Many corporations offer books as premiums, providing added value to their customers and creating a potentially lucrative sales channel for publishers. Despite low margins, publishers often find premium sales beneficial, especially for backlist titles, due to high volume and added exposure in nontraditional channels.

Publishers that have special sales departments are proactive about going after all types of premium deals and generating profit from them. Julie Sanders, director of special sales and custom publishing at Simon & Schuster, has been with the company for three years and expects her work to come to fruition in 2002 with three as-yet-unannounced deals involving quantities ranging from 500,000 to six million books each. "I've been pushing for growth in premium sales," Sanders said. "It's the area where you have the potential for extreme growth. One huge sale can literally make your whole year."

Other publishers assess premium sales on a case-by-case basis, forging deals when approached by potential partners but not devoting much time to premium selling. "The margins are always pretty thin," said Michael Jacobs, senior v-p of Scholastic's trade division. "We consider [the premium-sales business] incremental. It's hard to budget for, since it's opportunistic."

Some book premiums are offered to consumers for free. For example, Bradford & Bingley, a U.K. building society (like a savings and loan in the U.S.), markets a savings account aimed at children 15 and younger. B&B gives away a free Puffin book from Penguin U.K. to customers who make a certain number of deposits each year. (B&B also offers Puffin books for sale in statement stuffers.) Penguin U.K.'s annual sales to Bradford & Bingley total more than 100,000 units.

Self-liquidating premiums occur when the consumer purchases a book from a marketer (normally at a reduced price compared to retail); the income covers the marketer's cost. In 2000, Random House sold Hershey 20,000 sets of the classic Dr. Seuss title How the Grinch Stole Christmas! and the tie-in storybook for the film; Hershey then sold the book sets to shoppers through an offer on its chocolates, as part of its promotional support of the movie.

Books are sometimes co-packaged with the corporate customer's product. "We do a lot with value-added packages," reported Marie Hergenroeder, director of premium sales at HarperCollins. Harper sold copies of Vera Wang Weddings to Unilever, which the company packaged with its new Vera Wang fragrance. "[Weddings] is now at cosmetics counters at department stores, where a book wouldn't normally be," Hergenroeder said.

Incentive offers are another category of premium. A Pampers Rewards Program allowed customers to accumulate points when they purchased Pampers products; the points could be redeemed for catalogue merchandise. Four Random House Sesame Street titles were included in the promotion for a year and were redeemed at more than double the projection, according to Ken Berger, Random's associate director of premium sales and custom publishing.

Premiums can be targeted at distributors or retail employees, as well as at consumers. As part of Coca-Cola's global tie-in with the first Harry Potter film, it purchased Scholastic's Harry Potter and the Sorcerer's Stone paperbacks (not the movie tie-in version) to give to bottlers as gifts to encourage their support of the promotion.

The Match Game

The types of titles appropriate for premium sales are varied, as are the types of customers interested in book premiums. Retailers, software companies, financial and insurance firms and airlines are just a few of the potential partners. Among the most frequent premium customers are consumer products marketers, particularly food and beverage brands. These firms offer publishers the potential for large sales and lots of exposure.

In March, General Mills's Cheerios brand began offering three titles from Random House: Frederick by Leo Lionni (Knopf), for ages six and under; Nate the Great by Marjorie Weinman Sharmat, illus. by Marc Simont (Delacorte) for ages 5—9; and Tales of a Fourth Grade Nothing by Judy Blume (Dell/Yearling) for ages 7—12. Consumers can order any one of the three with two proofs of purchase and $1.25 shipping and handling; the promotion is advertised on all varieties of Cheerios, totaling 28 million boxes (compared to eight to 12 million for a typical General Mills multibrand effort). This wide exposure indicates the company's strong support for its new literacy initiative.

In the children's sector, licensed titles are popular premiums. S&S has worked with Nabisco for two years on a Farley's Fruit Snacks in-pack premium promotion involving Blue's Clues minibooks, of which 15 million have been distributed so far. McGraw-Hill Children's Publishing supplied Arthur activity books early this year (it recently ended its licensing deal for the character) for a promotion licensor Marc Brown Studios set up with Nestlé USA's Libbey's Juicy Juice brand, a sponsor of the Arthur TV series on PBS. MHCP does not typically pursue premium sales, but in this case was willing to participate. "It was a license we valued and it was something they wanted to do, so we were happy to help out," said David Kelly, MHCP's senior marketing manager.

Penguin U.K. did a six-week deal this year with Robertson's jams, which allowed customers of Sainsbury's supermarkets who bought two jars of jam or marmalade to select one of four Roald Dahl titles (featured on a shelf in the store) for £1.99. Penguin's sale totaled more than 60,000 books, according to Christine Jones, the company's special sales manager, and the offer was featured on 2.2 million jars. "We often work with licensees in this way," she said, citing Beatrix Potter, Flower Fairies and Disney licensees as examples.

Titles supplied for premiums are often customized by adding a company's brand message to the cover or creating an entirely new cover; putting together an excerpt or a compilation of content; or revising specifications (e.g., number pages, trim size or format).

Health Communications Inc. created a booklet, "101 Comfort Tips for Mom from Vicks VapoRub and Chicken Soup for the Soul," for a Vicks promotion in 2000—2001. The 64-page booklets, in Spanish, Portuguese, French and English, were copackaged with Vicks VapoRub in 32,000 VapoRub and 2,500 Pediatric Cough/Cold displays in drug and grocery stores, and were promoted in 49 million Sunday newspaper inserts.

In a Mother's Day promotion last year, JC Penney gave away 800,000 copies of a small hardcover gift edition containing an excerpt from S&S's Chocolate for a Mother's Heart. It was packaged, along with chocolate and recipe cards, in a box featuring the book cover.

Doing the Deal

Some publishers have a rate card for premium discounts, which often fall in the 50%—60% range, depending on quantity. Others negotiate each deal separately, and even publishers with rate cards often make exceptions. Deals involving customized print runs tend to be off the rate card, for example, and are generally priced on a cost-plus basis, with a profit margin added to the cost of the press run. The publisher's objectives, the customer's promotional budgets and licensing royalties, if applicable, also are factored into pricing decisions. Sales are nonreturnable and, in most cases, publishers prefer a straight minimum sale, leaving any fulfillment or other promotional logistics to the customer.

While publishers, especially those with special-sales departments, typically expect some profit on each deal, they also value the awareness generated by premiums. "We want to build our brand by matching it up with a brand that's a nice association and gives a message about who we are and what we do," said Jones. That exposure is a factor that Penguin U.K. considers when deciding how to structure a deal.

Kelly Maragni, HCI's marketing director, pointed out that while special sales are normally viewed as a profit center, HCI appreciates the value of gaining a large number of impressions outside bookstores. "What is the value of getting our name into an alternative venue? We know our reader is broader than just the bookstore buyer," she said. "We're sometimes willing to pay to get the message out."

Of course, the amount of exposure often goes hand-in-hand with sales; the more boxes advertising a book, the more redemptions. Some publishers have set minimums for premium sales, often between 5,000 and 10,000 units, although they may do a deal for less if other objectives are satisfied. Co-packaging generally lends itself to the highest quantities, followed by free and then self-liquidating offers.

One primary consideration in forging any deal is to avoid harm to trade sales. Berger said his company has liaisons in place to ensure communication between the imprints and special markets. "I know I have to contact the publisher if I want to sell a book," he said. "They might not want a premium sale until [a title] has been in stores for a while."

The majority of premium sales involve backlist rather than new titles, which reduces the chance of cannibalization (as well as giving a boost in awareness to books that are not at the top of consumers' minds). In addition, premiums tend to reach new audiences or distribution channels. In 2001, Nabisco Premium Saltine Crackers targeted seniors, who shop in grocery stores but not often in bookstores. For $5.99 plus one Saltines proof of purchase, customers could receive their choice of Chicken Soup for the Golden Soul or Chicken Soup for the Cat and Dog Lover's Soul. HCI contributed 20% of the cost of 13 million newspaper inserts supporting the promotion, as well as 15% of the cost of printing and inserting custom co-branded bookmarks in each copy shipped to Nabisco. The initial commitment was 10,000 of each title; 20 million packages featured the offer.

The Partner's Point of View

Marketers who offer books as premiums increase goodwill, awareness and sales. Hormel's Kid's Kitchen brand of microwave meals was launched 10 years ago; its second promotion was a free Berenstain Bears book offer with proofs of purchase. The results exceeded expectations, according to Dan Witkowski of Magiccom, a creative services and marketing agency that has represented Kid's Kitchen since its inception.

Over the last decade, the brand has run two or three free book offers a year, ranging from Random House's Are You My Mother? by P.D. Eastman to DragonTales TV tie-ins. The offers are typically promoted on between four million and 14 million packages, depending on the property and time of year, with book quantities totaling between 40,000 and 80,000. This year, Kid's Kitchen is giving away Clifford TV tie-ins. The first offer, in January, was promoted in more than 45 million newspaper inserts and on more than four million Kid's Kitchen Microwave Meal packages; in response to its success, Hormel added a third Clifford promotion to the two already scheduled for this year.

The effectiveness of books as premiums led the company to start a school outreach program. Three years ago, Hormel formalized its in-school efforts by establishing the Kid's Kitchen Reading Club, which is in 10,000 classrooms this year. The company's free book offers can be redeemed through schools as well as individual customers.

Kid's Kitchen's sales increased 19.8% over the three years from August 1998 through August 2001 and, while it is difficult to track a correlation directly, "virtually all of the [marketing] activity has been tied to these types of [book-related] promotions," Witkowski said. "So there's a good and positive reciprocal benefit. It's also helped build the image of the brand as something that's nurturing and wholesome."

The Cheerios/Random House book giveaway marked the launch of a major Cheerios literacy effort called "A Book for Every Child," supported throughout all the brand's marketing programs, from its Web site to its NASCAR sponsorship. The initiative's objectives are to get more books into the hands of kids and encourage family read-along time, explained General Mills spokesperson Liv Lane, who added that while the impetus for the program is philanthropy, it is likely to boost sales as well. "Is there a chance that someone will choose to purchase Cheerios over another brand because of the access to the books? Probably."

Cheerios promotions manager Pam Kermisch told PW the on-pack effort with Random House is just the first in a series of planned book offers. General Mills will donate 15¢ for every Random House book redeemed (up to $150,000) to Reading Is Fundamental, on top of a $100,000 donation to the organization that helped kick off the Cheerios literacy initiative.

Nestlé USA, another RIF partner, has donated money for books in 50 adopted schools since 1994. Some of the company's brands tie their promotional activity to the RIF sponsorship, according to Rita Henderson, manager of educational programs. For example, Nestlé made a donation to RIF each time a child sent a birthday card to the Quik Bunny.

While Nestlé has not yet tied its Juicy Juice/Arthur book offers to RIF, the partnership with Arthur—now in its sixth year—makes sense for the company, said beverage division spokesperson Yasmeen Muqtasid. "It is value-added for us, and likewise for Arthur."

Premium sales remain opportunistic for publishers. "There are a lot of books we can't sell," Harper's Hergenroeder said. "You have to be familiar with your customers' marketing themes, what their brand image is and what books you have that support that. You have to have an idea for them and tell them how that book will sell their product. You're going to get a lot of no's in this business." When the answer is yes, however, publishers find premium sales to be lucrative, as well as beneficial from a marketing standpoint.