The other morning on my way to work I was listening to CBS-AM, and Joe Connolly of the Wall Street Journal told the story of someone who had gotten a collections letter from their bank that sounded more like it had come from a repo man. (Or maybe it was the Sopranos… sorry if I’m misquoting, Joe.)

I’ve been seeing a lot of collections letters recently, and not because I’m up to my eyeballs in debt.

It turns out my agency, Tanen Directed Advertising, is pretty good at writing collections letters. And not the kind Joe was talking about.

For the most part, collections letters tend to fit into a few basic molds.

There’s the impersonal, computer-generated type that remove all humanity from the equation… and from the recipient. (You’d be surprised how many of them aren’t written by computers.)

There’s the escalating, threatening letter that’s meant to scare the recipient into compliance but frequently just pummels them into paralyzed inaction.

And there’s the sickeningly sweet, fake “we know what it’s like and we want to help” letters that allow the sender to hide behind feigned consideration without presenting any real options and just serve to drive the recipient further away.

We don’t write those kind of letters. You see, we look at collections letters as CRM (Customer Relationship Management) tools.

After all, the recipients are your customers. They bought a car from you. They took out a mortgage with you — or with a bank thrice removed, but they’re your customers now. They get their electricity from your utility. They’re your patients and you’re their doctor.

Every time you communicate with your customer, you have the chance to deepen or damage your relationship with them. Which outcome would you prefer?

Sure, you can beat them into the ground to get your money, and you’ll get it. Maybe all of it, maybe just some of it. Maybe you’ll be the last straw that breaks them, but you’ll get your money.  And unless you’re a monopoly, it’s probably the last money you’ll ever get from them.

What if it turned out that by simply communicating with your customers, by treating them like valuable human beings who have feelings and brains and are integral components of your company, and by going the extra mile to give them some options, you can actually get more of the money they owe you?

We’ve written collections letters that have gotten 400% more of our client’s customers to call in to discuss repayments than did their previous best performing letters (known as controls in direct marketing). We’ve increased the amounts collected by our clients time and time again.

If you know anything about collections, you know that you usually have to hunt down your customers to talk to them. Our letters get your customers to pick up the phone and call you. Willingly. Because we explain their options to them, we empower them to take control of what felt like an out of control situation.

If you keep a customer, their lifetime value to you continues to increase, rather than bottoming out. If you show faith in your customer, and work with them to come up with a solution, they tend to respond with something every business desires:  loyalty.

Last night our President reminded us that we’re not a nation of quitters. That given a chance, Americans will do what it takes to rise from the depths of despair and work their way back to the top.

I’ve heard our current economic situation described in part as a crisis of faith, and that not until we all have faith in the future and start spending and lending again will we come out of it.

I’d like to add that as businesses, if we have faith in our customers and help them through these tough times, the rewards can be far greater than can be gotten through threats and intimidation.

I’m not arguing for charity — I’m making a case for a more successful business strategy. I’ve seen it work for our clients.

So can someone please explain to me why there are so many short-sighted businesses out there who would rather turn their customers into quitters today than do what it takes to earn their loyalty for years to come?

Comments
  1. Faithful Reader says:

    Good blog, Jeff, about a simple way to build and maintain lasting business relationships. Why shouldn’t the tactic work as well as it does in personal relationships. Customers are just people, after all.

    F.R.

    F.R.

  2. Beth Pinson says:

    Excellent post. Thank you for writing this. Currently the customer is running things and the economy is tight. The key is to meet the customer on a level, that makes them feel like you (as a business) care. A great example of reaching customers on their level can be found in a post by Walter Pinson called Hyundai schools us on Relationship Marketing

  3. jlsimons says:

    Thanks for the comment and the link, Beth. It’s a great post about Hyundai. I am a big fan of their new marketing strategy. I especially liked two pieces of data in Walter’s post:

    “…marketers have a 5-20% chance of turning a prospect into a customer. In contrast the marketer has a 60-70% chance of selling again to an existing customer.”

    and

    “…profits rose between 30-85% in companies who increased customer retention by 5%. Other studies have shown that the cost of keeping an existing customer is about 10% of what it costs to produce a new customer.”

    Trite as this may sound, the numbers really do speak for themselves.

  4. jlsimons says:

    Faithful Reader: You’re right, of course, but it’s always amazing to me how many marketers and companies stop relating to their customers as people. They become trends, segments, targets, eyeballs… in short, data rather than people. People are messy. Data is predictable.

    I just found myself thinking about that old song, “Secret Agent Man”: “they’ve given you a number, and taken away your name.”

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