Bookbinders Book Club
By Gary L. Lilien & Arvind Rangaswamy
1. Before beginning any case, students should familiarize themselves with the model being used. Marketing Engineering for Excel comes with tutorials that demonstrate the capability of each model. The tutorial can be found under each model within the ME►XL menu after starting Excel. These tutorials are designed to work with our OfficeStar examples which are located in the My Marketing Engineering directory, usually installed in My Documents during software installation. The data required for this case is located in two files in the My Marketing Engineering directory (usually located within My Documents): Bookbinders Book Club Data (Customer Choice).xls Bookbinders Book Club Data (Customer Choice) Holdout Sample.xls
About 50,000 new titles, including new editions, are published in the United States each year, giving rise to a $20+ billion book publishing industry. About 10 percent of the books are sold through mail order. Book retailing in the 1970s was characterized by the growth of chain bookstore operations in concert with the development of shopping malls. Traffic in bookstores in the 1980s was enhanced by the spread of discounting. In the 1990s, the superstore concept of book retailing was responsible for the double-digit growth of the book industry. Generally situated near large shopping centers, superstores maintain large inventories of anywhere from 30,000 to 80,000 titles. Superstores are putting intense competitive pressure on book clubs, mail-order firms and retail outlets. Recently, online superstores, such as www.amazon.com, have emerged, carrying 1–2.5 million titles and further intensifying the pressure on book clubs and mail-order firms. In response to these pressures, book clubs are starting to look at alternative business models that will make them more responsive to their customers’ preferences. Historically, book clubs offered their readers continuity and negative option programs that were based on an extended contractual relationship between the club and its subscribers. In a continuity program, popular in such genres as children’s books, a reader signs up for an offer of several books for a few dollars each (plus shipping and handling on each book) and agrees to receive Copyright © 2008 by DecisionPro, Inc. To order copies or request permission to reproduce materials, go to www.decisionpro.biz. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording or otherwise – without the permission of DecisionPro, Inc.
a shipment of one or two books each month thereafter. In a negative option program, subscribers get to choose which and how many additional books they will receive, but the default option is that the club’s selection will be delivered to them each month. The club informs them of the monthly selection and they must mark “no” on their order forms if they do not want to receive it. Some firms are now beginning to offer books on a positive-option basis, but only to selected segments of their customer lists that they deem receptive to specific offers. Book clubs are also beginning to use database marketing techniques to work smarter rather than expand the coverage of their mailings. According to Doubleday president Marcus Willhelm, “The database is the key to what we are doing…. We have to understand what our customers want and be more flexible. I doubt book clubs can survive if they offer the same 16 offers, the same fulfillment to everybody.”2 Doubleday uses modeling techniques to look at more than 80 variables, including geography and the types of books customers purchase, and selects three to five variables that are the most influential predictors.
The Bookbinders Book Club
The BBB Club was...