For a long time, the debt collection process has favored businesses. Instead of creating custom processes that cater to the needs of each customer, collection tactics are more aggressive—like calling customers repeatedly.
Even though lumping customers into one category saves businesses time and money, the result is often frustrated customers who’ve suffered through a negative experience—due in part to aggressive repayment tactics. It’s especially frustrating for customers whose payments are late because of an oversight and not purposeful neglect.
It’s time to introduce a new way to connect with customers and improve their experience. An optichannel approach that relies on more than one channel to contact customers results in less customer churn, quicker payment, and, most importantly, a better customer experience.
As most companies make the switch to an optichannel debt collection process, failure to do so will only make it harder for you to learn from your customers and retain them longer.
Here’s what you need to know.
The benefits of an optichannel approach
Better experiences go a long way to retaining customers vs. upsetting and losing them once their debt is paid off. A report by Experian shows that “people with the lowest balances and the lowest amount past-due had the highest incidence of paying off their debt and closing their accounts.”
The report goes on to say that this “means that by being too aggressive over a fairly low dollar amount, you can damage the relationship with a customer who could bring a lifetime of more business.”
That better experience can be achieved through an optichannel approach. Optichannel helps in two ways:
- It helps reduce the need for aggressive collection tactics. Since communication doesn’t come from just one channel, customers are more likely to respond. Communication feels less pressure-based and more supportive.
- It caters to the fact that customers use different channels to complete tasks and communicate with brands. They expect the companies they do business with to know who they are and offer “on-demand” service regardless of the channel they’re using. In fact, 71% of customers want to have a consistent experience with businesses across multiple channels.
An optichannel approach to debt collection is customer-focused and does a better job of moving accounts from arrears to paid in full as quickly as possible. Instead of sticking to traditional methods like phone calls, emails, and letters that target one or two channels constantly, spread out efforts with an optichannel approach.
The optichannel approach also lets you differentiate between customers by using behavioral data to create a customized debt collection process based on each customer and their circumstance.
To experience the benefits of an optichannel approach, let’s look at how to build a new debt collection process.
How to create a customized debt collection process
There are three steps to creating a customized debt collection process to help you improve the customer experience and retain more customers after their debt is paid. Start by segmenting your customer base to find out how much debt each customer owes, then create customized messages that are action-oriented but not overly aggressive, and finally choose the right channels to deliver these messages.
Let’s take a closer look at how each of these steps works.
1. Segment your customers
Divide your customers with outstanding debt based on different factors. These factors include—but aren’t limited to:
- Debt amount. Use debt categories like low, moderate, and high, then decide what debt threshold determines which category customers fall into.
- Payment history. Identify which customers have a history of timely payments and which ones take longer.
- Type of debt. Whether you’re a bank, utility, or retail company, consider the different types of credit you extend to customers. Are they high interest? Expensive for you to carry?
- Access to customers. Think about what channels you have access to since this will determine what strategies you’ll be able to use to contact your customers.
Your customer segmentation will give you multiple categories, but the benefit is you’ll have a clearer picture of who your customers are, which customers are intentionally avoiding payment and therefore require more outreach, and how much effort it’s going to take to receive payment.
2. Craft custom messages
Once you have your segments, create customized messages for each one.
Position small debts as a friendly reminder and larger, long-term debt as “We’re here to help. Tell us what you need.” Neither approach is aggressive, but they provide concrete steps for customers to follow and move towards repayment. Both approaches also focus on maintaining the customer relationship and speak to each segment’s specific needs.
For example, customers with small debts who’ve missed their first payment aren’t pestered constantly for payment.
British Gas takes this approach of showing trust in their customers by offering support—via the support page of their website—to those having trouble paying their bills:
A collection agency, The Kaplan Group, suggests that “easing clients’ frustrations will make it more likely that you’ll be paid on time, and also help establish you as reasonable should a dispute arise.”
3. Choose your channels
Tailor your debt collection process to the channels you have access to.
For customers with low to moderate debt, send text message reminders that include the outstanding payment, payment deadline, and a link to a payment gateway.
Then follow up with an email reminder a few days later. Include the same information and a CTA to trigger payment.
For customers with higher debt, use an email drip campaign with new information in each one—so that the emails aren’t repetitive and easy to overlook—then send a rich media message (RMM) that includes the option to pay off the balance from the message, for example, via Stripe or Global Payments.
You can also use RMM to ask customers to set up a time to discuss a payment plan or to walk through the payment process with a customer service rep.
Finally, coach customer service on how to manage inbound calls. Customers might call in for a reason unrelated to their past due payment. Include a flag in your CRM to remind reps to talk to customers about repayment and offer to walk these customers through the payment process while they’re on the phone.
Companies making their optichannel debt collection process work
Lots of companies are approaching the debt collection process with optichannel communication in mind. They understand that by using more than one channel, they’re able to engage customers better and speed up the repayment process. Here are some examples of companies using this approach and what we can learn from them.
British Gas reminds customers of bill payments through their app, with paper invoices, and phone calls from customer service.
Customer invoices make it clear how much is owed each month and when payment is due. Also included is a breakdown of payments received since the last invoice and what’s outstanding.
Also included are options for customers to save money on future bills. This is especially helpful for customers who are consistently late with payment due to financial reasons.
The British Gas app is also equipped to send customers notifications when payment is due:
British Gas’ approach uses the channels its customers are most responsive to, to ensure payments are received on time.
What you can do: Do some research to figure out the best channels to contact your customers. Test different approaches and channels until you find the combination of channels that results in the most customer follow-through.
Express Gifts, a personal and successful home shopping service, uses RMM to make it easier for customers to make payments.
Through their own research, they found that they needed a process that effectively dealt with an increasing number of customers with past due balances.
First, they adopted a platform that let them segment their customers and create customized collection strategies. High-risk customers received a phone call, and low-risk customers received a reminder letter.
The result was Express Gifts saw a 15% improvement in bad debt, and in 12 months they improved ROI from the systems they invested in to manage debt repayment. They also noticed a positive change in customer experience, retention, and overall process efficiency.
What you can do: Find tools that will help you get organized, manage customer segments, and shorten repayment time.
Bank of Ireland
The Bank of Ireland (BOI) offers customers an app they can use to manage their accounts and monitor their balances.
They also have a help center on their website that offers customers suggestions on how to manage their debt if they’re having trouble repaying. They offer repayment plans and debt restructuring to provide customers with a positive experience and to help them reinforce the relationship. After all, debt payment shouldn’t just be about getting payment; it’s also an opportunity to show customers that you’re a trusted source.
What you can do: Include a help center on your website to give customers options to settle their debts. Track traffic to that part of your website to see how much time customers are spending on there and add more information and resources to guide customers.
Take the frustration out of your debt collection process
The thought used to be that the debt collection process had to be aggressive in order to push customers into making payments as quickly as possible. This approach has resulted in poor customer experience with many customers leaving once their debt’s paid.
A better approach is to take the time to get to know your customers and their needs and create a customized process. You’re more likely to build strong partnerships with your customers and keep them onboard longer.
Published on: 6th March 2019