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One of the simplest segmentation schemes around has helped Financial Engines Inc. reach new customers.

Those targeted for the Palo Alto, CA firm's retirement savings and investment counseling services find printed images of a traffic signal's red, yellow or green lights on the first page of their pitch letters. The “lights” are assigned based on employees' financial information, which is supplied by employers.

Yes, some prospects may feel that having a third party solicit them based on personal financial information volunteered by their employers is unsettling. But Financial Engines has a strong argument in its favor: The approach works. During the first three months since its rollout late last year, it has attracted some 15,000 new clients with $1 billion in assets.

In fact, when the program was first tested in mid-2004, personalized pitches for Financial Engines' counseling services yielded enrollment rates between 19.4% and 23.9%. In contrast, employees sent a generic enrollment solicitation signed up at rates ranging from 1% to 10.3%.

While these were tests, they weren't exactly small scale: Two of the participating companies were retailer J.C. Penney and communications firm Motorola.

J.C. Penney was “the mother of all direct marketing challenges,” according to Bill Thompson, Financial Engines' executive vice president of marketing. The target audience was young, not necessarily predisposed to investing, geographically diverse, and had a high degree of turnover. “They are hard to educate on retirement issues,” Thompson says.

Financial Engines modified some of the copy on its letter to reflect this audience of reluctant investors. One change demonstrated what made these people such a prime audience for financial counseling: Most of the retirement plans were not very well balanced; 80% were concentrated either in investment contracts or company stock.

This earned many of them “red lights” from Financial Engines. (Red or yellow lights usually are assigned to retirement plans that carry levels of risk, investment or diversification that aren't appropriate for an individual's present situation or post-career needs.)

Thompson feels it's important that his company's mailings not look like typical solicitations from a financial services firm. The J.C. Penney pieces, for instance, used terms and visual images that were consistent with the retailer's brand. Financial Engines also occasionally piggybacks messages onto intracompany satellite broadcasts when such opportunities arise.

“The processes of investing and advice are things people find daunting. You have to feel you can relate to this, trust the correspondence and who it's coming from,” he says.

Financial Engines' personal evaluation offers recipients an appraisal of the likelihood of their reaching retirement goals based on savings rates, their investments' risk levels and how diversified their low- and high-risk investments are.

“It's a wake-up call made personal,” Thompson says.

Graphically, the welcome package relies on the traffic-light motif. Furthermore, in most cases, the communications have outer envelopes from the employee's company, and memos are printed on the company's letterhead as well.

Financial Engines tries to limit employee resentment by having each firm inform their workers that this material is being sent to them. “We did anticipate [problems], but it ended up being managed very well,” Thompson says. “The program is endorsed by the employers.” These efforts apparently help mitigate any unease recipients might have about receiving a personalized solicitation based on their retirement fund information.

Motorola proved a somewhat easier market. The employees were a little older and much more concentrated in one location than Penney's. Motorola hoped that Financial Engines could convince its people to move away from big investments in company stock and toward a more diversified portfolio.

However, unlike Penney, Motorola's workers were a more tech-savvy bunch, and the solicitations focused on showcasing Financial Engines' online personal investment counseling services.

In all, the Motorola and J.C. Penney efforts solicited 110,000, 10% of whom have changed their investment choices and rebalanced their accounts to date.

The keys to the program's success were three bits of customization, Thomson says: A simple, yet effective graphic element; personalization; and a “respond by” deadline that gave the piece some urgency.

Initial tests also showed the importance of allowing prospects to respond through a variety of channels — including by telephone, even though one of the tests featuring a telephone-only response mechanism did poorly.

But efforts offering mail and online response mechanisms didn't do as well as those providing all three. “While people are highly comfortable with the Web and with paper, and maybe not as comfortable with the phone, they still want to feel that if they have a question they can call someone and get an answer,” Thompson says.

The company's services range from access to a financial consultant (who provides both retirement and non-retirement investment counseling) to automated online planning.

As a rule of thumb, Financial Engines expects half of the prospects indicating interest to use either its Personal Asset Manager or Personal Online Advisor services. Another 40% may take a look at rebalancing their retirement savings among securities with different levels of risk and reward, even if they don't use Financial Engines to do so.

The firm also employs the red-yellow-green tiering when soliciting organizations to allow it access to their employees. “We do a preview to diagnose what level of issues they have,” Thompson says. “We can show [benefits managers] what percentage of their employee population is saving inadequately, or is inappropriately diversified.”

Does this mean Financial Engines would pass up a chance to solicit a company whose employees are solidly in the green strata?

Yes, says Thompson. “They wouldn't need us.” But, he adds, even among the most informed companies, investors usually either don't save enough or aren't diversified enough.