Your Customers Want to Pay. Most of Them, Anyway.
Is your company unintentionally punishing your entire customer base because of a few late payers? Dunning processes focused on fees and collections may seem effective in the short term but can become a costly long-term strategy. Here’s why – and how rethinking your approach can pay off.
Regardless of the reasons behind a late payment – or who’s at fault – reminder fees and collection notices evoke strong emotions in your customers. These emotions often trigger reactions that, in turn, require additional resources to manage.
A Novus study on customer satisfaction provides a clear example: more than half of respondents stated that a collection notice would prompt them to contact customer service, while almost one in ten said they would go as far as switching providers.
So, the revenue gained from pursuing late payments via collection notices must be weighed against the additional costs incurred by your company, both in the short and long term. What’s the cost of handling a complaint from an angry customer? A bad online review or negative word-of-mouth? And perhaps most importantly, how much does it cost to launch campaigns to replace the customers you lose?
There Are Customers You Should Let Go
At Billogram, we want to be clear: there are absolutely situations where you shouldn’t offer second chances. While most customers want to pay, there is a small subset who lack either the ability or willingness to do so – or both. These are customers you can afford to lose. In fact, it’s likely a relationship you shouldn’t have started in the first place. A proactive way to avoid these situations in the future is by refining your scoring models using data-driven insights from your payment flows.
3 Tips for a Customer-Friendly Dunning Process That Pays Off
How can you turn insights into action and develop a dunning process that benefits both your customers and your bottom line? Based on the simple principle that most customers genuinely want to pay, we’ve compiled three tips:
1. Help Your Customers Pay on Time
A friendly reminder ahead of the due date feels far better than a late fee afterward. Sending "soft reminders" or due date notifications to customers who haven’t yet paid is a customer-friendly and effective way to prevent late payments altogether.
2. Differentiate Between Customers
Treating everyone the same might seem fair, but consider two scenarios: One customer is late for the first time after years of timely payments, while another has a history of recurring delays. Is it really fair to treat them both the same way with strict reminders and collection notices? Instead of applying the same standardized dunning process to everyone, create segmented workflows tailored to different scenarios and customer groups. This reduces the risk of driving otherwise loyal and profitable customers straight into a competitor’s arms.
3. Use Data and Machine Learning for Smarter Payment Flows
Take inspiration from telecom operator Hallon. They conducted randomized experiments on their customer base to assess the impact of various measures for late payments. Using the data gathered, they optimized and personalized their invoice and communication flows to increase the likelihood that each customer pays on time. They also developed machine learning models to predict which customers are likely to pay without collections and ensured these individuals receive a gentler approach. The results? Hallon saw an 80% reduction in collection cases, decreased churn, and lower customer service workload. Their success proves that a customer-centric dunning process is a profitable one.
Tip: Smart Dunning Webinar
Want to Learn More About Personalized Dunning? Find out how your company can implement individualized dunning strategies and what you stand to gain. Register for our Smart Dunning Webinar on March 13, 11:15 AM–12:00 PM.