Legislators in 14 states have introduced “Do Not Mail” bills, proposing measures similar to the national “Do Not Call” registry to reduce unnecessary mailings. For retailers who spend millions sending catalogs to people who will just toss them onto the recycling pile, it’s hard to know what’s worse—the waste or the restriction.
Bill Flach is offering a way out. He’s the CEO of Minnetonka-based Decision Intelligence, which uses database marketing—digging into past consumer purchasing data and demographic information from catalog companies—to help those companies and other clients with customer databases send their printed materials to people likely to buy their wares. “Otherwise, you’re just stuffing mailboxes,” Flach says.
Flach, who spent 20 years working for Fingerhut, started Decision Intelligence with two fellow Fingerhut refugees, Randy Erdahl and Deb Campbell. At Fingerhut, the trio worked on database marketing, developing a wide circle of industry contacts. The day after Fingerhut terminated their positions in April 2002, they incorporated Decision Intelligence. “We really believed we had the makings of a consulting business, doing what we did for Fingerhut for the roughly 500 catalog companies throughout the country,” Flach says.
So far, it seems they were right. In 2006, the privately held company made $1.5 million in consulting revenue, Flach says. It’s on track to earn upwards of $2 million from consulting in 2007.
Decision Intelligence works with statisticians, mathematicians, and software developers (20 of these are in house; the rest are on contract). Based on this research, Decision Intelligence has developed a proprietary algorithm that sorts out potential buyers from potential discarders. “If we can find those people who are never going to respond to whatever catalogs you send them and take them off the list, that’s a huge benefit,” Flach says. “Reduce the amount of advertising a company sends out and keep revenues the same, and that goes right to the bottom line.”
In most cases, Decision Intelligence says it can save clients between 3 and 7 percent of their advertising budget. For a client such as Lands End, which might spend tens of millions of dollars producing and mailing catalogs, the extra efficiency can translate into big bucks.
In May 2006, Decision Intelligence received $5 million in venture capital funding from the Duluth-based Hurlbut-Zeppa Investment Partnership. Decision Intelligence is using the money to develop Web-run applications based on the company’s algorithm; clients then can do their own data crunching. The firm will still do consulting, Flach says, but its new software products “are going to drive us from the consulting business to a higher-margin, product-based business.”
