In its second-largest acquisition, Amazon buys the company for $970 million.
Will web access at $4.95 a month bring Fingerhut’s middle-market customers online?
When BlueLight.com tried it, it was incredibly successful from a marketing point of view. More than 5 million consumers signed up for free Internet access through BlueLight. So if it worked for BlueLight, can it work for Fingerhut?
Fingerhut began offering low-cost Internet access to consumers in March. Unlike BlueLight’s free service, Fingerhut will charge $4.95 a month for 150 hours of Internet access. Just like BlueLight, Fingerhut is hoping the service will bring its customers online and thereby increase sales at Fingerhut.com. “The more people we can bring online, the better the chances that we can increase our sales,” says Jim Falbo, manager of online financial services and business development.
Fingerhut is offering access through AT&T WorldNet. Besides the 150 hours a month of access, customers will get six e-mail addresses, instant message capability, e-mail screens to eliminate spams and live customer support for the first 30 days. After that, customers will receive online support and pay $17 per incident that requires live assistance.
Whether the strategy can work is still in doubt. A recent study by comScore Networks shows that users who access the Internet through free ISPs spend 40% less than those who pay for their ISPs. One reason to explain that phenomenon, says comScore, is that consumers attracted to low-cost Internet access may not have as much to spend as others. But another reason may be that free access is consumers’ secondary Internet connection, meaning they do most of their web browsing and transacting over some other access.
Falbo says Fingerhut does not believe that study applies to its service because although it is low cost, it is not free. “Customers have a commitment to paying for this service, so they’ll use it,” he says. Customers’ home page will be an AT&T page with a Fingerhut box. As they move around the web, a toolbar with direct access to the Fingerhut page will travel with them.
Still, some question this strategy. “The response to this kind of offer is driven by personality type¯these are people who don’t have much money and they want everything for free or as cheap as they can get it,” says David Taylor, senior vice president of consultants Operon Partners. “They’re not going to pay for anything.”
Promoting on hard drives
The Fingerhut service is identical to AT&T WorldNet’s i495 offer, which it introduced last summer. AT&T’s regular service is $19.95 a month for up to 150 hours and $21.95 for unlimited with live customer service. Customers who pay $4.95 get an advertising bar that follows them around the web and they allow AT&T to track their movements. While it won’t reveal number of users, AT&T says it’s pleased with the results. “Within a relatively short period of time after introducing it, hundreds of thousands of customers had signed up for it,” a spokeswoman says.
Fingerhut is not the first to offer the AT&T co-branded service. Sam’s Club, Flooz.com, USA Today, Toshiba America and six other marketers have co-branded AT&T offerings.
Fingerhut is marketing the service through its web site, with e-mails, through its catalogs, on credit card statements, through direct mail and on the hard drives of the computers it sells.