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Supply & Demand & Forecasting
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From: Charles Bayless <charles.bayless_at_gmail.com>
Date: Sun, 02 Mar 2014 13:08:24 -0500
Marc Aronson said: "I suspect that part of what the CCBC and PW numbers show is the simple fact that overwhelmingly book publishers need to focus on retail sales to make their margins, while the concerns of the CCBC-net community are often those of the institutional market: not, what will an individual buy but, rather, what do we as educators believe should be available -- often for free to the reader -- in school and public libraries?"
We have had a lot speculation on the part of many viewpoints as to what the numbers are and what they mean and what they ought to be. Where in the supply chain is underrepresentation being sourced? Is it that authors are not producing, that agents are not representing, acqusitions editors not taking, marketing not investing, librarians not pushing, or the public not buying? All logical choke points. We don't have the data to determine exactly what is happening though we do have some data that is strongly indicative.
But I think Marc is on to something regarding the bifurcation between the retail sales market and the institutional market. It is all about Supply & Demand and people responding to incentives.
I think what would be very illuminating is if we were able to get someone, particularly from a large publishing company (or corporation), to describe what are the factors, considerations and processes by which a publishing company 1) forecasts likely unit sales, 2) allocates marketing budget, and 3) forecasts revenue and profit per book title. How do these processes typically work, do they work well, and how might they be reconciled between what external parties think demand ought to be versus what publishers models forecast that it will be?
We have to be careful because, a propos Marc's comment, there are all sorts of constraints on the retail market that are not obvious to the institutional market; in particular laws against data sharing that might be interpreted as collusion. So anything would have to be at a process level rather than any details.
I know how those processes work in consumer product and manufacturing companies but I have no knowledge on the details in the publishing industry which has a lot of historical quirks.
In consumer products, when looking at a new product launch or a line extension you typically are taking into account and forecsasting a number of possible variables:
. Anticipated market size
. Past sales comparables
. Category sale trends
. Topic category sale trends
. Number of competitive offerings by others
. Price point profiles
. Cost structure for launch and marketing
. Covariable events (movie tie-ins for example)
. Supplemental market sales (international for example)
. Exogenous known events such as anniversary years, cyclical events
(sports books during an Olympic year), etc.
. Probability of complimentary exogenous unknown events (selling a book about sharks in a year that happens to have a headline shark attack)
. Demand sensitivity
. Demand substitutes
. Etc.
If publishers have rigorous sales forecasting processes in place, they might shed light on where the disconnect arises. And if they don't have such processes in place, that is also informative.
Charles
Date: Sun, 02 Mar 2014 13:08:24 -0500
Marc Aronson said: "I suspect that part of what the CCBC and PW numbers show is the simple fact that overwhelmingly book publishers need to focus on retail sales to make their margins, while the concerns of the CCBC-net community are often those of the institutional market: not, what will an individual buy but, rather, what do we as educators believe should be available -- often for free to the reader -- in school and public libraries?"
We have had a lot speculation on the part of many viewpoints as to what the numbers are and what they mean and what they ought to be. Where in the supply chain is underrepresentation being sourced? Is it that authors are not producing, that agents are not representing, acqusitions editors not taking, marketing not investing, librarians not pushing, or the public not buying? All logical choke points. We don't have the data to determine exactly what is happening though we do have some data that is strongly indicative.
But I think Marc is on to something regarding the bifurcation between the retail sales market and the institutional market. It is all about Supply & Demand and people responding to incentives.
I think what would be very illuminating is if we were able to get someone, particularly from a large publishing company (or corporation), to describe what are the factors, considerations and processes by which a publishing company 1) forecasts likely unit sales, 2) allocates marketing budget, and 3) forecasts revenue and profit per book title. How do these processes typically work, do they work well, and how might they be reconciled between what external parties think demand ought to be versus what publishers models forecast that it will be?
We have to be careful because, a propos Marc's comment, there are all sorts of constraints on the retail market that are not obvious to the institutional market; in particular laws against data sharing that might be interpreted as collusion. So anything would have to be at a process level rather than any details.
I know how those processes work in consumer product and manufacturing companies but I have no knowledge on the details in the publishing industry which has a lot of historical quirks.
In consumer products, when looking at a new product launch or a line extension you typically are taking into account and forecsasting a number of possible variables:
. Anticipated market size
. Past sales comparables
. Category sale trends
. Topic category sale trends
. Number of competitive offerings by others
. Price point profiles
. Cost structure for launch and marketing
. Covariable events (movie tie-ins for example)
. Supplemental market sales (international for example)
. Exogenous known events such as anniversary years, cyclical events
(sports books during an Olympic year), etc.
. Probability of complimentary exogenous unknown events (selling a book about sharks in a year that happens to have a headline shark attack)
. Demand sensitivity
. Demand substitutes
. Etc.
If publishers have rigorous sales forecasting processes in place, they might shed light on where the disconnect arises. And if they don't have such processes in place, that is also informative.
Charles
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Received on Sun 02 Mar 2014 12:09:43 PM CST
