Fingerhut Companies Inc.

Personalizing the Shopping Experience

Fingerhut Companies Inc.'s business strategy is all about the customer. Based in Minnetonka, Minn., this large mail order and Web firm offers a wide variety of affordably priced products that range from appliances to blankets to mantel tchotchkes, and everything in between. What sets it apart in its competitive industry, however, is the way it personalizes its services to each and every customer.

For starters, the company sends out a general merchandise catalog every month for its customers to pore over and order from. When customers pick up the phone to place an order, Fingerhut closely tracks their buying habits and logs the information into an extensive database that is then analyzed to predict future buying habits. Banking on the fact that the customer will stick with their preferences, Fingerhut then sends customers as many as 25 different catalogs featuring products that were identified as potential items of interest based on their past purchases.

"Say they buy cookware; then we send them our specialized cookbook catalog," says Fingerhut's former CEO Will Lansing. "If they buy tools, we send them our home improvement catalog. Once we understand their purchase profile, we send them more specialized books with a broader assortment of products." As customers make more purchases, Fingerhut's database narrows down individual preferences and continually hones the company's personalization strategy to meet customer needs.

Fingerhut is also well known for its flexible financing strategy, which allows customers to purchase items on a monthly payment plan ($10 a month for six months for a George Foreman Grill, for example). Fingerhut has long used a closed-end type of credit arrangement with customers, where the principal on a loan is steadily paid down. It's a strategy that allows Fingerhut to appeal to a wide demographic: from the college student with little money to spare, to the established executive who pays in full.

Those credit terms were pioneered back in 1948, the year Manny and William Fingerhut began making car seat covers in their Minnesota garage and selling them through the mail. Early on, they rented lists of new-car buyers to target for their sales pitch, and slowly evolved into a cataloger, concentrating on the lower- to middle-income customers often ignored by traditional retailers. Extending credit was not yet a common practice, yet the Fingerhuts were able to slowly build their garage company into one of the most profitable catalog companies ever. (At one point, the company ranked second only to J.C. Penney.)

Acquired by Federated Department Stores in 1999, Fingerhut later became a key player in e-commerce, based on the vast distribution network and its ability to process orders with ease.