1 management science associates, inc. march 19, 2002 market basket analysis of magazine purchasers...

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Management Science Associates, Inc.

March 19, 2002

Market Basket Analysis of Magazine Purchasers in the Grocery Channel

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01

Magazine Purchaser ~ Market Basket Analysis

Loyalty Card Data

January through December, 2001

10 Stores

Regional, Mid-West Grocery Chain

600,000 Households

Cleansed data to eliminate any shopping trips resultingin a purchase of under $5.

Market Basket Study Methodology



Number of Households Included in Study

- 100,000 200,000 300,000 400,000 500,000 600,000 700,000

Non-MagazinePurchasers

Magazine Purchasers

Total

Number of Households


Magazine purchasers averaged 44% more visits per year to the grocerystore than non-magazine purchasers.


Average Number of Shopping Visits in 2001(Chain-wide)


Magazine Purchasers

Total

Number of Visits


Average Number of Items Purchased Per Shopping Visit

0 5 10 15 20 25 30 35


Magazine Purchasers

Total

Number of Items

The magazine purchaser averages over 10 more items in their shoppingbasket as compared to the non-magazine purchaser.



The dollar amount of the magazine purchaser’s market basket is 74%higher than the basket of the non-magazine purchaser.


Average Dollars Spent Per Shopping Visit


Magazine Purchasers

Total

Dollars


Shopping Patterns by Segment

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

% Shoppers % Retail Grocery Dollars % Items Purchased

Non-Magazine Purchasers

Magazine Purchasers

While magazine purchasers represent about 23% of shoppers, they account for almost 60% of retail grocery dollars and almost 60% ofthe number of items purchased.



Magazine purchasers are significantly more likely than non-magazine purchasers to shop the higher-margin business lines in the grocery channel.


% of Households that Purchase in Other Business Lines (Indexed to Total Households)

0

50

100

150

200

250

300

Pharm

acy

Video

Photo

Floral

Gener

al M

erch

andis

e

Greet

ing C

ards

Seafo

od

Prepa

red

Foods

Tobac

co Deli

Baker

yHBC

Mea

t

Produ

ce

Groce

ry

Grocery Business Lines

Magazine Purchasers Non-Magazine Purchasers


While magazine purchasing households are about equally likely to shop the grocery section as the non-magazine households, the magazine purchasers spend far more money in the grocery area.


Index of Dollars Spent in Other Business Lines(Indexed to Total Households)

0

100

200

300

400

500

600

Groce

ry

Gener

al M

erch

andis

e

Video

Greet

ing C

ards

HBCPho

toFlor

al

Pharm

acy

Prepa

red

Foods

Tobac

co

Produ

ce Deli

Mea

t

Seafo

od

Baker

y

Grocery Business Lines

Magazine Purchasers Non-Magazine Purchasers


Almost one-quarter of all magazine dollars are spent in the Home Women Family category.


% of Magazine Dollar Spending by Category

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Home

Wom

en F

amily

Busin

ess N

ews

Auto

Sports

Fitn

ess

Food

Enter

tainm

ent T

rave

l

Kids T

eens

Tablo

ids

Compu

ter E

lectro

nics

Men

s

Animals

Scienc

e Tec

hnolo

gy

Magazine Categories


% of Households that Purchase Magazines by Grocery Spending Level (Decile)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

DECILE 1 DECILE 2 DECILE 3 DECILE 4 DECILE 5 DECILE 6 DECILE 7 DECILE 8 DECILE 9 DECILE 10

A decile analysis was conducted to determine the propensity of a household to purchase magazines based on their overall grocery spending level. Clearly, the greater the level of overall grocery spending, the greater the likelihood that the household will purchase magazines.


Highest Spending Lowest Spending


Decile Comparison Across Categories

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

ANIMALS

HOM

E WO

MEN F

AMILY

AUTO

SPORTS F

ITNESS

BUSINESS N

EWS

CALENDARS P

UZZLES M

ISC M

AGS

KIDS T

EENS

COM

PUTERS ELE

CTRONIC

FOO

D

MENS

ENTERTAIN

MENT T

RAVEL

SCIENCE T

ECHNOLO

GY

TABLO

IDS

DECILE 1 DECILE 5 DECILE 10

While most magazine categories show increased consumption at higher spending levels, tabloids enjoy roughly equal penetration across all deciles.




An analysis was conducted grouping the magazine purchasers by their purchase frequency. The most loyal magazine consumer (21+ level) spends approximately 1/3 of all magazine dollars.

% of Magazine Dollars Spent by Purchasing Frequency

0% 5% 10% 15% 20% 25% 30% 35%

PURCH 21+

PURCH 16 - 20

PURCH 10 - 15

PURCH 7 - 9

PURCH 4 - 6

PURCH 1 - 3



The tabloid category has the most loyal following of regular purchasers.

% of Magazine Category Dollars by Purchasing Frequency

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Animals

Home

Wom

en F

amily

Auto

Sports

Fitn

ess

Busine

ss N

ews

Kids T

eens

Compu

ter E

lectro

nics

Food

Men

s

Enter

tainm

ent T

rave

l

Scienc

e Tec

hnolo

gy

Tabloi

ds

Category

PURCH 1 - 3 PURCH 7 - 9 PURCH 21+



Purchasers in the 21+ category spend nearly $120.00 per year on magazines.

Average Yearly Magazine Expenditure per Household by Purchasing Frequency

$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

PURCH 1 - 3 PURCH 4 - 6 PURCH 7 - 9 PURCH 10 - 15 PURCH 16 - 20 PURCH 21+

Frequency



Magazine purchasers buy more items and spend more money on shoppingtrips when they buy a magazine.

Magazine Purchasers Shopping BehaviorAverage Items Purchased and Average Dollars spent During

Shopping Visit

0

10

20

30

40

50

60

70

80

90

AVG ITEMS AVG DOLLARS

Weeks Magazine Purchased Weeks No Magazine Purchased



The business news category shows a stronger purchase level per title carriedversus the sports and fitness category.

Product Assortment Analysis(% of Quantity Sold vs % of Titles)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Home/

Wom

en's/

Family

Autom

obile

Busine

ss &

New

s

Sports

& F

itnes

s

Tabloi

dsFoo

d

Enter

tainm

ent &

Tra

vel

Kids &

Tee

ns

Compu

ters

& E

lectro

nics

Men

's

Animals

Scienc

e & T

echn

ology

Category

% of Quantity Sold

% of Titles


The purchasers at the 21+ level typically shop the front end for their magazine purchases.


In Line Dollars vs. Front End Dollars by Purchasing Frequency

0%

10%

20%

30%

40%

50%

60%

70%

TOTAL PURCH 1 - 3 PURCH 4 - 6 PURCH 7 - 9 PURCH 10 - 15 PURCH 16 - 20 PURCH 21+

Purchase Frequency

In Line Front End


The Home Women Family, Business News and Tabloids are the strongest categories at the front end.


In Line Dollars vs. Front End Dollars by Category

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Animals

Home

Wom

en F

amily

Auto

Sports

Fitn

ess

Busine

ss N

ews

Kids T

eens

Compu

ter E

lectro

nics

Food

Men

s

Enter

tainm

ent T

rave

l

Scienc

e Tec

hnolo

gy

Tabloi

ds

Categories

In Line Front End



Interaction Level between Business Lines and Magazine Category

(Index of Magazine Shoppers by Business Line by Category to total Magazine Shoppers)

BUSINESS LINE Animals

Home Women Family Auto

Sports Fitness

Business News

Kids Teens

Computers Electronics Food Mens

Entertainment Travel

Science Technology Tabloids

Bakery 100 97 106 93 95 96 92 94 91 98 100 121Deli 94 99 102 99 99 95 97 102 100 97 91 97Floral 113 109 98 102 113 100 97 123 104 98 109 100General Merch 125 104 100 108 111 116 120 111 113 115 127 109Greeting Cards 106 104 105 101 108 101 94 107 91 108 91 108Grocery 100 100 98 100 100 102 100 97 100 100 100 94HBC 113 103 99 108 106 103 102 99 117 105 109 101Meat 100 97 102 98 95 98 102 95 96 100 91 101Pharmacy 31 103 76 112 124 122 100 132 30 95 64 95Photo 113 104 94 104 113 127 102 99 109 109 109 86Prepared Foods 113 101 101 103 111 93 98 109 109 102 118 121Produce 100 103 97 100 102 93 91 112 96 93 100 95Seafood 100 102 95 100 100 84 91 116 96 90 109 91Telecommunications 113 98 97 110 102 110 117 91 122 113 109 95Tobacco 100 87 108 90 86 90 115 77 87 111 91 168Video 200 113 131 159 105 129 217 142 248 164 309 113



The magazine purchaser is typically one of the highest-spending grocery shoppers and will frequent many higher-margin business lines during their shopping trip. This suggests an opportunity for a cross-merchandising promotion between a particular magazine purchase and other high-ticket items in the store.

The magazine purchaser is a more loyal shopper, visiting the store more often than the non-magazine purchaser. This suggests a continuity-oriented magazine offer, possibly as part of a loyalty card reward program, to encourage additional, more frequent magazine purchases.

Compared to the non-magazine purchaser, the magazine purchaser is a more “involved” grocery shopper, relying on the store as a “one-stop” destination for more of their general household needs rather than just food-related purchases.

Conclusions



Since magazine purchasers are typically the higher-spending shoppers, retailers may want to locate higher-priced seasonal or impulse items near the magazine section.

Additional placement of magazine categories in the related business line sections should significantly increase magazine sales levels. Tabloids in the Bakery and Tobacco departments Food magazines in the Floral department Kids/Teens magazines in the Pharmacy and Photo

Departments Science and Technology magazines in the Video

Department

Since the purchase of a magazine typically signifies the consumer is on a major shopping trip, the magazine in-line section should be located near other high-margin business lines.

Conclusions (Continued)



The magazine section would be a great location to place the store’s weekly advertising circular, or develop a special in-store advertising section featuring varied higher-ticket items in which this consumer is likely to have an interest.

As shown by the high level of interaction between different magazine categories and specific business lines, a store would benefit from adjusting their business line product mix based on the magazine categories which are strong at that location. Likewise, if a specific store has unusually strong sales in a particular business line, it would suggest that there is increased potential for the related magazine category.

Conclusions (Continued)

24

Management Science Associates, Inc.

March 19, 2002

Market Basket Analysis of Magazine Purchasers in the Grocery Channel

1 management science associates, inc. march 19, 2002 market basket analysis of magazine purchasers...

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