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Management Science Associates, Inc.

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  1. Management Science Associates, Inc. Market Basket Analysis of Magazine Purchasers in the Grocery Channel November, 2002

  2. GROCERY CHANNEL MARKET BASKET ANALYSIS AGENDA • Study Methodology • Who is the Magazine Newsstand Purchaser? • What is the value of the Magazine Newsstand Purchaser to the Retailer? • What is the Shopping Behavior of the MagazineNewsstand Purchaser? • What is the Value of the Magazine NewsstandPurchaser to the Publisher and Advertiser? • What are the Opportunities? Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. BMH10/02

  3. Market Basket Study Methodology • Analyzed blind loyalty card data for over one million households and over 285 million purchase transactions • Covered a full year of purchases, September ‘01 through August ‘02 • Involved ten stores at each of two mid-sized, regional grocery chains • Cleansed data to eliminate: • Shopping trips resulting in a purchase of under five dollars • Negative purchase values • Cards that showed over thirty-five scans in a one-week period • Cards that did not show at least one shopping occasion during the last three quarters of the study period Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. BMH10/02

  4. Who is the Magazine Newsstand Purchaser?

  5. Magazine Purchasers Non-Magazine Purchasers 30% 26% 24% 23% 25% 21% 21% 21% 20% Percent of Households 14% 13% 15% 10% 9% 8% 8% 10% 5% 0% 18 - 24 25 - 35 36 - 45 46 - 55 56 - 65 66 - 75 Note: Data provided by one chain Age

  6. Magazine Purchasers Non-Magazine Purchasers 40% 34% 35% 31% 30% 28% 30% 25% 20% Percent of Households 18% 20% 15% 14% 15% 10% 6% 5% 5% 0% Grade School HighSchool Some College 4-Yr College Post Graduate Note: Data provided by one chain Education Level

  7. Education Level by Category

  8. Magazine Purchasers Non-Magazine Purchasers 33% 35% 32% 31% 28% 30% 25% 22% 18% 20% Percent of Households 15% 11% 10% 9% 10% 6% 5% 0% < $20,000 $20,000- $40,000- $60,000- $80,000+ $39,999 $59,999 $79,999 Note: Data provided by one chain Income Level

  9. Magazine Purchasers Non-Magazine Purchasers 40% 35% 35% 31% 30% 25% 22% 20% Percent of Households 19% 19% 20% 16% 13% 15% 9% 8% 10% 3% 3% 5% 1% 1% 0% One Two Three Four Five Six Seven + Note: Data provided by one chain Household Size

  10. Household Size by Category

  11. What is the Value of the Newsstand Purchaser to the Retailer?

  12. Magazine Purchasers Non-Magazine Purchasers 76% 80% 70% 58% 58% 60% 50% 42% 42% 40% 24% 30% 20% 10% 0% % of Shoppers % of Total Retail % of Total Grocery Grocery Dollars Items Purchased Significance of Magazine Purchasers

  13. Annual Shopping Weeks

  14. Average Dollars Spent Per Shopping Week

  15. Average Number of Items PurchasedPer Shopping Week

  16. Grocery Spending Definitions

  17. Percent of Households by GrocerySpending Level

  18. What is the Shopping Behavior ofthe Magazine Newsstand Purchaser?

  19. Percent of Shoppers Within Each Business Line that are Magazine Purchasers 24% of Total Grocery Store Shoppers Purchase Magazines 57% 60% 54% 52% 50% 45% 44% 42% 41% 41% 38% 40% 34% 34% 33% 31% 28% 30% 25% 20% 10% 0% HBC DELI MEAT VIDEO PHOTO FLORAL BAKERY SEAFOOD TOBACCO PRODUCE GROCERY PHARMACY GREETING CARDS PREPARED FOODS GENERAL MERCHANDISE

  20. Coupon Usage Among Magazine Purchasers and Non-Magazine Purchasers Note:Data provided by one chain

  21. Percent of Magazine Titles vs. Percent of Magazine Dollars by Category

  22. Average Yearly Magazine Spending By Purchase Frequency $140 $121.12 $120 $100 $80 $55.13 $60 $38.62 $40 $25.82 $16.15 $16.11 $20 $5.35 $0 TOTAL 1 - 3 4 - 6 7 - 9 10 - 15 16 - 20 21+ Purchase Frequency

  23. 80% 68% 70% % of Households % of Magazine Dollars 60% 50% 40% 35% 30% 23% 20% 14% 14% 13% 9% 7% 10% 6% 5% 5% 2% 0% 1-3 4 - 6 7 - 9 10 - 15 16 - 20 21+ Purchase Frequency Percent of Households vs. Percent of Dollarsby Purchase Frequency

  24. Percent of Households by Purchase Frequency Within Each Magazine Category

  25. Percent of Magazine Dollars by Purchase Frequency Within Each Magazine Category

  26. Percent of Magazine Dollars Spent by Month

  27. Magazine Shopper’s Average Basket Expenditure by Number of Magazines in Basket $100 $92.26 $90 $81.96 $80 $73.65 $70 $62.79 $60 $50 $45.14 $40 $30 $20 $10 $0 0 Magazines 1 Magazine 2 Magazines 3 Magazines 4+ Magazines

  28. Main Line Front End 80% 60% % of Magazine Dollars 40% 20% 0% Total 1-3 4-6 7-9 10-15 16-20 21+ Magazine Purchase Frequency Percent of Magazine Dollars by Purchase Frequency and Store Location

  29. High Grocery Spending Medium Grocery Spending Low Grocery Spending 50% 41% 40% 33% 30% 20% 11% 11% 10% 2% 2% 0% Main Line Front End Percent of Total Magazine Dollars by Grocery Spending Level and Store Location

  30. What is the Value of the Magazine Newsstand Purchaser to the Publisher and Advertiser?

  31. Percent of Households that Purchase Advertised Products Magazine Purchasers Non-Magazine Purchasers 76% 80% 70% 62% 58% 56% 60% 44% 50% 42% 38% 40% 24% 30% 20% 10% 0% Total Advertised Advertised Advertised Households Cookies Crackers Cereal

  32. Category Development Index for Advertised Products by Magazine Purchasers and Non-Purchasers Magazine Purchasers Non-Magazine Purchasers 200% 182% 174% 159% 150% 100% 81% 77% 74% 50% 0% Advertised Advertised Advertised Cereal Cookies Crackers

  33. Propensity to Purchase by Business Line for Magazine Buyers within a Category

  34. Average Number of Basket Items

  35. Average # of Items Purchased by Business Line When a Magazine is in the Basket

  36. What are the Opportunities?

  37. Opportunities • Broad-scale approach to better merchandising • Cross-merchandising between magazines and high-margin or high-ticket items • Magazine department located near high-margin departments and seasonal or impulse items • Placement of magazine racks within related grocery departments Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. BMH10/02

  38. Opportunities • Business line product mix adjustments based on magazine sales or Magazine category adjustments based on business line sales • Multiple magazine purchase incentives managed through loyalty card program • Coupon effort or other trial or continuity promotional programs • On-product subscription premiums or copy offers with the purchase of advertised product Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. BMH10/02