Demanding payment from past-due customers might seem like the fastest path to recovery—but it often backfires
When you're engaging with a customer and their past due, you gotta remember they're in a pretty vulnerable state. And we're not talking about some small percentage of the customer base for most large enterprises in banking, telcos and utilities, we're talking about 10 to 20% of the base. So losing them is not an option, right? It would sink a company.
So then you've got to think about it in that context and say, OK, these people are vulnerable. They're really, really important. I'm trying to save them. And I have two goals I'm trying to accomplish. I'm trying to cost effectively collect on the money that they owe me today, and I'm trying to maintain their loyalty and their value as a customer long term if all I do is demand stuff from them.
I frankly compromise both objectives because the more aggressive you are, the more people retrench. There's a fight or flight behavioral bias that kicks in where people start to ignore you and get locked up and freeze. And so they don't actually act sometimes when you start to yell at them all the time. And yelling becomes less and less effective, demanding becomes less and less effective. So in terms of the near term goal, it doesn't always work.
And so if there's a better way, you should definitely try it, especially when you take it into account the second factor, which is if you demand stuff from them and then demand again and then demand again the next offer promotion that they see from a competitor in a world where switching costs are lower than ever, they're going to switch. So you're going to create a bunch of voluntary and involuntary churn and your costs are going to blow up.
So in every respect, this idea of let me just be more aggressive is going to cost you in terms of value to your business and cost you in terms of your relationship with your customers.