Second Fingerhut UK Test Wins Double Expected Response

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MINETONKA, MN/LONDON - Fingerhut dropped a second test of 95,000 catalogs in the UK in May and received a response rate "double what our original projection was," COO Pete Michielutti said.


"We are very happy with that result and we are looking to expand on that by rolling out 1-2 million books in the third quarter," he added. Fingerhut dropped 80,000 books last October to a higher than anticipated response rate.


"We mailed some new lists, our initial lists and to customers who bought something from us the first time around. That's where we got the larger numbers." Fingerhut had planned to mail only 80,000 catalogs in a 2nd test.


Fingerhut did some tinkering with the first book for the second test. "We changed a little copy, took out some products and added some others, mostly domestic and houseware items, but nothing major," Michielutti said.


Product is shipped from a US warehouse via the USPS' Global Package Link (GPL) "and that is working out well thus far." Telemarketing is being outsourced, although Michielutti would not identify the call center. "We're negotiating the price right now so I can't say who."


Fingerhut bases much of its merchandizing on credit offers and "we thought that the UK would be a very conducive market for our credit offers because our interest rates are more competitive than those of other companies."


Sterling Marketing, a London-based DM firm that specializes in bringing American catalogers to the UK and to Europe beyond it, has been working with Fingerhut since last fall.


"Essentially what we have done is put together media recommendations and are using three media routes - lists, two stop inserts and parcel inserts which we put into other company mailings with a similar profile as Fingerhut's," Will Lewis, a Sterling director, said.


"We're looking at doing some space advertising. We're testing all the avenues to see which ones work best. In the UK the big merchandise catalogs traditionally run big media campaigns using small ads and high repeats and that is obviously something worth exploring.


"We're not looking at TV or radio because generally in the UK there has been very little success with either one in the mail order business. We only have five channels and ad costs are huge. It's not a cost effective media for us.


"We used lists which potentially have similar demographic profiles and we tested a very large number of lists. From there we are going deeper into those lists that performed well.


"We go through list brokers and work closely with a number of them. We source lists from all sorts of people and have a good knowledge of the list market. When we say we want something brokers go out of their way to get it," Lewis said.


On credit scoring, Sterling worked closely with Experian, "specifically looking at the score card aspect. Experian uses Delphi, a generic scoring card, and we can learn from them how Fingerhut customers are performing."


Finding credit suppliers is more of a problem, Lewis said, because in the UK "people who offer credit tend to be the big mail order groups. Most small companies don't and there is no strong third party fulfillment resource to handle credit, so we are working on that.


"We're looking at suppliers who could put together a much more sophisticated credit offer. For example, we could use a company that supplies a rolling credit offer or find a bureau to help us."


Fingerhut is also looking for a more flexible credit payment methods than sending out a book of coupons "which says to customers, right, every month you take a coupon and send us 3 pounds. That's inflexible and costly.


"Instead we want to mail customers once a month like a utility or a credit card company with the outstanding balance on a bill that says this is what you owe us and this is what you should pay.


"That's a more controlled and economic way of managing credit. And if you are mailing something anyway you can piggyback a promotion offering. We are talking to suppliers about that," Lewis said.


In effect, he added, Sterling acts as "Fingerhut management in the UK. We do everything that needs to be done in the UK to support their business.


"We create a marketing plan. We deal with suppliers and we work with printers, fulfillment houses and with Royal Mail. We behave as if we were Fingerhut in the UK and we do that for a number of US clients."


The idea, Sterling managing director Justin Metcalfe, explained, is to act as a kind of incubator for US firms until they are ready to strike out on their own.


Fingerhut does not intend to do that yet. "It's too early to think about an office in the UK," Michielluti said. "Decisions will be made as we see how things develop. Meanwhile we think we can fulfill from the US."
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