As the cost of acquiring new clients increases, many businesses prioritize customer retention. However, your definition of debt collection stages and related activities impacts churn rates. This is especially true with early-stage collections. The first 30-days of the collection process can set the tone, identifying your company as an adversary or a partner. In our recent Lexop survey 30% respondents said they were late on payments because they forgot to pay. This suggests that nearly a quarter of people can pay and are willing to do so, unless there has been a disconnect in their journey. Small changes to your customer engagement methods and timing can go a long way toward preventing past-due bills in the first place. Increasing the number of calls you make about an overdue bill may improve the chance that you'll speak to your customer and not a voicemail box. Still, it won't necessarily get your company paid any quicker. And aggressive tactics or non-empathetic conversations may result in more than a lost customer and unpaid bill. It could cost your reputation. In 2021, the CFPB received approximately 121,700 debt collection complaints. Among these complaints, credit card debt was the most complained about debt type. 4,000 of these complaints were related to communication tactics. Additionally, in light of the many challenges consumers face, customers becoming past due for the first time may take their case to the jury of public opinion after the perception of a poor experience. Although few people want to admit being behind on their bills, it can quickly become a public relations nightmare if they feel your company is wrong or out of line. The costs of reputational damage extend to several aspects of your company. Your teams are working in overdrive to deflect and counter negative social media mentions and reviews. They're also assessing and adjusting scheduled marketing activities to ensure they don't amplify an already tricky situation. Reputation issues also impact your hiring efforts, making it harder and more expensive to attract and retain top talent in your industry. From taking steps at each stage to addressing complaints, these efforts take a toll on your operations. It's time-consuming and resource-intensive to contact customers about overdue bills repeatedly, and there comes the point where the resources spent on collection efforts outweigh the repayment. At the same time, the alternatives, like charge-offs and third-party collection services, aren't an attractive option anymore. These methods often sever the customer relationship completely and affect revenue. A customer-oriented collection strategy can reduce operational costs, improve lifetime customer loyalty, and decrease charge-offs. It helps companies collect more and higher payments. Instead of a strictly reactive process, you can use data analytics and a full-channel strategy to manage each debt collection stage proactively. Your company can drive late payers to less expensive digital self-service tools and optimize the cost per dollar collected.
