Fingerhut Pricing Strategy Harvard Case Solution & Analysis

Finger hut is a mail-based direct catalog marketer. Unlike many other catalogs that target groups at the higher end of the economy. Finger hut took a unique approach to focusing on under served people, the poor. The company used its software algorithm to select them purposely and gave then persuasive advertisements. These data included more than 50 personalized information per customer, which gave Fingerhut an advantage in building a powerful, personalized product campaign for the low-income customers. On the surface, it seems to be a state-of-art way to market the catalogs’ product, but a major newspaper in Minneapolis pointed out in the spotlight that “Fingerhut made its profit by exploiting the poor”.  They partner with local credit card company offer a lucrative deal for those people makes credit purchases, but these low-income people end up paying more. On top of that, this case involves labor union, Minneapolis Urban League, Minnesota COACT, and other organization. This matter can easily escalate to at least 20 states. So the question raises: is Fingerhut action exploiting the poor? Is credit card Company’s high-interest rate worth the risk? Is this action unethical?

Before diving deep on what makes this ethically right or wrong[1], we shall point out who is the stakeholder in this case. Most of the time, the stakeholders of a company involve its customers, investors, competitors, employees, and indirect stakeholders such as the community they are serving and the government organization. In Fingerhut Price Strategy case, there are two primary stakeholders: the direct consumers they are selling it to and the local banks or financial institution that are willing to provide the customers who need credit to make a purchase. The first group is the consumers; they are connected to Fingerhut through one channel, and that is an advertisement. Then the issue we are discussing here is about persuasive advertising, autonomy, and the creation of desire.

The second stakeholder’s, financial institution, the ethical dilemma is based on pricing strategies[2]. The other primary stakeholders’ include the competitors such as Wal-Mart, K-mart, Sears, and J.C Renney that have a direct impact on the business. Most people’s perspectives towards the Fingerhut pricing strategy looked both unethical and misleading. According to them, Fingerhut was targeting and taking an advantage of lower-income individuals with poor credit history as well as misleading advertising campaigns. Therefore, it is necessary to analyze the business ethics of the company that helps the company to gain customers and competitive advantage in the long run.

According to Roger Crisp autonomy and creation of desires, Fingerhut purposely targeting the low-income customers with their persuasive advertisement[3]. Moreover, Fingerhut gathers an extensive database of its customers which includes age, hobbies, number of children and birthdays. The extensive database helps the company to know what people unconsciously need and desires and used that information to mail a catalog to its customers. Furthermore, Fingerhut relate real price item of the goods and services to low payments. According to Roger, ineffective marketing techniques and motive are exploiting the low-income consumers and therefore, the company is conducting its business unethically.

However, from the American economists Milton Friedman’s point of view, Fingerhut was acting ethically and morally because the company were conducting business in a capitalist way and managed to do social acts[4]. Moreover, the company effectively target niche market and offers specialized goods to the low-income consumers. Most companies ignore to fulfill the needs and desires of the niche market, which is the part of country’s economy. Furthermore, Fingerhut also helps the low-income societies to build their credit limits and do a responsible social act by extending the credit line.

Fingerhut Pricing Strategy Case Solution

According to the utilitarian approach[5], Fingerhut retained and attracted its target market through strategies tailored to the low-income consumers, which include installment payment option. Moreover, the company did not violate any absolutes and laws. Therefore, Finger hut price strategy should be accepted and continue to act socially. According to teleological and deontological moral philosophies[6], the objective of the company is to provide quality products and services to the low- and medium-income consumers and generate profits by adjusting the pricing and marketing strategies. Thus, the pricing and marketing strategies are legally permitted but morally wrong................

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