Anderson News Company Distribution Practices Kaleidoscope Profiling Wal-Mart Meeting February 3, 2008

Kaleidoscope Consumer Profiling Kaleidoscope combines – Geography (who lives around the store) – Market Profile (who shops the store) – Demographics (details of who lives around and shops the store) – Lifestyles (how they spend time and money) – What magazines they buy Rural Blue Collar

Market Segmentation Is Knowing Who the Consumers Are and How They Behave Demographics are the statistics of who you are – Age – Income – Ethnicity – Education Magazine purchasing habits also help identify who you are – Do they buy US News and Robb Report. – Do they buy Jet and Ebony Kaleidoscope uses demographics and magazine purchase data to identify the lifestyles that live in a geographic area Kaleidoscope also bundles the many consumers into one of 17 descriptive lifestyles Affluent Family African American Rural Blue Collar

More Examples Cincinnati Analyzing Metro Markets

Middle Class Family 40.0% 60.6% Affluent Family 11.0% Golden Years 11.0% 16.4% Blue Collar 5.0% 7.6% Middle Class Singles 17.0% Percent Shopping In This Store Percent Living In Store’s Radius Hispanic Mix 10.0% 15.3% Other 6.0% Cluster Group Affluent Families HispanicMiddle Class Families Store Profile Example These Consumers are not shopping in this store based on Magazine Sales The Radius around a store depends on Population Density. The more dense the population the smaller the radius Kaleidoscope Lifestyle

Kaleidoscope Consumer Profiling Accuracy – 80% Absolute Certainty – 10% A Shade of Gray Off – 10% Needs to be Challenged by Local Input Empowering Local Associates – Training – Shared Data – Exception Reporting Affluent Family

Title Ranking Anderson ranks titles to maximize sales for the Retail Customer – Annual unit sales – Cover price Regional titles are managed locally and through our regional title management tools New titles are ranked according to its competitive set and potential as gauged by the purchasing department

Ranks are calculated by identifying a select group of stores that are highly representative of each lifestyle and class of trade. Ranks are calculated each month using sales from the previous rolling year. Ranks are calculated for: – 17 lifestyles – 5 classes of trade Food stores Convenient stores Drug stores Mass market Military Ranks include sales index calculations that are used for various analysis tools. RankTitle 1People 2Nat Enq 3Star 4First 5In Style 6Cosmo 7Oprah 8Cook Light 96Motor Trend 104Arch Digest 145Essence 181Ebony 286Low Rider 385Jet RankTitle 1Nat Enq 2People 3Star 4Wom World 5Jet 6Essence 7Ebony 22In Style 44Low Rider 59Cook Light 158Motor Trend 409Arch Digest Affluent Mass Market African Amer. Mass Market Rankings allow us to insure the best potential titles are available

Sales Index by Lifestyle

Index Correlation Model

Topics for Discussion Retail Is Detail Kaleidoscope OPA COSTARS New Store Process Merchandising Central Distribution Opportunities

Optimal Product Assortment [OPA] Snapshot Overview The OPA Snapshot adds and deletes titles. It is a snapshot of what will fit on the rack at the time it is approved. Every snapshot is saved for three years so we can evaluate decisions. We run OPA 2-3 times annually on each store

Optimal Product Assortment [OPA] Snapshot Overview The OPA Snapshot combines the title list for each Lifestyle of the store. This creates a high to low list unique for that store that only has authorized titles for that store. When this snapshot is approved, the most productive titles not in the store are added and the titles that less productive are deleted. Each store can have a custom Expansion Factor to meet retailer-desired merchandising and turns.

OPA Snapshot Lifestyle Lists On the left are the ranks for an Affluent Mass Market and an African American Mass Market. Take a moment to notice the differences. Also notice that the top titles remain in the top of both lists. These checkout titles remain in most stores. The Snapshot builds a custom list by combining each list weighted average of that store’s lifestyles The result is a title list for the store that is customized for that store’s shoppers. Motor Trend127 Arch Digest266 Jet195 Low Rider165 Ebony94 Essence75 Cook Light34 In Style14 Wom World8 Star3 People2 Nat Enq1 TitleRank Store Specific Rank

At the time the snapshot is taken the rack data is critical. The length and shelves are used to calculate how many titles fit on the fixture – Length of Rack – Shelves – Pockets – Multiple Fixtures Look right at how many titles are chosen (Rank = # of titles) for slight changes in rack data RankTitle 1Wom World 2Nat Enq 3People 4TV Guide 5Star 6Globe Blue Collar Mass Market 20’ 12 Shelves 20’ 14 Shelves 32’ 12 Shelves 36’ 12 Shelves Facing Formula: ML Length (in Feet) x Shelves x 1.5 OPA Snapshot Rack Data

OPA Snapshot Expansion Factor The Expansion factor Determines how many more titles to send than will fit on a full faced rack. What to do with the extra titles – Overlap part of the fixture – Turn the lowest sellers – Fill in holes left by prematures or sell outs RankTitle 1Star 2People 3Nat Enq 4Wom World 5Cosmo 6TV Y Novelas Hispanic 0% Expansion 10% Expansion 20% Expansion 60% Expansion Title Cut-offs based on a 24 foot, 12 shelf mainline

Optimal Product Assortment [OPA] Snapshot Overview The Base for a new title is calculated on sales of competitive titles in the same store. Titles that are identified for deletion are kept if they meet the sales check. The sales check is calculated by using 75% of the store’s median sales.

The store presented to the right has a cut line drawn at 520 titles Adds and Deletes are determined based on their sales ranks – Truckin’ is Added to store based on annual sales (notice frequency) Trucks is Deleted from store. The sales check is determined for each store based on their mainline median. – Robb Report is kept because its sales are greater than the sales check of Another title will be removed. RankSaleTitle 1Woman’s World 2Nat Enquirer 3People 4Globe 5Family Circle 6Country Weekly New 1.0Truckin (Monthly) Trucks (Bi-Monthly) Robb Report Max Titles Golden Years OPA Snapshot Cut Line/Sales Check