Auto%20Club%20Group

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Auto Club Group

• ACG Direct Mail Program
• September 21, 2009

2
Agenda

1. RPM Direct Overview
2. Auto Club Group Overview
3. Auto Club Group Case Study

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RPM Direct your key to direct success

• Response Profitability Marketing
• Revenue
• Risk
• Retention

RPM leverages the drivers of customer
profitability through highly sophisticated
targeting and a data driven creative development
process.
RPM Direct Overview
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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
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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
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Insurance Drivers of Profitability
Policy Premium - Claims - Operating Expense -
Acquisition Cost Annual Profit x Life of
Product Lifetime Value of Policy
Revenue Model
Risk Model
Response andConversion Models
Retention Model
RPM Direct Overview
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RPM Direct CapabilitiesDatabase Marketing Model
RPM Direct Overview
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Monthly Targeting Cycle
RPM Direct Overview
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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
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ACG-Major Businesses

• Road 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
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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
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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
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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
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Claims by Credit Tier
ACG Case Study
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Persistency by Credit Tier
ACG Case Study
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Targeting Using Fixed Allowable
Fixed Allowable
ACG Case Study
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Targeting Using Fixed Allowable
Untargeted segment tends to be high credit
Fixed Allowable
ACG Case Study
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Targeting Using Tiered Allowables
Tiered allowables reflect customer value
Tiered Allowable
Fixed Allowable
ACG Case Study
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Targeting Using Tiered Allowables
Fewer low-credit prospects targeted
ACG Case Study
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Targeting Using Tiered Allowables
Additional high-credit prospects targeted
ACG Case Study
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Targeting Using Tiered Allowables
Net effect is to produce a better credit mix
ACG Case Study
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Results-Change in Marketing Metrics
Change Associated with the Use of Tiered
Allowables
But
ACG Case Study
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Results-Change in Business Mix
ACG Case Study
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Results-Change in Business Mix
Remember these
Claims
Persistency
ACG Case Study
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Results-Change in Business Mix
ACG Case Study
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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
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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.
• Dont rely on traditional marketing statistics
  alone.
• Tie targeting to profitability.

ACG Case Study
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• RPM Direct, LLC

24 Arnett Avenue, Suite 100, Lambertville, NJ
08530 Ph. 609.566.7150 Fx. 609.566.7155 www.r4
pm.com