1 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, Stores Regional, Mid-West Grocery Chain 600,000 Households Cleansed data to eliminate any shopping trips resulting in a purchase of under $5. Market Basket Study Methodology

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine purchasers averaged 44% more visits per year to the grocery store than non-magazine purchasers. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 The magazine purchaser averages over 10 more items in their shopping basket as compared to the non-magazine purchaser. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 The dollar amount of the magazine purchasers market basket is 74% higher than the basket of the non-magazine purchaser. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 While magazine purchasers represent about 23% of shoppers, they account for almost 60% of retail grocery dollars and almost 60% of the number of items purchased. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine purchasers are significantly more likely than non-magazine purchasers to shop the higher-margin business lines in the grocery channel. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 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. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Almost one-quarter of all magazine dollars are spent in the Home Women Family category. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 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. Magazine Purchaser ~ Market Basket Analysis Highest SpendingLowest Spending

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 While most magazine categories show increased consumption at higher spending levels, tabloids enjoy roughly equal penetration across all deciles. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis 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.

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis The tabloid category has the most loyal following of regular purchasers.

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis Purchasers in the 21+ category spend nearly $ per year on magazines.

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis Magazine purchasers buy more items and spend more money on shopping trips when they buy a magazine.

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis The business news category shows a stronger purchase level per title carried versus the sports and fitness category.

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 The purchasers at the 21+ level typically shop the front end for their magazine purchases. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 The Home Women Family, Business News and Tabloids are the strongest categories at the front end. Magazine Purchaser ~ Market Basket Analysis

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis Interaction Level between Business Lines and Magazine Category (Index of Magazine Shoppers by Business Line by Category to total Magazine Shoppers)

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis 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

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis 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)

Copyright © 2002, MANAGEMENT SCIENCE ASSOCIATES, INC. CEP031902I01 Magazine Purchaser ~ Market Basket Analysis The magazine section would be a great location to place the stores 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