Can Aaa Get A Jump Start?
Edward J. Thomas has been a member of AAA for about 30 years. The Lowell (Mass.) resident has used the organization for roadside service and just recently returned from a trip to Disney World booked through AAA's travel agency. But what really tickles him about his membership was the car loan he got approved in July in just one day. Through a new partnership between AAA and PNC Bank Corp., he got a car loan refinanced at 6.9% instead of the 12.5% he was paying--and even signed the papers at his local AAA club office. "It was absolutely fabulous; they took excellent care of me," he says.
AAA? The stodgy roadside organization best known for tow trucks and Triptiks? Faced with mounting competition in the market for roadside help--and an aging membership--the nonprofit federation of 97 local clubs is racing to buff up its image. AAA is rapidly adding financial services, credit cards, travel perks, and other benefits designed to rev up its fortunes.
The reason is simple: While membership, now at 40 million, is growing at 1.5 million every year and renewal rates are high, its longtime dominance of the market for roadside services is under attack. Worse, AAA isn't attracting enough younger drivers: The median age of a new member is 45. AAA, which changed its name from American Automobile Assn. this year, realized it needed to offer more than a helping hand to drivers or it could go the way of a Model T. "If road service is not as important, then maybe a lower credit-card rate might be," says Graeme R. Clarke, senior vice-president of products and services.
Certainly, AAA has come a long way since it began an overhaul about five years ago, a process that accelerated when Robert Darbelnet became president in 1995. AAA moved to improve its roadside service--still the primary reason anyone joins--but also began looking for other ways to lure drivers to plunk down $30 to $70 for membership. Last year, AAA formed an alliance with Thomas Cook to provide services to AAA clients traveling abroad; now, 15% of its members use the travel agency service, up from 10% five years ago. It has a deal with Walt Disney Co., expanded this year to include an office on Main Street at Disney World. To broaden its appeal to the under-40 set, members can now get discounts at General Cinemas theaters, Universal Studios, and Hard Rock Cafes. And in January, 1996, AAA chose PNC Bank to provide not only credit cards but also auto loans, home mortgages, and savings plans. Checking accounts are on the way.
ROAD RIVALS. Early signs indicate the overhaul is helping. Chicago Motor Club, which has emphasized the new programs in marketing campaigns--especially the retail and restaurant discounts--saw membership jump 7.3% for the year ended in June, up from a 3.2% gain the previous year.
Still, AAA has its work cut out. Already, a growing number of roadside service programs are eagerly courting younger drivers as part of their own marketing efforts. More than 82% of new-car and light-truck makers offer roadside assistance, according to J.D. Power & Associates Inc., as do many credit-card providers and insurance companies such as Allstate Corp. And long term, the biggest threat may come from direct marketing giant CUC International Inc., which now offers AutoVantage club emergency roadside help for $69.95 a year. CUC has just four million households today, but its add-ons, such as car-buying discounts, consultation on how to buy and finance a car, and deals on parts and maintenance, are fueling fast growth among younger drivers.
Moreover, AAA's new marketing efforts could use some more, well, marketing. Many members don't even know about the new services. And loyal customers like Andy Cowherd, who kept his membership even when his new Volvo came with an offer for roadside help, still looks to AAA for its basic emergency auto services, not the perks. Even with all its added benefits, that's a message AAA doesn't want to change.