Consumers continue to be impacted in both macro and micro ways by high inflation and interest rate hikes that have seen consumers looking to credit products like credit cards, personal loans and home equity line of credit (HELOCs). Their motivations for turning to a range of credit products in this evolving financial landscape? To better position themselves to weather whatever comes their way.
According to TransUnions’s Q4 2022 Credit Industry Insight Report, this means that although the consumer credit market is healthy, it is beginning to see indicators of headwinds, particularly around delinquency. It’s prudent for businesses to begin preparing for the anticipated rise in consumer debt and adopt strategies to mitigate any downstream impacts to your bottom line.
What is the collections process?
Traditional collections practices have been used for decades and have been shown to have negative effects on both the debtor and the collector. These traditional practices skew toward aggressive communication tactics, high-pressure techniques, and in some cases, legal action. The negative effects of traditional collections practices include increased stress levels, damaged credit scores, and even bankruptcy for the consumer, while the collector is met with resistance, strained customer relationships and an inability to recover revenue. The good news is, there is a better way.
A better way
This one-size-fits-all approach lacks empathy, which is an essential ingredient to sustaining the relationship with your customer. Empathy is an important factor in your customer engagement strategy as it humanizes both the consumer and the provider, making it more effective and efficient. Engaging with empathy means seeking to truly understand your customers. It’s shaped by your ability to meet your customers where they are, whether that’s digital channels or via direct contact, and demonstrating that you are a partner as they navigate the realities of falling behind on their bills.
Your first opportunity to infuse empathy into your engagement strategy is in the early stages of delinquency before customers are sent to collections. This concretely demonstrates your commitment to your customers’ experience and a desire to work together to drive the best possible outcomes for them and for your business. When done well, this can mitigate potential losses, increase revenue recovered, and in the long term, enhance your brand reputation.
Along with considering your approach pre-collections, there are a few tactics that you can weave into your customer engagement strategy that can serve at this stage, and across the entire customer lifecycle.
Where to begin
Through our millions of interactions, leveraging behavioral science, we know that to become a trusted partner to your customers, it requires a different approach. Imagine the impact of creating a positive experience for a customer when they need it most and think about leveraging the following tactics as an initial step toward inserting empathy into your engagement strategy.
1. Hyper-personalized messaging
Hyper-personalized communication means leveraging customer data and insights to create more relevant and engaging communication that resonates with your customers. From there, you can glean greater insights based on the success of your outreaches that enables you to fine tune your knowledge of your customers’ preferences and create personalized empathy-driven interactions.
2. Offers or options
As an extension to personalized messaging, offering your customers different options or alternatives demonstrates that you value their needs and preferences and are seeking a true partnership. Additionally, offering options or promotions can encourage customers to make a purchase, potentially increasing sales revenue down the line.
3. Channel variety
The ‘physical’ way that you demonstrate that you are meeting your customers where they’re at. Whether it’s email, SMS, phone call, mail or another avenue, your customers are diverse in the ways they choose to engage with you. Uncovering where they are, where they are most engaged and what channel your message is most effective on will serve your company-customer relationship.
Collectively, this will help to illustrate a deep understanding of the unique needs and preferences of your customers, while building the foundation needed to consistently provide a positive experience that adapts as customers change.
Download our 2022 consumer report, The Great Shift in Billpayer Behavior, to discover more about what’s driving consumer behaviors. Find out what support service providers can offer customers to overcome the impact of exhaustion and uncertainty, and to engage with them more effectively.
