The encyclopedia · Marketing & Brand · Marketing decision · 2001
Fingerhut optimized each customer's catalog stream, not each mailing
IBM and Fingerhut pick the most profitable sequence of catalogs per customer, replacing redundant mailings.
Fingerhut
The solution
Fingerhut mailed up to 120 catalogs a year to each of 7 million customers. With each catalog planned on its own, many customers received redundant and unproductive mailings, and the cost of paper, postage and printing piled up.
IBM and Fingerhut developed an optimization system that selects the most profitable sequence of catalogs for each customer — a mail stream — instead of deciding each catalog in isolation. It runs weekly to keep the plan current.
The move works because a customer's response to one catalog depends on what they were sent before: joint optimization of the sequence captures that dependence, cuts wasteful mail and raises the profit of the mail plan.
Why it worked
- Joint sequencing captures how mailings cannibalize each other
- Customer-level decisions replace catalog-level averages
- Weekly reruns kept plans fresh
What can be applied
When repeated offers compete for the same customer, optimize the whole sequence jointly; independently optimized touches can cannibalize each other.
Aftermath
The 2001 Interfaces paper documented the system as a winner in the Edelman competition series; Fingerhut continued to run the mail-stream application weekly.
Sources
- Optimizing Customer Mail Streams at Fingerhut
- Optimizing Customer Mail Streams at Fingerhut (abstract)
- Optimizing customer mail streams at Fingerhut (abstract)
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