news and opinion
Halfway through 2009 and it's clear that a fresh approach to the collections process has never been more vital. The financial crisis of 2008 and the resulting global recession has created never before seen circumstances, and many consumers now face a significant challenge in managing their day to day finances. Already the Credit Services Association (CSA) has released figures detailing a growing trend for consumers to 'settle later', and we're likely to see continued increases in those finding it difficult to repay outstanding credit and bills; delivering a negative knock on effect for lenders and utility brands across the board. With a reduction of c.20% on overall collection rates it's clear that utility providers must make every effort to address this issue.
Arguably the most important objective for utility brands is to engage actively with their customers; opening a dialogue with them to offer support and guidance to help manage their finances, and ultimately pay what they owe. Given so many consumers 'stick their heads in the sand' when faced with financial instability, taking this partisan position, especially at an early point, massively differentiates a utility brand from the competition, and crucially from other potential creditors.
Whilst the cross-sector variance determining what constitutes an 'at risk' customer is fairly large, relying solely on a score-based approach is a high-cost/low impact method to identify and tackle customers approaching financial difficulty. Instead, combining trigger points, an effective risk/value score profile and common sense, can empower your operation and yield significant results. In simple terms, a customer switching their payment schedule from monthly to quarterly may well be displaying the first signs of financial difficulty, so engaging with them at this early stage may be the most beneficial approach.
If you start from the basis of wanting your communication to be personal, relevant and efficient then the key trigger points in your strategies keep it 'real' from the customer's perspective. You have a reason to call them and it means that you are using your valuable, finite operational resource to tackle those accounts most likely to cause you problems in the long run.
Once pre-delinquent customers have been identified, human contact via the telephone can play a fundamental role in instigating this kind of relationship, so consumers can benefit from help and advice before their problems escalate further. This is a crucial stage for both customer and provider; once a bill payment is missed and the collections process is instigated it immediately becomes much harder to recover outstanding bill payments and get out of the process.
Let's consider Denby's words "the importance of actually talking to the customer in a supportive and non-threatening tone shouldn't be underestimated". What is important here is that the resource for this activity is ring fenced and highly skilled - their objective is to balance a view that this customer may be about to be in trouble but as yet has done nothing wrong. Their approach is key both to lending the appropriate support and ensuring a continued profitable relationship. They need many tools at their disposal and an ability to get into a huge range of possible issues.
A colleague's recent experience, whilst not directly related to the utility sector, is an excellent example of how not to do this. As a customer of a premium banking service with a large credit card limit, a flurry of Spring-time spending put her £100 over limit. This immediately invoked a standard collections process. After paying a substantial sum via debit card the operator asked if she was experiencing financial difficulty. The blunt response was "I've just transferred several grand from my current account, what do you think?" Not the brand experience she expects and I imagine the brand and product managers would agree. Clearly a more insightful and natural conversation would have yielded a better result for all and yes, she may have been in trouble and may have benefited from the formulation of a payment plan, some debt advice, a payment holiday or any number of options, but this can only come after the agent has figured out what is really going on, rather than having found a short term solution to the problem then checked if everything is OK.
In the case of utilities, the customer may have switched to quarterly payments, but as a result of more savvy financial management as opposed to impending money troubles. Clearly the approach in any situation needs to be made very carefully, but equally there is a significant opportunity in connecting with the customer in a calm and potentially sympathetic way in order to find out what is really going on.
A utility brand using this approach also benefits from being able to improve the efficiency of subsequent communication, depending on the outcome of this initial interaction. Other, cheaper, channels may be adequate to maintain the relationship going forward but for some regular phone contact will still be required.
Bad debt will always need to be managed, and using a combination of excellent data analysis and management and effective, human, communicators is a cost efficient means of reducing cases. With the prospect of ever greater numbers of consumers facing financial difficulty, the process of identifying and communicating with customers in the pre-delinquency stage can reap huge benefits in the short and long term, impacting on the customer's propensity to pay back debt whilst simultaneously encouraging future loyalty.
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