It’s 2:30 p.m., 48 hours after AARP endorsed the controversial Medicare prescription drug bill, and more than 2,000 calls have ripped through its call center in Plantation, Fla. The callers, like the gaggle of protesters who tore up their membership cards outside AARP’s downtown Washington headquarters earlier in the day, are furious at the nonprofit organization for supporting the bill, which they believe will benefit not seniors, but drug and insurance companies.
CIO John Sullivan has tried to prepare for the onslaught. His IT staff and AARP’s call center contractor have added 30 to 40 people to ensure that the phones are answered and that callers are able to register their opinions. For Sullivan, the fact that so many AARP members get through is living proof that his IT strategy is succeeding. His goal, like that of many CIOs, is to be flexible and to respond quickly to changing business conditions?whether it’s demand for a new product or a surge in complaints.
But even the most prescient IT strategy can’t anticipate every problem. AARP executives decided to deal with the flood of angry calls made directly to its headquarters in Washington, D.C., by telling switchboard operators not to connect those calls. Eventually, the blackout is lifted, but by mid-January, an estimated 45,000 of AARP’s 35 million members had quit, and AARP is deep into damage control.
What members seem most incensed about is the notion that AARP gave its imprimatur to the Medicare legislation, which Congress passed in late November, because there’s money in it for the organization. It’s true that the bulk of AARP’s revenue comes from selling or distributing third-party products and services, including insurance policies. But AARP executives say they endorsed the bill because it was important to achieve some sort of prescription drug benefit for seniors. They also say they conducted numerous focus groups and membership surveys before making that endorsement, and they repeat, almost like a mantra, that whatever profits they make are reinvested to provide services to members. All of this, they note, benefits seniors in the long run.
The question is, which seniors? According to health policy analysts, current Medicare recipients who have their own prescription drug coverage and affluent retirees are among those least likely to benefit from the new legislation. This active and vocal group is part of AARP’s core constituency?60 percent of its members are aged 65 and older?and they have provided AARP with much of its political power. But AARP also has its eye on an emerging constituency even more powerful due to its sheer numbers?the 76 million baby boomers who are easing into middle age and will begin their retirements during the next decade. According to some surveys, this group expects to be healthier than their parents and is more amenable to the idea that the government cede control of some Medicare services to private companies. They also have nothing immediately to lose, notes Grant Reeher, a health-care expert and associate professor of political science at Syracuse University.
The Medicare debate is emblematic of a conundrum AARP now faces as both an advocacy group and a $636 million business: how to balance the needs of its current members with the demands of an emerging constituency and potentially lucrative market. Interestingly, AARP executives are betting $50 million annually on information technology to help them bridge the generational divide. They have invested in a central customer database that can be accessed both by members and trading partners to provide more timely personal service. They are revamping their Web self-service offerings so that baby boomers can more easily do their retirement planning online. And they are investing in Web services as a way to deploy new applications quickly so that AARP and its partners can offer a greater range of products to members from both generations.
CIO Sullivan travels a lot, and he makes a point of talking to people about baby boomer expectations wherever he goes. From those conversations, he says, one thing is clear: Baby boomers are more demanding than their parents were. Giving them the personalized attention they want will only benefit everyone.
The Times They Are A-Changin’
AARP’s marble-faced headquarters encompasses most of a block in a rejuvenated downtown business district of Washington. Trendy restaurants, boutiques and luxury condos have supplanted many abandoned storefronts and crumbling apartment buildings, but there is scaffolding everywhere: The transformation is not quite complete.
Formerly known as the American Association of Retired Persons, AARP began its own transformation not long after moving into the 10-story building in 1992. The first baby boomers turned 50 and became eligible for AARP membership in 1996. Two years later, the organization dropped its name (along with the word retired) in favor of its acronym. More changes followed: AARP began to offer products, services and information targeted to younger members, such as an online calculator to help people figure out how much to save for retirement. It began producing multiple versions of its magazine Modern Maturity for three distinct age groups (the name of the magazine was changed last year to AARP: The Magazine). And it started to invest more heavily in IT, developing not only a strong online presence but also revamping its customer databases so that member information can be maintained and secured independently of the numerous IT applications that use it.
And for good reason. Among the many facts AARP has learned about Americans born between 1946 and 1964?their ethnic diversity, relative affluence and sense of individualism and self-reliance?one of the most significant differences between them and their parents is that they are not good at waiting. When they buy products and services or look for information, they want choices, convenience and control. AARP does not have any direct competition, even though there are other groups at both ends of the political spectrum that lobby on issues important to seniors and provide some modest services. But no one else offers the same combination of community service, information, political advocacy and AARP’s now-legendary discounts. Nevertheless, if the benefits of membership aren’t easy to access, why join at all?
“[Baby boomers] are looking for one-stop shopping,” says Ava J. Baker, AARP’s director of member service. A typical baby boomer is working, has children at home, and may also be taking care of aging parents. Whether she is doing research or has a question about her?or her parents’?benefits, she wants information at her fingertips. As Americans live longer, even members who turn 65 are likely to have living parents who need help, says Baker?another difference between boomers and the older generation.
Furthermore, baby boomers are increasingly wired. A study published in April 2003 by The Pew Internet & American Life Project found that in 2002, 52 percent of Americans aged 50 to 64 had Internet access, compared with 45 percent in 2000. Meanwhile, among respondents aged 30 to 49, a category that includes the last nine years of the baby boom, 47 percent said they are current Internet users, while more than half of the rest said they would go online eventually. Their experience working, shopping, investing, planning trips, doing research and communicating online has already carried over into a demand for transacting business with AARP on the Web. Although seniors aged 65 and older use the Internet the least, the number of people in this age group who are online is increasing as well. AARP’s own data shows that about 16 million of its members have regular Internet access. “The percent of members who want to interact that way is increasing at a healthy rate,” says Tony Habash, director for IT strategies and solutions at AARP.
It is already possible to interact with AARP electronically on several dimensions. Members can sign up and renew their memberships on AARP’s website. Almost 100 message boards provide forums for members to discuss just about any subject. Hundreds of messages flew back and forth on AARP’s policy message board recently as members debated the merits of the Medicare bill. And through a partnership with nonprofit online service VolunteerMatch, AARP helps members sign up for hundreds of volunteer activities nationwide.
If you purchase an AARP-sponsored insurance policy, you can get rates quoted online and download applications. In what has become a staple of political advocacy, you can sign up for alerts about upcoming votes on congressional legislation and use an online tool to generate and send an e-mail to your congressman about an issue.
“Right now, we’re like any other organization in the U.S. when it comes to providing online services: We let members do a few transactions,” says Sullivan, who has a bigger vision in mind.
This year, for instance, AARP plans to launch a new system that will help aging baby boomers plan for their future medical needs and how they will finance them. From surveys and website statistics, AARP executives have learned that health information and products relating to health care are among the top interests of members.
One of the organization’s biggest challenges is making sure the website has something for everyone. “We can’t make a decision that we’re only going to worry about the people buying health care or home or auto insurance products,” says Mark Carpenter, AARP’s director of Web operations. “Everyone pays their $12.50 a year, and that entitles them to a certain amount of access.” Younger members might spend a little time online conducting a transaction, but when older members do get online, they spend a lot of time using the site to get involved with the organization.
An early effort to enable personalization on the website “didn’t work so well,” says Carpenter, because it relied too much on the members to define their own interests. Now Carpenter is working on an “Amazon-type” approach to deliver information based on what visitors do on the site, rather than asking them lots of questions about what they want. If you search for information about Medicare, AARP might serve up some related articles for you to read or a link to its health insurance products.
“Gotta Keep the Customers Satisfied”
Inside, AARP’s offices are a warren of corridors and cubicle pods coated and carpeted in a soothing gray. As in most office buildings, visitors can’t wander around without an escort, but here even employees sometimes have trouble finding exactly who they are looking for. The building is arranged around two stove-pipes: elevator banks that serve Building A and Building B. The IT department is on one side. The executives who run AARP’s health-care programs are on the other.
For years, its customer data and systems were similarly stovepiped.
And for members of any age, that can, at worst, be traumatic. A husband dies, and his wife calls AARP to cancel his membership. But the message doesn’t get to Scudder Investments, through which he bought an AARP-branded mutual fund. Soon, a few marketing solicitations come for him in the mail, and the grieving widow has to make another phone call. Ideally, says Sullivan, member data should be integrated so that the widow can end the painful mailings with a single call. “It is a small thing, but if you do small things well, it’s just going to improve the process of aging for our members,” he adds.
It turns out that taking care of such seemingly small details can be addressed with IT investments that solve some bigger problems?like how to support a multifaceted business model or keep costs down. During the past two years, AARP has deployed a central membership database that is continuously updated, making it easier for the organization to market products and services to its members. Establishing common interfaces to this database for its suppliers, through a Web portal and using Web services, also makes it less expensive for the group to maintain links with suppliers or change its mix of services.
AARP already offers dozens of services from third parties, which have stiff competition to be allowed to offer an AARP brand. While AARP has traditionally inked long-term contracts with suppliers, that’s starting to change as industry practices evolve and members look for more choices. For instance, AARP Services, a wholly owned, for-profit subsidiary that manages AARP’s third-party services (and returns its profits to the parent organization), is planning to renegotiate a series of 10-year contracts with five health insurance providers as three- to five-year deals. Noelle Ronald, the division’s director for member health products, says the shorter contract terms will allow more flexibility to negotiate new terms or rebid the contracts.
Up till now, AARP has coded data exchanges separately with each of its service providers, a slow and expensive process. Now, CIO Sullivan’s team is deploying a set of interfaces to its applications based on Web services that will speed integration with suppliers and enable AARP to improve its customer service. The first iteration of the interfaces is currently being rolled out by AARP’s contact center contractor, Precision Response. When a member calls, writes or e-mails with a question or complaint, Precision Response will be able to use Web services to access AARP’s applications, change someone’s address or look up information about a service she uses. In the future, this interface will enable AARP to change its mix of products and services as the need arises, with less work for the IT department.
The organization tries to control spam through a “double opt-in” process, through which members have to confirm they want any information they’ve signed up to get. AARP also has set up procedures to verify that its service providers aren’t violating agreements not to send junk mail. In addition, AARP also requires its partners to comply with its security practices, and it does its own testing of suppliers’ networks to confirm they are following these procedures. “We rely on our own security to ensure that we’re only giving them data that’s appropriate for them to receive,” Hall says.
Takin’ Care of Business
From most places in central Washington, there is some icon of democracy within sight. Live and work there long enough, though, and the view can fade behind the daily grind. Sullivan says he was reminded of this recently when a friend pointed out a view of the Capitol’s dome from a steep hill halfway up North Capitol Street. Yet for years Sullivan drove into work day after day without registering that sight.
In much the same way, it’s easy to lose sight of the fact that AARP is a big business.
According to its most recent financial statement, the organization collected $257 million in royalties and other income in 2002 from the products and services it sells or brands to members. Another $76 million came from advertising in its publications. Only 29 percent of its revenue comes from members. AARP reported a $15 million profit, which the statement says partially recouped a $23 million investment in its statewide operations the previous year. AARP’s reliance on supplier revenue has frequently left the organization open to charges that its leaders do what is best for AARP, rather than for its members. It has always, for instance, rewarded its executives handsomely (in the wake of the Medicare debate, Executive Director and CEO William Novelli has been criticized by some members for taking a $420,000 salary).
AARP executives acknowledge that their need for revenue to support activities that don’t make money results in “an interesting dance, sometimes,” as Web Operations Director Carpenter puts it. When it comes to IT, some decisions, such as how much to invest in integration with a service provider, are made based on how much revenue AARP will get from the deal. But not every investment decision comes down to whether AARP will make money from it. Some projects, such as the deployment of a new system that will scan, sort and route paper mail, are tied to customer service goals that are independent of whether a member purchases AARP’s products. Baker, the member services director, says she needed a better way to funnel members’ questions to appropriate people for a response. “Our members have a tendency to write questions on their renewal [forms],” she says. Meanwhile, Hall notes that AARP’s attention to privacy and security is related to its education and advocacy programs that aim to combat predatory marketing practices that victimize seniors.
IT provides the stage from which to manage this complex choreography, one project at a time. “Whether it’s 76 million baby boomers coming or 35 million existing members, we serve a large audience,” says Sullivan. “By making incremental gains [in service delivery] across a wide number of industries, we can affect the marketplace and improve the lives of our members.”