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No marketing decision is made in a vacuum. The choice to adjust one part of your marketing mix influences the other marketing functions. Your profitability is determined by your ability to plan and control the interaction among the four major elements of marketing strategy: the product and its price, distribution, and promotion.

The impact of marketing decisions on your profitability is demonstrated in the charts below.

The first one shows the net revenue for a title priced at $14.95 with 1,000 books published and sold through a distributor charging a fee of 65% of sales. The net profit is determined by deducting the Cost of Goods – Sold (COGS)–in this case, $4,500 for editing, cover design, layout, and printing–and the distribution discount from the total revenue. Selling all these books would net $732.

Quantity

Distributor’s

Distribution

Net

List price

Sold

Revenue

COGS

Percentage

Deduction

Revenue

Distributor-only

$14.95

1,000

$14,950

$4,500

65%

$9,718

$732

How would your profitability be affected by a change in distribution? The chart below shows how much you would increase net revenue if you sold these same books (with a promotional offer of 20% off) directly to commercial-sales markets. Commercial sales include those to corporations, associations, and foundations that buy books for use as premiums, incentives, and sales promotions or for educational purposes. By selling directly to these markets, you could multiply net revenue by 10 and make $7,460.

Quantity

Distributor’s

Distribution

Net

List price

Sold

Revenue

COGS

Percentage

Deduction

Revenue

Direct-only

$14.95

1,000

$14,950

$4,500

20%

$2,990

$7,460

There’s also a way to combine traditional and direct distribution to optimize (as opposed to maximize) your profitability. Dual distribution (selling some books through bookstores and some directly) would yield less net revenue than direct sales of the same number of copies, but it might suit your budget and time constraints better.

Quantity

Distributor’s

Distribution

Net

List price

Sold

Revenue

COGS

Percentage

Deduction

Revenue

Traditional

$14.95

500

$7,475.00

$2,250

65%

$4,859

$366

Direct

$14.95

500

$7,475.00

$2,250

20%

$1,495

$3,730

Total

1,000

$14,950

$4,500

$6,354

$4,096

This analysis seems to point out the most profitable distribution strategy. However, there’s more to this than meets the eye. The information below demonstrates how a distribution decision requires adjustments to your product development, pricing, and promotional strategies if you’re to maximize profitability.

Product:

If you sell your books to commercial-sales markets, several new options present themselves. A perfect-bound book with a wide spine (as preferred by bookstore buyers) may no longer be required. Now, a spiral-bound or comb-bound book may be more suitable to your customers’ needs.

Pricing:

If you decide to utilize direct distribution, other pricing alternatives become available. For instance, you could lower your price. Without a 65% distribution fee, your profits might actually increase. But don’t forget that now you’ll be responsible for conducting all the activities your distributor once handled–such as carrying inventory, shipping, handling returns, and billing. You may need to maintain the higher price to cover these costs.

Promotion:

Promotion is divided into four general categories: publicity, advertising, sales promotion, and personal selling. The distribution, product, and pricing choices you have made up to this point affect the emphasis you place upon each promotional tactic.

Your traditional distribution through a distributor and/or wholesaler required at least a partial push strategy. That approach supported your distributor’s sales efforts, perhaps through sales-promotional devices such as bookmarks, sales literature, and additional covers. With a direct-distribution strategy, you may have to perform direct-selling activities, send direct-mail letters, or conduct niche-advertising campaigns. These techniques demonstrate a pull strategy that is directed to the ultimate consumer–and that requires more of your time and money.

Product and pricing decisions also determine the text of your promotional copy. If you eliminate certain physical elements that are common to your competition and you still charge a similar price, then your headline and copy must demonstrate superior value to readers–i.e., you must convince them they will still be better off buying and reading your book rather than competitive titles.

 

Putting It All Together

The point of all this is to focus your attention on the ripple effects of any change in any one of the four elements of your marketing mix. As a change in one element influences each of the others, the impact of the combined changes shapes your net profit either positively or negatively. You’ll be more likely to optimize your profitability if you consider how changes in your distribution, pricing, product development, and/or promotion strategy affect each other and then plan ways to increase profits in light of the interaction.

 

Brian Jud is an author, speaker, seminar leader, book-marketing consultant, and creator of the Market-Mappingä
System for special sales. Contact Judd at P.O. Box 715, Avon, CT 06001; 866/788-5334; fax 860/276-2453; info@strongbooks.com, or visit
http://www.strongbooks.com.

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