Choose the optimal collections action for each customer

It is essential for businesses to design and deliver collection strategies that find the balance between the needs and preferences of the customer, and the requirements of the business.

With today’s highly competitive environment and increased need to understand customers as individuals, collections strategies are becoming more and more sophisticated. They increasingly exploit analytical techniques and software traditionally used for marketing. The roadmap for this increased sophistication culminates in fully optimised collections strategies. Here we look at how optimisation software can be used to improve collections performance, using analytics to find the best possible strategy which meets business objectives whilst ensuring customers are treated fairly.

Customer level collections actions
For a single customer with one possible collections action, there are two potential collections strategies – you can either choose to execute the action for the customer, or not.

For one customer with two possible collections actions – for example, dialler and letter – there are four potential collections strategies; all the combinations of the two actions, including no action.

By the time there are just ten customers and two actions to choose from, there are over a million potential collections strategies. With so many strategies to consider it can be difficult to be sure that each collection action will be the most appropriate for each customer’s circumstances.
Analytics can be used to predict the outcome of applying each available collections action to each customer. Once you’ve done that, optimisation is used to determine the best action for each customer in order to maximise performance – whether that be cash collected, number of cases collected, right party connects, cost-effectiveness or the customers’ ability to repay.

collections action

Meeting business constraints and limits
A key feature of optimisation is that performance is maximised whilst meeting business constraints. In collections terms, this can mean the capacity of the dialler or call centre, the number of cases that can be subjected to litigation, the budget available, existing contracts with DCAs etc. This is complex, and is why software is required.

These can be built into an optimisation project so the best decision for each customer within constraints is proposed; it will find the very best solution that your business would allow. However, another key advantage of optimisation software is that the impact of applying these constraints – and how your business could perform if they were lifted or altered – can be explored very easily.

Scenario planning and “What if?” analysis
Increasingly, a key reason for clients buying optimisation software is the powerful “what if?” scenario planning capability. This enables a user to very quickly – and accurately – explore the impact of changing assumptions, constraints, capacities and scenarios.
For example, what would be the impact of increasing call centre capacity by 10%? What would be the cost of doing this? How much impact would it have on the amount collected? What’s the ROI of this decision?
Likewise, what about reducing the capacity by 10%?

What would happen if we skipped a treatment and moved all our customers straight on to the next stage?

Optimisation tools make this planning simple – and very quick; what may have taken weeks can be completed in a matter of minutes. What’s more, the results of this planning exercise will be optimal, using actual customer data and being analytically driven rather than based on assumptions and guesswork. Increasingly, businesses are exploiting this use of optimisation software to improve their collections process and ensure more mutually beneficial outcomes.

If you want to find out how Experian’s Optimisation solutions can help your collection strategy please call us on 0844 481 5638 or visit our website.