1
Auto Club Group
ACG Direct Mail ProgramSeptember 21, 2009
2
Agenda
1. RPM Direct Overview
2. Auto Club Group Overview
3. Auto Club Group Case Study
3
RPM Direct – your key to direct success
Response Profitability MarketingRevenueRiskRetention
RPM leverages the drivers of customer profitability through highly sophisticated targeting and a data driven creative development process.
RPM Direct
Overview
4
Our Solution
The Turnkey, Outsourced Solution for Highly Targeted, Profitable, Direct Market Auto Insurance Customer Acquisition.
RPM targeting techniques have driven in over $1.5 billion of profitable direct auto insurance premium.
RPM Direct
Overview
5
Proprietary Methodology• Methodology developed over the past 12 years.
• Employs a measure of Policyholder Lifetime Value to target each marketing prospect.
• RPM builds discrete multivariate scoring models on the key drivers of insurance profitability: Response, Conversion, Revenue, Risk, and Retention.
• Proprietary methodology integrates multi-dimensional scoring models into a measure of Policyholder Lifetime Value for each prospect.
• Customized for each client.
RPM Direct
Overview
6
Insurance Drivers of Profitability+ Policy Premium- Claims- Operating Expense- Acquisition Cost
= Annual Profitx Life of Product
=Lifetime Value of Policy
Revenue Model
Risk Model
Response andConversion Models
Retention Model
RPM Direct
Overview
7
RPM Direct Capabilities
Database Marketing Model
RPM Direct
Overview
8
Monthly Targeting Cycle
RPM Direct
Overview
9
Auto Club Group
• Began operations as Chicago Motor Club in 1906
• Currently operates 6 AAA clubs in 8 Midwest states
• 4 million members
• 5,000 associates
• Home office in Dearborn, MI
ACG Overview
10
ACG-Major BusinessesRoad Service
– North American network of 42,000 towing providers
• Travel
– Full service agency
– $300 million annual sales
• Insurance
– Auto/Home/Life
– Sales through ACIA and joint ventures with other AAA clubs
ACG Overview
11
Auto Club Insurance Association• Insurance sales in 12 states
• Distribution through captive and independent agents, partner clubs and call centers
• 1 million policies in force
• $1.8 billion in assets
• “A” Rating (excellent) from A.M. Best.
ACG Overview
12
Auto Club Group Case Study• RPM has been working with ACG since 2005.
• Direct mail is a major lead generation channel for ACG.
• Direct mail targeting selections based on fixed allowable through June 2008.
• Tiered allowables implemented in July 2008.
ACG Case Study
13
Tiered Allowables
• ACG developed separate allowables for each risk tier.
• Allowables reflect differences in lifetime value by risk tier.
• Differences in lifetime value are driven by differences in losses, persistency, premium and other related expenses.
• Targeting for each tier is done on the basis of index to allowable (CPS/Allowable).
ACG Case Study
14
Claims by Credit Tier
Low Medium High
Credit
Cla
ims
Freq
uenc
y
ACG Case Study
15
Persistency by Credit Tier
Low Medium High
Credit
Ave
rage
Life
(Ye
ars)
ACG Case Study
16
Targeting Using Fixed Allowable
Fixed Allowable
ACG Case Study
All Prospects
Credit
Cos
t Pe
r Sa
le
Target Do Not Target
17
Targeting Using Fixed Allowable
Fixed Allowable
ACG Case Study
Low Medium High
Credit
Cos
t Pe
r Sa
le
Target Do Not Target
Untargeted segment tends to be high credit
18
Targeting Using Tiered Allowables
Tiered allowables reflect customer value
Fixed Allowable
Tiered Allowable
ACG Case Study
Low Medium High
Credit
Cos
t Pe
r Sa
le
Target No Longer Target New Target Do Not Target
19
Targeting Using Tiered Allowables
Fewer low-credit prospects targeted
ACG Case Study
Low Medium High
Credit
Cos
t Pe
r Sa
le
Target No Longer Target New Target Do Not Target
20
Targeting Using Tiered Allowables
Additional high-credit prospects targeted
ACG Case Study
Low Medium High
Credit
Cos
t Pe
r Sa
le
Target No Longer Target New Target Do Not Target
21
Targeting Using Tiered Allowables
Net effect is to produce a better credit mix
ACG Case Study
Low Medium High
Credit
Cos
t Pe
r Sa
le
Target No Longer Target New Target Do Not Target
22
Results-Change in Marketing MetricsChange Associated with the Use of Tiered Allowables
ACG Case Study
Metric % Change
Response Rate -16%
Conversion Rate 5%
Cost Per Sale 13%
Allowable 175%
Index to Allowable -59%
But…
23
Results-Change in Business Mix
ACG Case Study
0%
10%
20%
30%
40%
50%
60%
70%
Low Medium High
Fixed Allowable Tiered Allowable
24
Results-Change in Business Mix
Low Medium High
Credit
Cla
ims
Freq
uenc
y
Low Medium High
Credit
Ave
rage
Life
(Ye
ars)
Claims Persistency
Remember these…
ACG Case Study
25
Results-Change in Business Mix
ACG Case Study
0%
10%
20%
30%
40%
50%
60%
70%
Low Medium High
Fixed Allowable Tiered Allowable
26
Results
Tiered allowables produce:
• Higher credit mix of business.
• Higher persistency.
• Lower claims risk.
• Higher overall Net Present Value.
• Higher cost per sale.
ACG Case Study
27
Lessons Learned
• Working closely with Risk and Product people leads to better decisions.
• The use of tiered allowables lets you focus on your market niche.
• Don’t rely on traditional marketing statistics alone.
• Tie targeting to profitability.
ACG Case Study
28
RPM Direct, LLC24 Arnett Avenue, Suite 100, Lambertville, NJ 08530
Ph. 609.566.7150 | Fx. 609.566.7155
www.r4pm.com