When businesses are faced with outstanding balances, there’s often a debate on how to effectively engage past-due customers. Customers generally want to pay their bills, but sometimes barriers get in the way of taking action. Delinquent customer accounts aren’t just a financial line item, they also represent opportunities for more effective engagement.
A better understanding of the modern roadblocks that keep many customers from submitting repayments is key to solving this problem. Let’s dive into three of the top reasons why past-due customers don’t make repayments.
1. Customer Priorities Can Drive Down Recovery Rates
During tough economic times, more consumers make financial trade-offs to stay afloat. A recent McKinsey report on consumer sentiment showed that increases in inflation and cost of living expenses have caused many consumers to become pessimistic about covering their bills. When budgets get tight, many of your customers build a prioritization list. Key bills essential to daily life like mortgage and car payments are settled first, with financial obligations that aren’t “mission critical” being pushed out to deal with later.
In this case, businesses need to cut through the noise since getting noticed is a crucial step to boosting recovery rates. When macro-economic pressures are weighing down consumers, introducing more empathy to the digital debt collection process can go a long way. Empathy isn’t just found in the message being sent to customers, but how your business is segmenting them. For example, a customer who is five days past due usually shouldn’t get the same experience as an account that’s just hit a 90 day default.
Use empathetic messaging to show customers that your business understands the challenges they are facing and use communication channels they prefer. The goal is to make the process as frictionless as possible, so that making a repayment doesn’t feel insurmountable for customers who are already financially stressed.
2. Some Customers Aren’t Failing to Pay – They’re Failing to Navigate
How can your business increase recovery rates? A good first step is to think about the current repayment process. Do customers have to use a clunky log-in portal? Is there self-service in place? Do customers have to call in over the phone? Are the details about financial obligations hard to decipher?
Any bump, challenge or hurdle customers have to go through to submit a repayment can delay them taking action. Most consumers expect businesses to provide a digital-first and frictionless experience. Convenience is often just as important as the messages being sent to past-due customers. Self-service portals, for example, give customers 24/7 access to their account information and ability to make a repayment.
One of the best ways to increase recovery rates is to embrace digital debt collection. Recovery strategies that leverage texting reminders, include direct links to payment portals and offer transparency into the process have a better chance of getting more repayments. All of these strategies shrink the distance between when a customer decides they want to pay and actually submitting that payment.
3. One-Size-Fits-All Outreach Holding Back Recovery Rates
Traditional debt collection strategies often make the mistake of treating every past-due customer the same way. However, every past-due customer has unique preferences that go beyond phone calls and urgent messaging. When a business takes a one-size-fits-all approach to engage past-due customers, there’s some added risk.
For instance, a long-time loyal customer is more likely to respond to a message that acknowledges the relationship that’s been built. And a new customer who missed paying a bill for the first time would likely appreciate a gentle reminder as a first touchpoint instead of a sternly worded letter. To help maximize recovery rates and preserve customer loyalty, it’s important for debt collection strategies to practice effective segmentation and personalization.
When outreach feels cold and impersonal, customers are more likely to disengage and focus on other financial obligations. For effective customer segmentation, start by asking yourself some questions like:
- How does your business currently segment past-due customers?
- What is the ideal message tone and communication channel for each segment?
- How is the timing of messages being sent determined?
- How are internal resources spent across past-due customer accounts?
While personalizing outreach based on customer segments often takes up a lot of internal resources, AI-powered software can help automate the process and go a step beyond segmentation with account-level personalization.
Retain Personalizes & Automates Outreach for Better Recovery Rates
Retain white-label debt collection software automates the sending of digital debt collections messages while optimizing engagement for every past-due customer. If your business is looking to improve recovery rates by leading with empathy and a customer-centric experience, Retain is here to help. Contact us to learn how our AI-powered debt collection software can give your business a boost.
