FINGERHUT COS. INC.

Attend enough industry seminars and one becomes inured to the sound of direct marketers chanting “Right offer, right price, right time” in unison. But the industry is beginning to mine a fourth dimension in marketing besides the previous three: Reaching a consumer through the right channel.

Fingerhut Cos. Inc., Minnetonka, MN, prides itself on developing and maintaining relationships, a practice largely accomplished through its database and analytical processes. And an increasing amount of energy is being spent on determining the appropriate channel to maintain that relationship.

“We don’t believe that any one channel will be dominant [or that any] channel will become obsolete,” says John Hunsicker, the company’s vice president, database marketing.

Hunsicker is excited about the opportunities the Internet offers for enhancing Fingerhut’s transactional data. “Companies that are experienced in capturing, maintaining and leveraging large quantities of data will have a tremendous amount of opportunity on the Internet.”

One kind of data Fingerhut hopes to capture is how a consumer behaves when presented with a range of merchandise. When sent a catalog, says Hunsicker, consumers read it once, or five times, or dog-ear certain pages – or immediately throw it away. Regardless of what they do, a company has no way of seeing how a consumer interacts with it.

But this interactive behavior can be captured in cyberspace. “All of these have analogies in the electronic world,” says Hunsicker.

“Our goal is to take the database expertise we have built up and apply [it] to clickstream data, and to propel our [Web] business beyond just selling stuff in a general store on the Internet.”

Fingerhut is devoting significant resources to configuring its Internet practices. Hunsicker estimates that 70% of his time is spent tending to the Web business. Two or three years ago management might have channeled nearly all its energies toward making Fingerhut’s catalogs better.

This said, Hunsicker doesn’t expect Web marketing to supplant paper catalogs.

“Even [now] we are in a multichannel world. Phones aren’t going to go away, and mail isn’t going to go away. The Internet is going to grow, but it will not [account for 100% of all business].”

Sometimes the right channel comes in the form of brand marketing, which is the heart of Fingerhut’s affinity marketing program.

The company has begun selectively mailing customers who have a relationship with women’s clothing cataloger Arizona Mail Order Co. Inc. or one of Fingerhut’s non-apparel catalogs. It’s also been sending catalogs to those who have ordered other branded merchandise, such as Arizona Mail Order cookbooks.

Hunsicker sees Federated Department Stores, which acquired Fingerhut this past March, taking advantage of Fingerhut’s strength in affinity direct marketing to bolster its strong retail brands, such as Macy’s. A customer appearing on Fingerhut’s database as a mail order customer and on Macy’s database as a retail customer might be mailed a Fingerhut toy catalog under a Macy’s label if transaction data revealed that the consumer is more likely to respond to toy offers from Macy’s.

What of that other maxim, “Mail smarter, not more”? Fingerhut’s database division has addressed that as well through its proprietary mail stream optimization system. One hazard of doing hundreds of mailings a year is that some high-performing customers may be selected for several different mailings, often within the space of a few weeks. A customer slated to receive, for instance, Fingerhut’s big book one week and an electronics catalog the next would be bounced off the electronic catalog’s mailing list. Since the system’s complete implementation early this year, the company has seen a significant decrease in its advertising expenses and an increase in overall margin.

Database hygiene has resulted in both tangible and intangible benefits: Fingerhut’s returned-mail rates are half those of the industry average, which has proved to be “a huge cost driver,” according to Hunsicker. And the investment has had a slightly less substantial impact on the company’s customer relations.

“I’m proud of the job we do in capturing, storing and making sure [customer information] is correct,” says Hunsicker. “There is nothing that irritates customers more than when you spell their names wrong. It’s the etiquette of direct marketing.”