American Home Shields didn’t have a problem selling its home repair, appliance and maintenance warranties: Roughly 60% of its contracts are generated as add-ons to mortgages and home sales. But this passive sales process meant that customers were often unaware of the value of the service – and in some cases the fact that they own one at all. The incidental nature of these types of sales created a challenge during the renewals process. After a warranty’s standard one-year term expired, customers had to be marketed anew, as if they were prospects. While the company does have a direct-to-consumer business, the 23% this channel represents predominantly is generated through referrals, or through an existing policyholder purchasing a second home. Its prospecting efforts to cold customers were not nearly as effective as they could have been. The company set out to change this. Through a mixture of external demographic, financial and census data about its customers, as well as behavior information and a series of attitudinal research studies, American Home Shields generated a profile of its customers that served as a guide to targeting for prospects. The company ultimately planned on using compiled files to fill its prospect pipelines. But it initially screened some of the attributed it generated through a series of telephone interviews made to homeowners. In some cases it guessed wrong. For instance, at the start of the current Iraq war the company tested a response list of military households, assuming that homeowners would want a suite of services normally performed by military members. But that demographic was distracted. “We were looking for red flags. With that audience, we could hear CNN on in the background when we called,” said Steve Burnett, chief marketing officer of American Home Shield. Over time, however, a series of top-performing attributes emerged. As might be expected, high-income individuals were among those most likely to purchase these products. But so were older, lower-income consumers – retirees who have a great deal of wealth, but little income. While the company’s models are ever-evolving, it has managed to quadruple its response rates, and significantly cut its cost-per-acquisition expenses. And on the retention side, American Home Shield used a variety of attributes, such as whether a customer was a first-time renewer or not, the channel the customer came in though and attitudinal and value-to-the company attributes. It has tailored renewal efforts based ont these attributes, and has seen differences between segments’ renewal behavior that range between 10% and 40%. Burnett presented his findings at the Direct Marketing Association’s annual conference, which ended Wednesday.
American Home Shields didn’t have a problem selling its home repair, appliance and maintenance warranties: Roughly 60% of its contracts are generated as add-ons to mortgages and home sales. But this passive sales process meant that customers were often unaware of the value of the service – and in some cases the fact that they own one at all.
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