Nuts & Bolts - Case Study : Direct Mail Is AvMed’s Silver Lining

Challenge: Grow membership.
Solution: Optimize direct mail through predictive modeling.
Results: Reduced cost per enrollee to $94 and gained 4,600 members, representing $70 million in additional revenue.

Before adding intelligence to its direct mail efforts, Miami-based AvMed Health Plans was just as likely to solicit a senior couple away on a river cruise as one firmly parked on the couch, so ensconced in game shows that they didn't notice when the mail arrived.

But when Winston Lonsdale, AvMed vice president and chief Medicare executive, needed to significantly increase membership, he decided the spray and pray tactic had to go. During the fall of 2008, AvMed hired Hingham, Mass.-based database marketing services agency Intellidyn to increase response rates and lower member acquisition costs for its Medicare plans.

"Previous to that, we used simply a list with no intelligence or analytics behind it and mailed to prospects and hoped for the best," Lonsdale says.

Working to improve that situation, Intellidyn took AvMed's existing customer list, analyzed it and cloned it—based on who was most likely to enroll. Then it segmented the "whos" into eight behavioral models. AvMed now has segments separated by healthiest and most active to less so.

National demographics databases and credit files aided in creating those segments. Additionally, the resource helped AvMed learn what the prospects' interests were. Lonsdale says all the direct mail, for instance, highlights how AvMed provides its members with the opportunity to participate in the SilverSneakers Fitness Program.

Using the behavioral models to help design the direct mail creative, the more desirable river cruisers would see images and copy that were relevant to them. And, likewise, the less active game show viewers saw messages geared toward them.

Right away, AvMed saw results.

In 2008, AvMed sent 1.1 million solicitations to 350,000 prospects. After achieving a .35 percent response rate, with a cost per enrollee of $107, AvMed rebuilt its predictive models around the best results for its 2009 campaigns.

In 2009, AvMed sent 770,000 solicitations to 350,000 recipients for a .62 percent response rate and a $94 cost per enrollee.

So, since adding intelligence to its direct mail, AvMed's seen significant growth.

"The membership at the point we started was 18,700, approximately," Lonsdale says. "And we're at 23,300 today. The difference represents about $70 million in additional revenue."

While other channels, such as newspaper advertisements and direct response television, are aiding in the increase, direct mail is the acquisition "workhorse," Lonsdale says, providing about half of all enrollees.

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