After several years of stagnant sales, Blue Cross and Blue Shield of South Carolina (BCBSSC) challenged its direct marketing firm, Harte-Hanks DiMark, to better define the health plan's target market and boost ROI by 15% in 1998.
Though BCBSSC's marketing demands increased, its budget of $950,000 didn't. To achieve these goals, DiMark had to overhaul its direct marketing approach and BCBSSC had to be open to significant changes.
The direct marketing strategies that previously supported BCBSSC's Individual Major Medical program, an insurance product that targets small business owners and individuals, were not achieving the potential the health plan expected. Specifically, BCBSCC wanted to see a 20% increase in lead volume, a decrease in cost per lead and a new sales model that prioritized those most likely to qualify for coverage.
DiMark exceeded these goals by redirecting its marketing resources and messages to focus on top-tier target segments. For instance, lead volume increased to 32,000 in 1998 from 30,000 in 1997 and qualified leads jumped to 1,000 in 1998 from 500 in 1997.
These results led to a 21% increase in ROI, exceeding the original goal of 15%.
Identifying Top-tier Prospects
A key challenge for DiMark was identifying individuals who had the ability to pay the $150 monthly health plan premium before significant marketing resources were invested in follow-up messages.
Previously, everyone who called the hotline promoted through television and newspaper ads received an initial insurance quotation package, followed by another more comprehensive package in 45 days.
Through extensive research, DiMark developed nine indicators of an individual's ability to pay for the health plan's coverage. These included financial information (banking/credit card history), insurance status and employment profile (retiree, self-employed, part-time employee, etc.).
The top-priority targets were defined as those who were not insured but had the ability to pay, says Gary Powell, DiMark's group director.
To zero in on the most desirable targets, all responder and buyer records in BCBSSC's database over a 15-month period were evaluated with demographic and behavioral filters.
This information was key in developing a marketing model for phone surveys and follow-up communication efforts. For instance, instead of sending the same fulfillment information to everyone who responded to an ad, follow-up information was customized by target segments ranging from a postcard (least qualified targets) to a full follow-up kit (most qualified targets).
This approach helped reduce the amount and cost of fulfillment packages sent to those least likely to purchase the insurance plan, which increased the program's overall efficiency.
To improve the overall quality of leads, DiMark also developed more targeted advertising creative that focused on four groups: early retirees, single parents, small business owners and self-employed individuals.
Demonstrating Short-term Success
Like most health plans, BCBSSC wanted to see short-term ROI success. "Health plans don't have the luxury of waiting things out," says Frank Boatwright, marketing manager of BCBSSC's group and individual division. Although it took a year to achieve its ultimate ROI goals, DiMark's new direct marketing strategies started to show impressive results in generating more qualified leads within the first six months.
While it may be tough for new direct marketing programs to demonstrate short-term ROI results, it's crucial in order to win client confidence. Agencies that develop these programs should suggest direct marketing strategies that can achieve small increases on a quarterly or semi-annual basis.
What is also equally important is trying unconventional strategies and developing realistic ROI goals based on historical customer trends and strategic segmentation, says Powell.
Moving forward, DiMark will be challenged to develop more effective ways of communicating with second-tier audiences. This market represents an exciting opportunity for health plan growth and will be looked at more closely in the next few years, says Boatwright. (DiMark, Gary Powell, 800/543-2212, www.dimarkinc.com; BCBSSC, Frank Boatwright, 800/288-2227, ext. 41254)
Harte-Hanks DiMark
Headquarters: Langhorne, Pa.
Founded: 1983
Billings: $603 million
Employees: 200
Healthcare clients: Several Blue Cross health plans and managed care organizations.
Focus: Response management and database marketing
Web site: www.dimarkinc.com