BREAKING THE DEFAULT CYCLE ARTICLE

 

Byline:  Scott Zimmerman, President, TeleVox Software, Inc.

 

Collections 2.0 : combining the collective wisdom of high technology with a human touch

 

Media, wall-street and main-street are awash with statistics -- statistics on consumer confidence, debt and default.  Over a million businesses last year went into bankruptcy; around 8% of US monthly mortgage payments are presently in arrears; delinquency on utility bills is nearly 20% higher than this time last year; and with credit card default typically tracking to unemployment currently at a 25+ year – the statistics are very sobering indeed.

 

More sobering is that behind all these statistics are people.  Millions of people managing debt, including several million experiencing and coping with payment delinquency for the first time.    Behind these statistics is also the business challenge of managing the massive increase in overdue payments, a challenge that is not just about the short-fall in revenue but also the additional costs associated with encouraging consumers to bring their accounts up to date.

 

So how can a business intervene with its customers early and help them avoid or get out of a cycle of default, while not undermining their own business health due to the high costs and drain on resources associated with collections?  

 

Historically a series of call center originated calls, or automated voicemail and standard letters were pretty much the tools available to business and collection agencies – before resorting to legal action.  However, advances in personalized voice, data, messaging, web and wireless technology has made a new approach, one that combines high-technology with a human-touch, an increasingly attractive strategy for collection departments and agencies.  This approach, called consumer engagement communications (EC), is helping companies help their customers avoid or break out of default cycles through early intervention.  

 

According to Karin Brown, a collections consultant with LSI (Lending Solutions Inc), engagement communications (EC) often works best in the early stages of payment default - particularly the first 25 days.   She explains that, as a result of the lasts 18 months downturn, there are millions of people who have never had to make a decision about which bill they’re going to pay or if they will pay it on time.  People are not used to this situation, often don’t know how to talk to the companies they owe, or where to start or are simply embarrassed. 

 

Companies such as TeleVox, which provide hosted engagement communications (EC) services, work with collections departments and agencies to create and host outreach campaigns that are 100% delivered by technology but in a highly engaging, personalized and managed way --- high technology with a human touch.  Campaigns can range from polite and friendly reminder phone calls and voicemails, sent on a massive scale but still personalized to each customer; to a campaign which automatically escalates depending on the response from the customer and which could include a range of message formats from phone calls to voicemail, email, SMS and even old snail mail. 

 

 

 

 

 

Automated voice calls and messaging have made huge advances in recent times with companies now able to automatically broadcast anything from twenty to millions of voice calls and messages in a matter of hours, all tailored to individuals and their situations.  For example in the very early days of a customer’s late payment cycle, a soft female voice pleasantly suggesting a payment has been overlooked has a much better impact than an assertive and direct request for payment by a male voice.  Moreover calls and messages personalized by name create a sense of engagement.  Making contact is one thing, engagement is another – as it is engagement that helps drive consumers into action to get in touch with their debtors to discuss or to pay outstanding payments.

 

In today’s world of 24/7 talk, chat, connectivity and communications, different communications have very different impacts and outcomes depending on the demographic.  Sending an SMS payment reminder message to people in their 40s and older is typically not an acceptable form of communication for payment reminders as it’s viewed as invasive (assuming they actually even use SMS).   GenX and younger however would expect to be contacted by SMS; and would expect to be able to SMS back which, for both business and customer is  highly beneficial as it creates an all important point of engagement and intervention that increases the likelihood of payment and helps move the customer out of a default cycle. 

 

Few companies have the technology resources and capabilities to manage high-scale automated two way communications of phone, voice, email, SMS communication campaigns – which is why they are increasingly outsourcing to hosted engagement communications (EC) software and services companies.  The payback is pretty compelling – reduced default, faster collection cycles, increased revenue predictability and reduction in expense of collection (EOC)

 

John Helms, supervisor at Active Collections, is one of the earlier adopters of engagement communications (EC) and has seen the business and human benefits first hand.  One customer example is Georgia Power - which takes great effort to help its customers avoid disconnection.  In 2009, Georgia Power sent some 1.3 million proactive calls (via ProActive) to customers to help them avoid disconnection.  This was a significantly higher volume than previous years; however because they used massively scalable engagement communication services in partnership with TeleVox, they were able to scale without significantly greater overhead and expense.  An even more rewarding data point is that the 1.3m Proactive calls resulted in a swing of 59% customers bringing their payments up to date and avoiding disconnection – which as well as a great human story is a positive business story as it means significant business advantage through less field calls to make disconnections, happier customers and greater revenue predictability. 

Customer centric companies are managing the business imperative of reducing late payment behavior and default AND the brand importance of helping their customers get through a tough situation in as un-stressful and respectful way as possible. As well as the right thing to do – it is also good business practice; as we cycle out of the recession and consumers regain a stable footing, they will remember the brands and businesses that ‘treated’ them well and respectfully through a tough time – and they will remember those that didn’t.