In at least one important respect, the term "collections" is a bit of a misnomer.
For a collection business to succeed over the long term - namely by retaining clients and adding new ones over time - the practice of collections must ultimately be treated as a negotiation.
In fact, the collection process is just that, an ongoing experience and not a singular event. Keeping a debtor engaged during a difficult process that can last anywhere from months to a year or longer has increasingly come to be recognized for what it is: a sustained relationship centered on resolving a problem.
A heightened focus on the relationship aspect of the collection process rather than on the end result alone has brought much needed attention and a growing body of knowledge to an area best referred to as "managing the customer experience."
It's no coincidence that growing awareness of the skills and techniques required to manage the collection process toward a quality customer experience is coming about at this point in time.
Events since 2008 - an epic financial crisis, a parallel and unrelenting economic crisis marked by high unemployment and a nationwide housing and collapse - have created unprecedented levels of stress among consumers. One prominent byproduct of which has been increased empathy for almost anyone who has fallen behind in their financial obligations.
We're seeing unprecedented lawsuits and regulatory scrutiny surrounding collections. Last year, U.S. consumers filed an estimated 13,901 lawsuits against collection agencies and creditors, including 10,914 cases based on the Fair Debt Collection Practices Act, (see story). This represents a nearly 20% jump over the 9,135 FDCPA suits brought in 2009.
It's important to recognize that, under any circumstances, a call from a collection agent will lead to a certain degree of stress and contention. Agents are contacting someone at a difficult time when patience as well as resources are stretched thin. The resulting environment within which we are all operating has fueled significantly more creative, collaborative approaches to debt collection, an important reason why managing the customer experience has gained particular momentum.
Importance of a Customer Experience Plan
The heightened sensitivity that defines the collection space today is creating the need for agencies to alter their approach and focus on more than simply delivering economic results at any cost.
Instead, agencies need to determine how to turn the collection experience into a brand-building experience for the client. They also must formulate a definitive customer experience plan.
As part of the plan, collection firms need to focus on four components in particular. Firms must:
* Identify the behaviors in the collection process that directly and indirectly impact the customer experience
* Develop formal compliance systems to track and measure customer experience
* Formulate and deliver the training and tools that will enable agents to enhance the customer experience
* Institute processes, procedures and support/incentive systems that will reinforce the desired behaviors
All of these elements come into play when setting out to generate a positive customer experience. Unifying these parts requires a commitment to quality throughout the cycle. This means cultivating a relationship with the debtor so that he or she is engaged in collaborating on a solution to their debt.
An approach based on problem solving rather than a utilitarian approach to the call has been shown to reduce contentiousness, leading to a solid working alliance, all of which augurs well for successful resolution.
The Brand Wagon
One invaluable yet often overlooked tool in cultivating this kind of working alliance in support of a positive customer experience is a clear understanding of a client's brand, as mentioned earlier.
Studying and internalizing the key traits of a client's brand can be an important contributor in setting the tone for a debt negotiation.
What are the brand traits (the essential image) that the company communicates to the marketplace? How does this company typically talk to its customers? What are the high-level brand promises and how might they be acknowledged in a collection-related dialog with a customer of that company?
Arming agents with insights into the nature of a company‚s brand identity is an excellent way to foster the rapport and mutual respect that is at the heart of every successful resolution.
Clients are usually happy to provide their collections firms with brand guidelines and supporting documentation. Collection firms cannot afford to delay or defer in implementing some kind of client branding training.
As further validation of the new importance of managing the collection process with a view to a positive customer experience, we see a growing number of clients that are incorporating the customer experience. It is readily measured by integrating criteria such as customer complaints, prolonged disputes and litigation into the scorecard.
The customer experience metric has become sufficiently material to collection that we recently created the internal role of Customer Experience Manager. Other essential components include intensified analysis of call outcomes and refined call monitoring procedures.
Orientation for Agents
Make no mistake, orienting employees to a perspective that has a positive customer experience as the outcome does not come about instantaneously.
The nature of collection work is such that agents can demonstrate laudable collection rates on absolute terms but rank poorly on managing to a positive customer experience. It takes time and focus on this area to overcome the indoctrination most agents receive early in their career to "just collect."
Optimizing the performance of agents by emphasizing a quality experience for debtors, while seeming contrarian, actually makes good economic sense.
According to a 2008 survey conducted by PricewaterhouseCoopers LLP for ACA International, the collection industry as a whole returns more than $40 billion in debt annually to creditors. That equates to an average annual savings of $354 for each American household, representing the estimated amount that might otherwise have appeared as price increases to cover the lost debt.
Engaging debtors in ways that lead to successful debt recovery ought to be job one for every collection agent. For that to happen, the agent and the debtor must feel like they‚ve both won when the call is finished. That's what a positive customer experience is all about.
Tim Smith is senior vice president at Firstsource Solutions.