Marketing and collections are inseparable: the marketer’s disciplines, says Peter Taylor, are critical in persuading people to pay outstanding debts.
Despite financial services firms showing tentative signs of recovery after two years of falling business volumes and profitability, the level of bad debt or non-performing loans within the sector is still increasing at a rate of 37%.
Against this backdrop and with more and more consumers falling behind with their payments, marketers can no longer afford to be divorced from the realities of debt, and the way it is handled and collected.
Typically left at the feet of collections and recoveries – an all too often forgotten and hidden department – consumer credit providers could be missing out on considerable revenues if this division continues.
Marketing and collections to be joined at the hip
Although at first sight the disciplines of marketing and collections may seem poles apart, closer inspection shows distinct similarities.At its heart, marketing is all about persuasion and the influencing of behaviour. The same is true for collections, where the focus is on persuading people to pay an outstanding debt.
By recognising these similarities, more forward thinking financial services firms are beginning to break down the barriers between the disciplines with significant commercial advantage.
With collections springing into action when a customer misses a payment, or even before, for businesses with sophisticated pre-delinquency strategies, the greater alignment of marketing and collections enables businesses to increase returns from collections activities.
For example, assigning more intensive collections action, and resources, to the customers where it has the most impact on their behaviour and ultimately on their intent to pay – or simply tailoring the way they speak or write to a debtor dependent on the likely payment outcome.
This targeted approach takes its lead from marketing to identify where more effective collections action can be taken more quickly with better immediate and long-term results.
At the same time, marketing has much to learn from collections, not least the impact of marketing on the collections process – whereby failing to predict payment intent in campaigns for acquisition and retention increases the number of bad debt accounts ending up in collections in the first place.
The principal notion here is that marketing analysis should look beyond conversion and incorporate payment performance, to take a longer-term view of customer value. Indeed one client from the home shopping sector that took this approach saw bad debt reduce by an average of 45% over a twelvemonth period.
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