The American Automobile Association (AAA) built its business along U.S. roadways by being a trusted travel partner to motorists. But it's been able to grow its business model beyond roadside assistance and Trip-tiks by tapping into its member data and using in-depth predictive analytics to adapt to changing traveler needs.
The AAA is not alone in its strategy. The amount of data that organizations have access to has increased exponentially in the past years. McKinsey has estimated that in the vast majority of sectors in the United States, companies that employ more than 1,000 employees store, on average, upwards of 235 terabytes of data. To put it into perspective, McKinsey points out that's more data than is contained in the U.S. Library of Congress.
While the availability of data provides big opportunities for organizations, some are still struggling with making sense of it, often grappling with information silos and the inability to extract actionable insights. This was a problem for some of the 44 affiliated auto clubs that make up the AAA. Daniel Mathieux, director of the AAA's Member Relationship Management (MRM) action center, designed to help clubs with customer analytics initiatives, notes that some of the clubs used simplistic customer analytics and relied on basic customer profiling. Hiring expensive teams of consultants and contracting third-party predictive models wasn't enough. Clubs, especially the smaller ones, weren't able to scale these initiatives, leaving them struggling to optimize relationships with the AAA's 53 million members.
Further, Mathieux notes that the capabilities of clubs vary greatly, and while some were very analytics-driven, others weren't as savvy. The latter were often working off a list of their members' names and mailing addresses, which didn't give a holistic view of clients or allow clubs to know enough about these members to deepen their relationship through relevant communications. "We were missing opportunities to grow our business," he says.
In order to help the different clubs make the most out of their data, senior leadership gave the MRM action center four objectives:
- Leverage national buying power of hardware, software, and market data
- Socialize best practices for marketing and analytics
- Provide customer analytics to clubs
- Support clubs' membership relationship management and customer analytics initiatives
The action center first created a 360-degree view of AAA members through the aggregation of more than 2,500 attributes, including membership information, transactions, and demographics, with the aim of helping clubs predict member needs. In 2009, the action center implemented a predictive analytics solution, allowing it to create and evolve analytics models. The center's team of marketing analysts now works with each individual club to create a plan and then use the automated system to deliver analytics to optimize club cross-sell, acquisition, and retention campaigns.
Increased customer visibility means that clubs know the characteristics of customers who are likely to respond to a given offer or can identify members at risk of churn. Mathieux says that while the AAA has a renewal percentage in the upper 80s, new members are the most likely to churn. However, their propensity to renew increases exponentially when they use one of the products offered. The action center's job is to help clubs find relevant products for individual customers to increase their likelihood of making a purchase and reduce their churn risk.
Data is used to listen to members, helping different clubs tweak their communications throughout the year, focusing on what different customer segments find most appealing. For example, Mathieux explains, some customers are more money-conscious and the club can engage them in a conversation about the savings they can get on different products, like a cruise.
The federation was quick to see results. Individual clubs believe the campaigns have contributed to substantial incremental sales across the AAA's network, with some individual clubs increasing their sales by millions of dollars, which would otherwise have been lost. After applying customer analytics to travel campaigns for one year, one particular club reported a 42 percent year-over-year increase in sales. Membership renewal rates have also increased slightly, from 87.9 percent in 2009 to 88.2 percent in 2012.
Predicting customer needs
Further, a forecasting initiative uses customer road service history to predict call counts and the types of vehicles needed at a facility, allowing the AAA to be more agile in responding to roadside assistance requests. The federation has achieved a forecast accuracy of 89.5 percent, leading to cost savings, partner loyalty, and increased member satisfaction. "Our goal is to maintain satisfaction levels in the 80s and 90s, and the biggest contributor is how quickly we can get there following a roadside assistance request," Mathieux says.
Seeing the strength of predictive analytics and the successes achieved, individual clubs have been requesting more analytics insights from the action center, which has grown from five people when it first started in 1998 to a 30-strong team. The different clubs recognize the benefits that the action center can provide, and while they are not obliged to use the MRM action center for their analytics needs, the majority of them do. The action center offers expertise that outside analytics firms can't duplicate, because it can share lessons learned among the clubs. And in cases where a particular club doesn't have the critical mass of data needed to derive the necessary insights, the MRM action center is able to integrate data from different clubs to extract the needed intelligence, Mathieux explains.
Another advantage that clubs have seen is the action center's ability to share best practices so that mistakes can be avoided and successes replicated. "We're evangelists of best practices," Mathieux says. In fact, the center uses predictive models to help clubs serving 93 percent of the AAA's membership optimize marketing campaigns.
Predictive analytics are used in campaigns within clubs' call centers, stores, and websites, as well as over email, text messages, and direct mail, to determine the most relevant and timely offer for members. Further, frontline staff are reminded of offers sent to individual members so that they can better interact with them. The plan is to extend these successes to social channels, which are currently being developed, and will be instrumental in helping clubs communicate with their members wherever they are.
The action center forms an integral part of the AAA's data-driven business strategy, which is aimed at helping members and connecting with them in the best possible way. "It's all about the customers," Mathieux stresses. A century after the AAA first started operations, "we have the same desire to connect with members at a very personal level," he says, adding that the aim is to recreate the same highly personalized relationship that was commonplace in the past, like knowing your local grocer. "We use data to make that happen," Mathieux says.
And the action center leads by example, understanding the needs of the individual clubs and making sure that it's relevant to them. "We drink our own Kool-Aid and understand the importance of relationships and our members but we also [work on developing our] relationship with clubs," Mathieux says.
Note: AAA is a winner of a 2013 Gartner and 1to1 Media CRM Excellence Award for analytics.