Case Study Fingerhut PDF

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Case Study: Fingerhut’s Price Strategy Focus on: o Time period o Customers they wanted o How they got their info o Owners Frame the Case (like on the news) Identify the participants: o Jane Johnson; Director of corporate communication (1996) o Star Tribune; Minneapolis newspaper o January 1996, 4 women brought suit alleging usuriously high interest rates on merchandise o Lawsuit was supported by Minneapolis Urban League, Minnesota COACT and NAACP o John Ellingboe; Fingerhut’s Vice President and General Counsel o Minnesota’s “Time- Price- doctrine” (other states had already abolished it at that time). Was it legal? o CEO Ted Deikel o Anne Bergman; Attorney who drafted an amicus curiae (friend of the court brief) on behalf of several interest groups, including NAACP and the Urban League Critical Features of the case: o “Alleged case of predatory lending to the working poor”. Unfair and deceptive marketing techniques o Arguments against Fingerhut: o Fingerhut was charging an interest rate that was higher than the legal limit for its type of transactions. Minnesota’s general usury statue law prohibited lenders to charge over 8% annually. There were exceptions, for savings, loans, banks, and credit cards. An exception that Fingerhut’s business did not qualify for. o Attack #2: Preying on, low-income people through deceptive or misleading advertising. (It questions Fingerhut’s marketing Strategy, and its target population) o Defense #1: John Ellingboe; Fingerhut’s Vice President and General Counsel; argued that the sales were covered by common law “Time- practice” doctrine, which permitted merchants to charge a lower price for immediate cash sales than for sale taking place over time. o Defense #2: Argues that they are providing purchasing options an flexibility to their customers o They are extending credit to whom other companies wont o They are risking more than their competitors by serving a riskier market segment.

Background: Research and background info on corporation o Company started in 1948 by Manny and William Fingerhut; began selling seat covers by mail o 1996; Fingerhut was worth 1.8 billion, as a catalog business. Became the second largest catalog company in the nation Target Market: o Were targeting low-income families. Their customers made an average od 18,000 a year. o 90% were women o 5% were Hispanic, but were becoming a fast growing population for them. o 40% of their customers had no credit history Marketing Approach: o Installment payment options for low-income to moderate income consumer. Extended credit to those would not qualify for credit purchases elsewhere o If paid off balance, customers would be able to make bigger purchases o Would personalize Catalogs, determined by their state of the art database, to attempt to determine consumer behavior o Keep in constant contact with their customers o Created a socially responsible corporate image, leading in recycling o Pricing Strategy: Offered consumers low monthly installment payments that would bundle the price of the merchandise and interest charges -> reframes the total cost of the product Issue: The bundled price, including the product and the interest charge, was higher than any other competitor Company’s History Recent Activity (of Scandals and Illegal activity)

Ideas: o Research “Tried-and-True” installment pricing o Look up the case on the Star Tribune newspaper o What is a “Catalog Business”? Questions for Kahoot? o What was Fingerhut’s marketing approach?  They offered installment payment tailored to the low to moderate income consumer  Promoted a low monthly payment instead of the total price  Customers would received personalize mailings with specialty catalogs o When was a suit brought against Fingerhut?

January 1996, 4 women brought suit alleging usuriously high interest rates on merchandise o How much was the company worth in 1996?  1.8 Billion ...