Heuristics-Based Modeling Approach for Referral Marketing to Optimize CAC
Partner Type: The largest federation of consumer motor clubs throughout North America.
Challenge: The Client’s Acquisition team wanted to optimize their CAC (Customer Acquisition Cost) and hence wanted a novel way of targeting a cohort of members whom they would reach out to for adding their associates.
Solution: iSOCRATES DataTech team performed multiple experiments using a heuristics approach-devised a MRI score which allowed the client to send direct mails to cohorts of existing members who were more likely to add their associates.
Approach: A data-driven approach was taken to solve the client’s core pain point. On exploring the historical data of the client, the iSOCRATES team identified significant correlation between number of days left for membership expiration, and seasonality to be some of the important drivers of existing members adding their associates as subscribers to our client’s core services. Using these dynamic primary drivers and other considerably static demographic dimensions, a composite index named Marketing Risk Index (MRI) score was developed. This score was then used by the business team to find out cohorts of members (each month dynamically) who would receive a Direct Mail (DM).
Results: Initially, the response rate (RR) was additional tertius ~ 0.75 – 1%. When the MRI score matured, we saw a significant increase in the numbers to ~ 1.5 – 2%. This increase in response rate allowed that the client’s membership team to achieve their monthly targets of new joiners with a targeted and optimized Direct Mail strategy. While historically the client mailed around 300,000 members to reach their target of 2K new joiners from the Add Associate channel, after the deployment of our proprietary MRI score model, the client was able to save Direct Mail costs of mailing around 150,000 ~ 200,000 which amounts to $75 -100K USD per month.
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