Common pitfalls of collection strategies: part three of three

By on July 26th, 2016 in Industry Insights
Common pitfalls of collection strategies: part three of three

There are multiple reasons for preferring certain collection strategies over others. Every strategy has built in areas of weakness that cause it to make less money than possible. Strategies shouldn’t be stagnant, and as new tools present themselves, strategists can continue to fine tune their strategy and improve returns.

In the following three post series, adapted from our free eBook Building a Collection and Recovery Strategy, we’ll review the top three pitfalls we see with common collection strategies. They are:

  • Under-charging when selling or over-paying when outsourcing
  • Only focusing on a small percentage of customers in an outsourced strategy
  • Losing customer relationships in a sell or litigation heavy strategy

In this final part, we’ll talk about sacrificing customer relationships with an aggressive strategy.

A common wisdom is that retaining customers is a much more profitable activity than acquiring them. Yet when reaching recovery, most companies default to relatively aggressive tactics with limited regard to the customer’s unique situation and the chances of retaining them.

Large financial institutions now realize that during the lifetime of a customer, they may end up in collections but recover over time and get back to being a profitable account. This is why more banks and non-bank lenders adopt a customer-friendly approach in recovery, giving customers flexible repayment options with the goal of keeping them engaged. Long term, this approach is more profitable, but harder to maintain with traditional sell/outsource tools because of their limited scalability and lack of commitment to the lender’s brand.

Want to use our tools to optimize your strategy? Visit our website to learn more.