Placing Empathy at the Core of a Collections Strategy

The past couple of years have been difficult for many people in the UK. The expected ‘post-Covid boom’ didn’t materialise and instead we have a situation the media is calling a cost of living crisis. Many factors created this situation, but - in short - energy prices have gone up dramatically along with inflation making everyone feel poorer. Incomes are not keeping up.

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Reading into this in more detail is disturbing. The Joseph Rowntree Foundation has estimated that there are around 3 million low-income households that cannot afford to heat their home. There are now a record number of food banks that are helping millions of people.

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This all makes grim reading, but the economy has always bounced back from recession and difficult periods in the past. In fact, if you look back at a list of all the times the British economy was struggling then it’s surprising to see how quickly recovery can begin. Even the great recession of 2008 only lasted five quarters before growth returned. Downturns usually last about a year.

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But this does mean that collections are likely to increase in the near future as customers struggle to pay all their bills and start prioritising the more important ones, such as rent or mortgage payments.

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How can companies build their collections process around empathy for the current economic situation, but also ensure that customer debt is managed effectively?

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It may sound like squaring a circle - empathy in debt collection - but there are several very specific strategies that can be deployed to help customers to manage and help brands to increase the success of their collections process.

Data and insight is really at the heart of how to improve collections. Creating insight into customer behaviour can help to prevent some debt occurring in the first place and it can create better opportunities for managing debt when it becomes problematic.

?Here are a few of the steps that can get you started on a dramatically improved collections process:

Customer Segmentation

Use data analytics to segment customers into different groups based on their payment behavior, financial stability, and historical data. This will enable the company to tailor the collections approach according to the customers' circumstances. In short, know your customer in more detail.

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Train and Educate Employees

Collections staff should be trained to communicate respectfully and empathetically. Include training modules that teach them the importance of emotional intelligence and how to understand the potential challenges that customers may be facing. The team should understand that they are often interacting with people at a vulnerable time in their life.

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Personalised Communication

Craft personalised communications that take into account the customer’s history and current circumstances. Use a tone that is understanding and non-confrontational. Offer various channels for communication (email, phone, chat) so the customer can choose what’s most comfortable for them - if customers are not answering on one channel then try others as appropriate. They might be avoiding paper bills, but will read a text message, especially if it’s offering help rather than chasing them.

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Flexible Payment Options

For customers who are genuinely struggling, it's important to offer flexible payment plans. This can include reducing the monthly payment amount, extending the payment period, or offering a temporary grace period. Ensure that a range of options is available and that the agents are empowered to offer any new arrangement.

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Early Intervention

Use predictive analytics to identify customers who are likely to face financial hardships before they miss a payment. Reach out to these customers proactively with support and guidance. It may be clear from historical analysis who is likely to miss payments - reach out and offer help before a problem arises.

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Leverage Technology for Analysis

Use advanced analytics tools to continuously monitor and analyze customer data for signs of financial distress. Tools such as machine learning algorithms can help identify patterns and trends that may not be evident through manual analysis. This can really help with the previous point on intervention, but can be used more generally to help all customers avoid debt where possible.

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Holistic View of The Customer

When assessing a customer’s ability to pay, consider the entire customer relationship, including their history, loyalty, and potential future value to the business. This broader view may lead to more lenient and empathetic collections approaches for valuable long-term customers.

This is an important area of personalization. A loyal customer with many years of on-time payments should be helped if they can explain why they are struggling at present. Give them some time - return the loyalty.

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Establish Customer Assistance Programs

Develop programs aimed at assisting customers facing temporary hardships, such as unemployment or medical emergencies. These programs can include financial counselling, referral to Citizens Advice or social services, or special payment arrangements.

Many private companies may not see financial counselling as a service they need to provide, but more effectively helping your customers with empathy doesn’t need a large budget. Customers will remember how you treated them as the economy recovers.

By combining data-driven insights with empathetic communication and flexible payment options, companies can create a collections process that is more humane and responsive to the needs of their customers. This approach can not only improve customer satisfaction and loyalty, but also enhance the company’s reputation and brand image.

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Let me know what you think about the future for collections! Leave a comment here or get in touch via my LinkedIn.