April 30, 2001, 12:00 AM

Mountains of Data

Online selling allows retailers to collect much more data than ever. In fact, one study determined that 68% of a catalog/web retailer’s customer data came from the 10% of shoppers who bought on the web.








At 50-plus years old,

direct merchant Fingerhut Co. has been around longer than most Internet

executives have been alive. The launch of Fingerhut.com in 1998 simply

added another channel to a successful catalog and telemarketing operation,

and more customer information to a database already so big it boggles

the mind.


Every transaction, every promotion received and every payment made,

every bit of personal information volunteered, every questionnaire filled

out and more are in the database: a motherlode of customer intelligence.

And in fact, Fingerhut has long mined the data for marketing guidance,

developing a reputation as a savvy database marketer in its catalog and

telemarketing channels. But what about the Internet?


“It’s all about how we use our database to put in front of customers

offers that are going to appeal to them,” says Michael Sherman, president

of Fingerhut, a division of Federated Department Stores. “It’s been part

of our business from the beginning. Now we’re just doing it in another

channel-the Internet.”


Fingerhut estimates its database is as large as seven terabytes. How

big is seven terabytes? “I can put it this way,” says Randy Erdahl, Fingerhut’s

director of business intelligence. “We have 65 million customers who’ve

bought from us at one time or another over the years, with an average

3,000 data elements on each one.”


Like most retailers collecting data about their customers, Fingerhut

has known that collecting data is good; the question is, what do you do

with it once you have it? “In a new channel like e-commerce, there’s a

lot of data that we’re stockpiling but haven’t figured out how to utilize

yet,” Erdahl says. “The software data mining tools that allow you to search

and mine the data efficiently weren’t available until recently.”


But now they are. And this year, Fingerhut, with annual sales of more

than $1.5 billion, is migrating its legacy systems into the data warehouse

it started building in 1995. It expects within the year to


have full capability not only to do database marketing and queries for

decision support for its web channel, but also to build models, score

and select customers for and execute integrated marketing campaigns across

all sales channels.


Bottom line:

$3.5 million



with IBM’s horizontal marketing technology, it’s already stripped redundancy

from a cross-channel customer database grown so unwieldy that some customers

received as many as 60 catalogs a year. And it has segmented customer

groups most likely to respond to various promotions. This exercise in

database mining cut catalog mailings by 7% and added $3.5 million to the

bottom line in its first year of implementation, a combination of saved

costs and increased sales. Next up: applying those analytical capabilities

to cross sell and upsell to customer groups on the web, which the company

plans to do this year.



As Fingerhut goes, so goes e-retail. While some web merchants are out

ahead and others behind the curve, the trend is clear. Multichannel marketers

are getting a new stream of customer data from their web operations, and

they’re just beginning to turn it into web-based and integrated marketing




however, without some challenges. “The joke is that everyone says they

need data, but half the time they don’t do anything with it,” says Elaine

Rubin, chairman of e-retail trade association Shop.org. “It’s not that

they don’t want to, or that they don’t realize that knowledge is power.

Everybody plans to do something with the data, but it’s a matter

of priorities. A vast number of e-retailers have been given just enough

resources at this point to get their sites up and prove a business.”


Indeed, the challenge for many is not collecting data but figuring out

the best way to use it for marketing. “The issue is not the accumulation

of data,” says Robin Green, executive vice president of the ASP business

unit at Xchange Inc., a provider of analytic software. “Retailers have

for years amassed an enormous amount of customer information as transactional

data, product registration data, direct marketing data-reams of information.

We’re seeing now that many of those retailers have not found a way to

translate that information into their online channels. Their biggest challenge

now is to convert this offline asset-this customer database-into something

that’s useful for online purposes and keep all of the information integrated

and synchronized in real time.”



A bigger window



recently, retailers have been able to collect only purchasing data that

breaks down sales. But now, with the advent of the web and a whole new

generation of analytic technology, they have a potential window on a range

of customer behavior beyond buying that’s not trackable through other

channels. “If a retailer’s customer gets a catalog, he might spend a week

looking through it, circling items, showing them to other people. But

the retailer didn’t know that- all the retailer knew was what he bought,”

says Trevor Rubel, director of product strategy at Personify Inc., an

analytics software and services provider. “But online you can see what

they looked at, what they checked on the sizing charts or that they checked

the color availability.”



the market



online merchants with access to the right analytics and the smarts to

use it, there’s gold to be mined in that data. Ofoto.com is an online

photography service offering digital and film processing, prints, private

online image storing and sharing and other services and products. The

Emervyville, Calif.-based company has been monitoring its visitor activity

with Personify profiling and analytic technology since it launched in

1999, and is already mining its 1-year-old database to segment customers

and support personalization efforts.



In a recent test, for example, Ofoto identified customers who had visited

frame and card product pages relating to babies, children, weddings or

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