Combinatorial Modeling® Case Study: Reverse Mortgage

American Advisors Group (AAG) wanted to gain U.S. market share through direct mail advertising.

Objective: acquire more customers without exceeding the allowable cost to acquire a new customer (CAC).

Maximum Allowable CAC: $10.5k
Addressable Market: 12 Million+ Households

Problem: when the lender tested mailing deeper in the ensemble model (deciles 6 & 7) the customer acquisition cost (CAC) was too high to continue ($9k & $10K over budget)

Solution: multiple different models were developed using the Combinatorial Modeling® methodology. Households in the lowest deciles of the Ensemble Model (deciles 8,9,10) were re-scored with two new Combinatorial Models. Households not selected by the first Combinatorial model were then rescored with a second Combinatorial model.

Acquisition Cost
1 785,334 $4,580 
2 1,100,803 $5,630
3 1,005,034 $6,160
4 1,205,934 $7,020 
5 1,267,247 $10,170  
6 1,196,725 $19,670 
7 1,316,820 $20,038 
8 1,701,544 $31,240
9 1,027,518 $37,850
10 1,395,280 $49,170
Total 12,002,239

Households from lower deciles (8 to 10) of the Ensemble Model were re-scored with two new Combinatorial Models

Test Results: Mailing 1

Model Type Decile HH’s Mailed Response CAC
Ensemble 1-7 1,548,000 .042% $11,110
Combinatorial 8-10 187,211 .088% $3,050

Test Results: Mailing 2

Model Type Decile HH’s Mailed Response CAC
Ensemble 1-7 2,588,147 .067% $14,180
Combinatorial 8-10 1,411,051 .110% $3,260


Most direct mail modeling solutions shrink the marketable universe. Mailing the same consumers over and over creates list fatigue. Going deeper in the model increases customer acquisition costs and reduces ROI. Results get continually worse, not better. Our Combinatorial Modeling solution does the exact opposite. It expands your total addressable market; enabling you to acquire new customers without exceeding your allowable budget.

Results: Mission Accomplished!

Combinatorial Modeling® significantly increased response and ROI while expanding the total addressable market. This was accomplished without exceeding the lender’s allowable customer acquisition cost (CAC).

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