned books are not in salable condition.
  • Commitment– This factor takes into account such things as the level of inventory reqired to service the channel and the degree to which the inventory is covered by prepayment.

The rewards for selecting a certain channel are determined by its effectiveness – the ability to reach and sell to customers who are the target audience for the title, as well as the profitablity of each sale.  A channel may provide broad exposure but to the wrong set of customers.

  • Audience coverage – This measures the number of customers appropriate for your offerings that are served by the channel.
  • Conversion – How well similar offerings sell in this channel.
  • Per sale profitability – This is the amount you, the publisher, receives from a sale through this channel.
  • Payment – This indicates how quickly the publisher gets paid by the channel.  Time is money, and cash flow dynamics are critically important to publishers.

calculatorRank each of these factors on a scale of 1 to 3 for your title where 3 is the most favorable and 1 the least favorable.  Divide each risk score by the sum of all the maximum risk scores.  Divide each reward score by the sum of all the maximum reward scores.  This normalizes the risk and reward values.  Compare the resulting risk and reward values to see how well they balance out.  A score heavy tilted toward more risk is means the channel is probably not a good bet for the publisher.

Creating a portfolio with channels that show high reward to risk will be more likely to yield good results.

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