In recent years forward-looking players in the collections industry have begun to shape their efforts around the idea of customer-centric collections. Reframing the collections process as customer service marks a significant cultural shift, one which in turn requires turning a debtor-centric eye on the collections experience as a whole.
Although it runs counter to the historically adversarial relationship between debtors and collectors, finding ways to improve the debt collection experience for consumers in delinquency makes solid, pragmatic sense. In this article, we’ll get into exactly why that is — and share our top five tips for how to improve the collections experience for debtors. Let’s get into it.
The Case for Collections as Customer Service
It’s a well-established truism in marketing circles that it’s less costly to retain a customer than to attract new ones, and established customers are also better customers: they’re more receptive to cross-selling and tend to spend more. This is a compelling argument in its own right, but it’s still a short-term assessment. Thinking in terms of a customer’s lifetime value, or CLV, may provide a better approach to valuing customers properly. It quantifies the likely value of a customer over their entire lifespan and, therefore, their total value to the vendor (in the collections context, a first-party creditor).
Customers are likely to walk away from even highly trusted brands after a poor customer service experience, and almost 1 in 5 Americans will do so after a single such experience. Most consumers will experience transient financial difficulties in the course of a lifetime, and an adversarial interaction can easily rupture the customer relationship. For vendors focused on CLV, this point of friction (when extrapolated across the total number of delinquent accounts) represents a significant loss of potential revenue.
An improved collections experience mitigates much of the potential losses, whether the delinquency is addressed directly by first-party creditors or the third-party professionals who service them. A debtor-centric approach can not only minimize customer loss and/or reputational damage but also result in better recovery rates and more efficient, cost-effective collections.
Key Takeaway: Although this focus on customer service is new to the collections industry it is important to remember that it is a baseline expectation for many modern consumers. Meeting that expectation can be impactful. Only about a third of debtors report making repayments on a rational basis, while the remaining two-thirds made their decisions on less formal criteria that might be subject to change. On the negative side, one in five reported delaying a payment after an unpleasant interaction with a collections agent.
Improve the Debt Collection Experience With These 5 Strategies
Reimagining your collections process from the consumer’s/debtor’s perspective can pay dividends, but doing so successfully may require substantial changes in your team’s collective culture, as well as the operational systems and procedures that support it.
The details of that transition will vary between enterprises and are outside the scope of the current discussion in any case. Instead, let’s look at a handful of strategies that can serve to illustrate the necessary changes in procedure and culture in a larger sense.
1. Setting the Right Tone
One of the farthest-reaching strategies centers around communications. A dominant theme in all communications between the collections team and the debtor should be empathy: a recognition that the course of life doesn’t always run smooth, and a reassuring manner that says “we’ll find a way through this together.”
Consistent messaging is vitally important in establishing this newly debtor-centric relationship. In the case of written communications, for example, an existing collection letter template can be used as a basis for new templates aimed at digital channels such as email, text messaging, or even social media messaging. Interactive customer portals and interactive chatbots can be set up using approved, empathy-forward phrasing.
Verbal communications between collections agents and debtors are less straightforward to standardize. Consistent training and manager-level support can help inculcate the appropriate attitudes in your telephone staff, especially when used in conjunction with call recording and monitoring to provide accountability. This can also be useful in verifying compliance.
2. Meeting Your Customers Where They Are
As far back as 2019, consulting giants McKinsey spoke of a “mandate” for the collections industry to expand its use of digital communications. A follow-up study two years later showed significant improvements in key measures including resolution rates, engagement, and collections costs, when collections strategies utilize digital-first communications channels.
Identifying potential communications channels, and using those the debtors prefer, is a powerful first step in “meeting them where they are.” Another is to recognize that modern consumers expect convenience and personalized service. For the collections industry that might include:
- Offering a wider range of channels for debtors to respond to your communications. This might include texts, emails, in-app messaging (where applicable) or secure messaging on a website.
- Increasing the range of available payment options to include popular choices such as digital wallets, ACH transfers, debit cards, or payment apps such as Zelle and Paypal. It should never be difficult for a debtor to make payments.
- Providing self-serve options for those debtors who prefer to minimize interaction with human agents.
- Ensuring that payment plans and options are flexible, rather than cookie-cutter “one size fits all” templates. Personalization isn’t the sole domain of marketing teams, and offering personalized payment plans is an especially powerful tool.
3. Formally Charting Your “Customer Journey”
This is another concept borrowed from the marketing world. As the name indicates, a customer journey map is a sort of flowchart that traces, step by step, a debtor’s passage through your app, website, telephone voice menuing system, or interactive self-service channels.
Every point at which the customer/debtor interacts with your digital presence (a “touchpoint”) should be logged, and, ideally, it should also be tested both by internal staff and hired outsiders to ensure that your systems are working correctly at each touchpoint.
Customer experience (CX) mapping can help collections professionals visualize their processes from the debtor’s perspective, making structural redundancies and inefficiencies easier to identify. Hands-on testing goes further, identifying any steps where your existing processes or software stack don’t perform as expected or intended. Any areas of friction identified through the mapping process should be removed, restructured, or otherwise revamped as needed.
4. Giving Debtors a Voice
This next strategy grows naturally from the previous one. The sometimes-significant issue with a customer journey map is that as an in-house product, it is subject to in-house biases and interpersonal politics. Having outsiders perform the hands-on testing of your digital platforms is a useful antidote to any institutional bias, but ultimately it is your customers/debtors who determine whether your attempts at reducing friction are successful.
Soliciting, evaluating, and acting on this direct user feedback is crucial to long-term success. At its simplest, asking debtors which is their preferred communications channel, and using it henceforward fits under this strategy. Routinely soliciting debtor feedback after every interaction with your digital platform or a human rep can also yield useful insights. Anonymized feedback options should also be provided, lest debtors fail to offer blunt criticism for fear of retaliation.
Giving debtors a forum to express their opinions can also be a positive. Testimonials from satisfied customers can help improve trust, and provide excellent content for your company’s website or social media presence. Encouraging commentary on your social media accounts is one of several ways social media can help drive debtor engagement.
5. Positioning Yourself Firmly as a Partner
The idea of non-adversarial interaction with debtors may feel either strange or intriguing to those within the industry, according to their experience and biases. But among debtors themselves, it may be all but unimaginable. Overcoming consumers’ ingrained reluctance to engage with debt collectors — and their often negative lived experience — requires patience and an unreserved commitment to creating a customer-centric culture.
Positioning your team as empathetic partners in debtors’ efforts to rein in their debt and repair their credit is a powerful stance, if you can back it up in practice. This represents both a full-circle return to empathy – the first of these five strategies – and a skill-building challenge to the creativity and flexibility of your collections team. Working with customers in good faith to help them meet their obligations, even if they can’t manage to meet your traditional payment schedules, can result in recovery (and goodwill) from those who might otherwise have been written off.
It is possible to build a favorable environment for that kind of creativity by providing your agents with training in basic personal finance principles and budgeting skills. This arms your collections team with the necessary tools to partner with debtors in good earnest, and in many cases to teach them how to remain out of delinquency in the future. In first-party collections this changes debt recovery from a reputational risk to an additional reason for loyalty; and in third-party collections, it helps build a positive reputation for the agency itself as well as its first-party clients.
Fueling the Change
A major paradigm change, such as shifting to a customer-centric collections experience, is not something to undertake lightly. It requires a significant investment in planning and research, both in staff training and management oversight. Offering new services and payment methods to customers, or generating the data to successfully implement your new strategies, may also require updates to your software stack.
Spokeo for Business is one such update: Its simple and intuitive search interface, and powerful combination of regulated and unregulated data, can greatly improve the speed, efficiency, and cost of making right-person contacts. Its depth of data on individual debtors also provides insights into their social media presence and a more holistic sense of who they are as people. In short, Spokeo can greatly enhance your company’s ability to deliver on these strategies.
To learn more about how Spokeo for Business can enhance your operations, set up a demo, or arrange a no-cost trial of the product, reach out to our team using the contact information on our Skip Tracing and Collections page.
Sources
Forbes: Customer Retention vs Customer Acquisition
IBM: What is Customer Lifetime Value (CLV)?
PwC: Experience is Everything. Get it Right.
McKinsey & Company: The Consumer Mandate to Digitize Communications Strategies
McKinsey & Company: Holistic Customer Assistance Through Digital-First Collections
McKinsey & Company: Behavioral Insights and Innovative Treatments in CollectionsForbes Advisor: Customer Journey Map: Everything You Need to Know