Why This Case Study Is Relevant
It demonstrates how to acquire new members at a lower cost by building and refining targeting models and reactivating former members.
AA faced significant member acquisition challenges. Increased competition from roadside and travel planning service providers, coupled with easy and inexpensive access to online mapping and travel planning, have made it more difficult and more costly to identify and target potential buyers. They needed a direct marketing strategy that could provide a larger audience each quarter and remain sustainable.
AAA was spending more to engage certain segments than the total value of their purchase. Building refined targeting models would be more effective and less expensive than simply buying larger lists.
- Even the largest demographic sources didn’t have full coverage of households. Additional viable households could be found with USPS walk sequence data
- The optimal contact strategy varied from prospect to prospect. The best prospects needed to be contacted more often
- The most responsive prospects were not necessarily the most valuable long-term customers
- Former members were especially valuable and best targeted with a differentiated win-back model
- Response and value-based targeting models to maximize the size of the available universe
- Managing frequency of contacts as a function of model scores
- Customer Value Analysis to segment high- and low-value customers and identify trending patterns
- A Lifetime Value Model to predict who was likely to become AAA’s best customers
- Once best customers were identified, we increased contact frequency and developed a specific contact strategy to:
- Reactivate former members
- Reduce higher-cost acquisition mailings
- Eliminate mail to lowest-value prospects
- Acquisition response rate is nearly 80% higher than the response rates at other AAA clubs
- Win-back response has doubled
- Promoting all levels of membership at the same time increased the purchase of higher-priced memberships by more than 750%
- Average per-member net revenue increased by 30% after three years
- Cost to acquire new members plummeted by more than 20%
- Annual attrition rates declined by more than 10%