In this article, we will reveal the secret to reducing business debt in retail. In theory, store credit cards are good for your business. They incentivize customers to spend money at your store in exchange for rewards, discounts, and savings.
But store credit cards can actually hurt you and increase your business debt if customers spend more than they ever pay off. In fact, the largest companies in the UK have debt totalling £406 billion. Many of these companies end up writing off their debt due to late or unpaid fees. That means you’re likely leaving a lot of money on the table.
Hopefully, you’ve already launched protective measures, like credit checks, shortened repayment terms, or early payment discounts. But you can go even further and proactively counter customer behavior (and reduce business debt) by using mobile messaging.
1. Send Payment Reminders To Reduce Business Debt
Until a few years ago, payment reminders were sent exclusively via snail mail or phone. Customers had time to review their invoices and make payments if they had enough lead time. The problem with this approach: there was no guarantee your messages would be seen by customers. Mail gets lost, and phone calls are missed or ignored.
Plus, even if your reminders were seen, the payment process was cumbersome. Customers had to log on to their banking website, access their Direct Debit portal, or go into a physical store to pay. Tech issues, slow web pages, or long store lines were enough to frustrate customers and have them put off paying. The result is you end up carrying more business debt than you’re comfortable with.
Mobile messaging simplifies the repayment process for customers and increases your chances of getting paid on time. For example, send payment reminders early in the billing cycle, and then send multiple follow-up messages. A proactive campaign like this ensures repayment stays top of mind for customers. Your messages are also sent on time once you create a campaign. You don’t have to worry about payment abandonment or cash-flow issues. Some retailers see an increase of up to 35% in debt repayment.
Your costs also stay low because you don’t have to pay for postage or hire a collections team.
Within each message include a link to a payment gateway. With just a few clicks—and without leaving the text message— customers can send you payments. You improve your chances of reducing business debt by removing hurdles that slow down or prevent payment.
Studio Retail (formerly Express Gifts) is a personal shopping service with over 1.8 million annual customers. Studio Retail uses VoiceSage to send SMS campaigns to these customers. Each message they send includes the outstanding balance and a link for customers to make a payment. Studio Retail saw a 90% retention rate when rich media messages (RMM) linked to a payment gateway. The best part? By using SMS, Studio Retail lowered their business debt.
Learn how to create a seamless debt collection process: 6 Reasons Your Debt Collection Process Is Failing You
2. Send Customers Debt Collection Surveys
Send a debt collection survey to learn more about customers’ debt. Every customer situation is unique and should be treated as such. There are lots of reasons why customers don’t repay debt on time: they forgot, can’t afford to, or they dispute the amount owed. Once you know the reason, you can use that information to segment customers and treat each one differently. For example, segment your customer list based on factors like the amount of their overdue balance or how long it’s been outstanding.
Use mobile messaging to send custom messages to each group and glean relevant insights. You’ll be able to understand each group’s debt collection preferences and their experiences to date. You can then tailor your campaigns to improve customer relationships, speed up repayment, lower your business debt.
The data you collect from surveys will also highlight opportunities to improve your collection process and pinpoint customer communication preferences. You might find that it’s stressful for some customers to receive multiple messages in the days leading up to the deadline. As a result, they stop reading your messages and end up missing the deadline. Or survey results might show that customers prefer to have more lead time before making a payment.
VoiceSage can help with interactive RMM surveys. One option is to send surveys with multiple open text fields to customers who routinely miss payments. Ask questions that help determine their past debt collection experience, how often customers want to be contacted, why it takes so long to pay, and more. They’ll be able to give more insights into their experience.
Studio Retail sent a five-question survey that included transactional questions and a free-text box. They also used survey data to build profiles to understand customers better. Former Strategy & Transformation Director at Express Gifts Martin Dove explains, “This data tells us how long they’ve been with us, their account utilisation, the frequency they order from us, how open they may be to an up-sell, and so on. It’s a great, and growing, resource.”
By understanding why customers are delinquent, you can create processes to help them pay sooner, like offering lower interest rates to qualified customers to make their debt more manageable. The sooner they pay, the quicker you reduce your business debt.
Download our mobile messaging eBook to learn more: The Rich Media Blueprint to Engaging Mobile Messaging
3. Gamify the Experience
Another reason some customers take longer to repay their debt boils down to procrastination. Spending money is the fun part—repaying it, less so. Your customers are required to pay back their debt, but many of them delay the inevitable. Eventually, late fees start to compound—increasing their anxiety and driving customers further into debt—which, ultimately, hurts your business.
With mobile messaging, you can make repayment more interactive and engaging. Instead of receiving an invoice and eventually paying it, customers get an invoice they can connect with. Give them a call to action (CTA) to learn more about their debt or schedule a time to speak with customer service. The improved experience increases your chances of being paid on time since customers access information in one place.
One way to gamify repayment is to offer customers rewards for paying early or on time. For example, offer two payment tiers. If payment is received before the deadline, the customer qualifies to pay a lower amount. If payment isn’t received on time, customers have to pay a higher amount with a late fee added in. The purpose of the early payment is to encourage customers to pay sooner rather than later.
When the discount is applied to the customer’s debt, your payment might be less than you’re owed, but a reduced payment is better than not getting paid. Customers appreciate incentives, so use gamification to get them engaged and excited. You’ll improve your chances of getting paid.
Find out how to get customers to repay debt faster: 5 Credit Collection Strategies for Faster Repayment (and Better CX)
Be Strategic About Reducing Business Debt
Store credit cards are only good if they work with and for your business, not against it. They’re meant to incentivize customers to spend with you, and that only works if they’re not also putting your business in debt. Do your best to preempt the harmful behaviors with proactive mobile messaging solutions.
To find out how VoiceSage can help your business, contact us today.
Published on: 9th December 2019