When your customers think about debt collection, the first thing to come to mind might be traditional collection strategies. This is where they receive an onslaught of phone calls, emails, and possibly mail to remind them about their outstanding balance.
For your part, you send these messages with the best of intentions — you want to keep your customers informed and give them payment options. However, debt collection strategies that rely on constant messaging frustrates customers, jeopardizes the customer experience and relationship, and potentially lengthens the time to repayment.
Debt collection is an important part of running your business, but you have to tread carefully so that customers are responsive to your efforts. Here are four debt collection strategies to help you guide customers to repayment sooner.
1. Understand the Root Cause of Late Payments
As you manage your debt collection strategies, keep in mind that customers miss payments for different reasons. It isn’t always because they’re being negligent. For example, some of the reasons why customers miss payments include:
- They forgot.
- They lost their job and don’t have money.
- They thought they already paid.
- They’re sick and off of work. As a result, their income is reduced or lost.
- There’s an ongoing dispute with their account.
As you can see, there are a number of reasons behind missed payments. That is why it’s important that you don’t lump customers into one category and bombard them with the same types of calls and messages. Instead, treat customers as individuals and tailor your approach to match their current experience.
To figure out why customers are late with their payment, survey them. For example, for customers who’ve missed a payment in the last six months, send an email or rich media message that includes a short survey. Ask why they missed a payment in the past, and include the reasons listed above. The only thing these customers have to do is click an option and add more insight or comments if they choose to.
Read more about how to use rich media in collections campaigns: 5 Credit Collection Strategies for Faster Repayment (and Better CX)
Tip: If you send your survey via email, use an inviting subject line to encourage customers to open and read the email. You don’t want them to ignore this email because they think it’s another debt collection tactic you’re using. Here are some examples:
- Hey! We’ve got a quick question for you.
- Do you have a minute? We have a short survey to help us serve you better.
- Thanks for being a loyal customer. We’d love to hear from you.
Your survey will show you what percentage of customers missed payments for each of the reasons above. You might find that the main reason is customers simply forget. If that is the case, this is an opportunity for you to change how you communicate with customers. For example, consider sending invoices closer to the due date.
2. Reassess the Timing of Your Outreach
In addition to the types of messages you send, there’s a fine line between being helpful and being annoying. The temptation is to send lots of messages to get customers’ attention and remind them of what’s outstanding. At some point, customers tune out your messages because reading and responding to each one becomes overwhelming.
A more productive approach is to use your debt collection strategy as a guide rather than using it as a reminder tool that doesn’t offer any value. Start by analyzing how long it takes customers to repay their debt. This repayment time period might be anywhere from 10 days to 90 days or more.
For customers who tend to take longer to repay their debts, send an initial invoice a few weeks before the payment is due. Include the amount owed and the payment deadline. Give customers time to respond or follow through before sending another message. If there isn’t a response a week before the payment deadline, send another reminder, and share the number of your customer service team. That way, if customers have a question or concern, they have someone to contact.
For payments that are a week past due, ask customers how you can help them. If they’re having a hard time financially, offer repayment plan options.
The goal with managing message timing is to give customers time to respond between each message and to make each message increasingly more supportive. This helps you position yourself as a company that’s understanding and willing to take the time to help customers meet their commitments — not just get paid.
3. Use Omnichannel Messaging for a Holistic Approach
One of the most popular ways to follow up with customers with outstanding balances is phone calls. They are direct and quickly get you the answers you need. There’s one drawback: Debt collection strategies that rely heavily on this approach are time-consuming and won’t be effective for long. Customers will either refuse to answer your calls or they’ll block the number.
Another option is to target customers using more than one channel. Use a combination of phone calls, emails, and rich media messages (RMM).
Here’s an example of how the debt collection strategy would work:
- Message #1: Send the initial invoice via email or in the mail. This depends on how customers prefer to receive invoices.
- Message #2: Follow up with an RMM that includes the outstanding amount, the due date, and the option to pay right then.
- Message #3: Send an email with more information. In addition to account details, include a short section on debt repayment tips, contact details for customer service, and a link to pay now.
- Message #4: Save phone calls as a last resort. When you get customers on the phone, make the call a positive experience by listening and offering ways to help customers make their payment. Late payments are frustrating and costly to you, but don’t jeopardize payment by being hostile to customers.
Based on feedback and response rates from customers, you can adjust any steps along the campaign to make it easier for customers to follow through. For example, send multiple mobile messages early in the repayment stage.
Vanquis Bank found that it was taking their customer service team a lot of time to get customers on the phone. They decided to use a combination of RMM, interactive voice messaging, and SMS text messages to notify customers of upcoming payments. This approach resulted in a 200% increase in contact rates.
Tip: The tools you use for your debt collection strategy determine success. For example, use automation to help you manage the process. Create RMM campaigns with VoiceSage in advance, and set them to send when your CRM identifies customers with late payments.
Read more about how to use new technologies and methods to improve debt collection: 6 Reasons Your Debt Collection Process Is Failing You
4. Ensure Customer Data Is Correct and Up to Date
Debt collection can be a stressful process for customers. It can be made even more frustrating when there’s a mistake. Contacting customers who’ve already made a payment is confusing for them and undermines the positive experience you’re trying to create with your debt collection strategy and in other areas of your business.
Since late payments can arrive at any time — for example, while you’re setting up your reminder email campaign — check your CRM before sending campaigns. Remove customers from the campaign contact list who’ve made a payment. That way, you avoid disturbing customers unnecessarily.
An unnecessary collections message doesn’t just confuse customers but might also prompt them to call into customer service for answers. As a result, customer service ends up repeatedly fielding the same kinds of questions, which takes time away from other tasks.
Tip: Sometimes sending a message after payment has been received can’t be avoided. In this case, include a disclaimer in all of your messages that reads, “If you’ve already made a payment, we’re in the process of updating your account and appreciate your payment. Thank you for your patience. No further action is required on your end.” This minimizes calls to customer service and gives customers the information they need if they’ve already paid.
Review Your Debt Collection Strategies
Once you’ve updated your debt collection strategy, ask your customer service team for feedback. They deal with customers directly and can tell you how well the strategy is working and whether customers are receptive. Successful strategies should be reviewed often and updated to make sure the customer experience stays positive.
As you review your strategy, also look for opportunities to offer individualized support that guides customers to repayment. Avoid tactics that are demanding and result in a negative customer experience. Your debt collection strategy should be an extension of the overall customer experience you offer as a company and shouldn’t negatively affect the rest of your business because customers are unhappy.
For more information on how VoiceSage can help you create and send debt collection messages, book a demo today.
Published on: 2nd September 2019