Between Empathy and Technology: The New Sweet Spot for Lifetime Customer Value
Companies are in a double bind today. The coronavirus pandemic has put many customers at financial risk, and through no fault of their own, many suddenly un- or under-employed people simply cannot meet their financial obligations. Consumers may become delinquent on payments, and companies will accumulate unpaid debt, negatively impacting balance sheets in the short term.
The new customer currency: empathy
Previously, companies might have employed traditional collection techniques to recover delinquent balances, but in today’s environment, it comes down to empathy. Empathy means transforming recovery to make it kinder and more humane, providing at-risk customers with tools that enable self-treatment, and empowering resolution of financial challenges without long-term penalties.
Leader companies are turning away from a purely finance-driven collections approach, given a greater understanding of two factors that are critical to long-term success: branding and lifetime customer value. That’s because brands are at greater risk in today’s social media era and because long-term customer value is more important than ever. New approaches must address these trends, and the marriage of empathy and technology is the path forward.
Empathy instead of hammering
In the past, a delinquent customer might have experienced “traditional” collection techniques, like robocalls, letters, emails, or texts, or even be sent to collections or experience service disconnection. These legacy techniques are generally unproductive, particularly in today’s pandemic-driven environment of financial stress, wherein many consumers just don’t have the funds for bill payment.
It is unsurprising, then, that customers on the receiving end of these legacy collection techniques might feel mistreated and go online with their grievances. Whether fair or not, negative customer stories can easily gain traction, and even one disgruntled customer can quickly damage a brand due to rapid dissemination of news and because bad news has great potential to go viral. What once might have been a trivial collection issue can easily metastasize into a PR and brand nightmare.
More importantly, the strained customer relationships arising from traditional bill collection are simply not worth it. The lifetime value of a customer far exceeds short-term revenue gains from unsavory collection practices that cause customer churn, and even the most basic customer LTV calculations bear that out. Customer retention is critical, and it is common knowledge that customer acquisition is more expensive than retention. Missteps in the collections process can have a magnified impact on businesses in the form of reduced loyalty and churn, which is the reason that truly enlightened firms are addressing recovery with empathy and technology.
Commercializing behavioral science to create better customers
New approaches that address at-risk customers with a combination of empathy and technology have moved to the forefront of debt recovery, because they treat customers the right way and ultimately help achieve collection objectives. They combine behavioral science, psychology, neuroscience, and data science to determine the patterns that inform best actions in the collections process.
These actions include having the right conversations with consumers and engaging humanely and at the right level in order to create a dialog that facilitates a path to recovery of unpaid debts. Computer science is the final element, which enables empathetic customer communication and dialog – consistently, efficiently and at scale – allowing organizations to treat many customers simultaneously by leveraging automation.
A top-of-mind priority for everyone: retention
Getting this right is critical for long-term financial success. Companies brave enough to leave behind legacy collection models based on risk management and short-term financial gain will ultimately empower customers to self-correct, get and stay current on their bills, and emerge from the process with a positive brand association that leads to greater retention. In a highly uncertain world, the intersection of empathy and technology truly is the sweet spot when it comes to long-term customer value.