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Consumers are entitled by law to a free annual credit report. But there's another way of learning where they stand: Sign up for DirecTV.

Those who are asked for cash up front can assume their credit rating isn't very good.

“We have a proprietary credit-scoring system that we've developed with Equifax,” says Brad Bentley, vice president of marketing and direct sales for the satellite TV service. “People who score low on that model have to give us a deposit.”

These charges range between $200 and $300, but subscribers get the money back if they maintain good standing.

The money doesn't cover installation costs or prevent customers from dropping out when the football season ends. But it does reduce “involuntary churn” — people who simply stop paying their bills.

“We used to build our models on [initial sign-ups], and these were inversely related to what makes a quality subscriber,” Bentley says. “The most responsive targets turned out to be the lowest quality.”

How are customers generated? Through direct mail.

DirecTV pulls between 15 million and 20 million names a month from DataSource, Merkle Inc.'s consumer database. The resulting mailings are designed to drive prospects to a Web site or contact center. (The sign-up process is too complicated to be handled by mail.)

Consumers are asked if they'll agree to a credit check. Nobody is turned away, but those who decline are automatically charged a deposit.

“As we added more strict credit policies at the point of sale we started filtering out bad sales,” Bentley says.

The company started doing credit screening 18 months ago, so it has only recently gathered enough data to build payment and attrition models, according to Craig Shirk, Merkle's director of analytics.

Those models will become even more important as DirectTV moves into high-definition television, a technology requiring a steep initial investment.

Meanwhile, Merkle is helping DirecTV figure out household penetration rates. And it's tying the data to local market conditions.

“In markets where DirecTV doesn't have local channels it's definitely at a disadvantage,” Shirk says. These are areas where the provider knows it will encounter higher consumer resistance and can target more lightly on its solicitations.

Mailing to pre-screened candidates yields $10 million per year in savings, and is thus preferable to sending pieces to random lists. And there's no drop in customers.

The analytics are paying off in other ways. The firm's third quarter churn rates stand at 1.61%, down from 1.8% in the same period last year.

And its U.S. subscriber base jumped to 16.6 million in the third quarter, compared with 15.7 million last year.

But there's room for further improvement. Shirk hopes to move DirecTV's response modeling from a national to a regional basis by the end of next year.

Why? So it can get a handle on geographic differences in sign-up patterns. Philadelphia subscribers to a rival service like Comcast may have a very different attitude toward their provider than their counterparts in Denver.

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