Adding the "P" (Product Category) to RFM (1,079 words)
Fingerhut's major growth came by increasing the number of mailings offered to customers from 20 to more than 100 per year. The significant point is that all customers didn't receive all 100 mailings. Product category of past purchase (carefully tracked and maintained in Fingerhut's database) was used to determine which mailings customers received.
For example, if the first purchase was women's apparel, customers would received six women's apparel promotions during the coming year, and would be tested on complementary product categories such as kitchen, decorative home furnishings, linens, cosmetics, etc. If customers buy linens, they then receive four linen mailings during the next year, and so forth.
The theory was sound and led to Fingerhut's astounding growth during that time: Buying one product category leads to further purchases in that and related product categories. If a man purchases men's clothing as the initial purchase, Fingerhut will test tools, electronics and sporting goods offers in future mailings to see which interest him.
The Challenge in Using the P-Word
During much of the 1970s Fingerhut mailed more solo direct mail pieces than catalogs. For a general merchant like Fingerhut, cataloging presented some challenges because of the broader, multi-product offering in its catalogs. Two things changed: more niche-driven catalogs and the development of the "multi-mailer," a promotion of multi-products (up to 30 or more) that was cut-sheeted and mailed with a letter in an envelope. The multi-mailer was half catalog and half solo. Fingerhut continues to use the multi-mailer today, while it has broadened its more targeted catalog efforts.
Adding "P" or product category to RFM is highly applicable to many catalogers. Business-to-business catalogs work almost exclusively in product categories. They organize their catalogs by product category; their selling efforts (catalog, telemarketing or the Internet) are often driven by product category.