Background
AAA offered three membership levels: Basic, Plus and Premier. Each membership was annually renewable. The association wanted to identify who its most profitable customers were and reduce the level of annual attrition. They also hoped to move customers from roadside-only service to other more profitable AAA services, such as travel. Their business objective: To increase average member three-year net revenue by 30%.
Our approach
Our analytics team began with a Customer Value Analysis to segment High Value customers, Low Value customers and identify trending patterns. The data clearly showed that, true to the Pareto Principle, the top 20% of customers generated the highest value. We then asked:
- Where did these top customers come from?
- How do we keep more of them?
- How do we find others just like them?
Next, Catalyst built a Lifetime Value Model to predict who was likely to become AAA’s best customers within a three-year period.
What we learned
- Former members looked more like that top 20% than never-ever members. It was more effective to make reactivating them a priority
- The membership level purchased did not predict long-term customer value—people who bought the most expensive membership did not necessarily become best customers
- The association was spending more to engage certain segments than the value of their purchase
- Promoting all levels of membership at the same time increased purchase of the more profitable Plus and Premier memberships
- Our strongest offers produced higher first-year attrition…but over time, yielded more profitable customers
Putting it into action
- Once best prospects were identified, we increased contact frequency
- We developed a specific contact strategy to reactivate former members and reduced higher-cost acquisition mailings
- We eliminated mail to lowest-value prospects
Did it work?
- A test to former members resulted in a 300% lift over never-ever members
- After three years, the strongest membership offer produced 50% more paid memberships
- Providing a clear explanation of all three membership levels increased Plus and Premier memberships by more than 750%
- After three years, average per-member net revenue is projected to increase by 30%
About AAA
AAA Western and Central New York is a not-for-profit, fully taxpaying association serving nearly 880,000 members throughout Upstate New York. As Upstate’s largest member services organization, AAA provides its members with world class travel, insurance, financial and automotive related services 24 hours a day, seven days a week through its AAA Travel and Insurance Centers and online at www.AAA.com. Since its founding in June 1900, AAA has been a leading advocate for the safety and security of all motorists and travelers.
About Catalyst
Catalyst (www.catalystinc.com) is a direct and digital marketing agency that helps clients acquire, retain and develop long-term relationships with their customers. The agency takes the guesswork out of marketing decisions by combining intellectual curiosity and inquisitiveness with hard-core analytics, deep customer insight and a measurement mindset. We call it Science + Soul. Headquartered in Rochester, NY, our clients include AAA, Assurant Health, Eastman Kodak Company, First Niagara Financial Group, GE Capital Retail Bank, Heraeus Kulzer, Neff Motivation Inc., Oreck, and Valvoline, among others.
