Managing Payment-Troubled Customers in Hard Times

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Managing Payment-Troubled Customers in Hard Times

Sarah FiebigerSenior Analyst, Market Research Services

@ESourceSarah

May 26, 2010

Wednesday, May 26, 2010

www.esource.com || © 2010 E SOURCE2

3 Steps to Success

1.Identify

2.Segment

3.Manage

Courtesy: iStock


© E Source

The Changing Face of Delinquency

Typicaldelinquentcustomer

demographics

SingleLow

income

Renter

Urban

Newdelinquentcustomer

demographics

Single

Married Lowincome

Middleincome

Renter

Home-owner

UrbanRural

Suburban


4 Primary Groups Struggling to Pay

Payment-Troubled

Customers

Overextendedcustomers

Carelesspayers

Single-incomefamilies

No-income

households

Behavioral

Economic


3 Steps to Success

1.Identify

2.Segment

3.Manage

Courtesy: iStock


3 Ways to Segment by Risk Level

Technique Accuracy Level

Behavioral Scoring

Industry-specific information exchange

National credit bureau scores

High

Medium

Low


Target Customers with Effective Collections Treatments

Save aggressive treatments for high-risk customers Increased type / frequency of

late payment notices Accelerate to disconnect as

fast as possible Be more lenient on low-risk

customers Could be a one-time thing Could be a self-corrector

Courtesy: iStock


Distribution of Risky Customers

National Grid U.S.A. Lowest risk customers

80% will pay on their own with a “nudge”

20% need more than a “nudge” before they’ll pay

Highest risk customers 20% will pay given the right

collection treatment is used 80% will not pay

Low risk

Medium risk

High risk

60%No action or

automated call

30%Manned call or

termination notice

10%Termination notice

or disconnect


Orlando Utilities Commission & Allegheny Power – In-house Risk Segmenting

Allegheny Power 5 risk categories

10, 20, 30, 40, 50 (lowest to highest)

Lower-score customers might be excluded from certain collections treatments

Frees up field personnel to concentrate on higher-risk customers

Orlando Utilities Commission

4 risk categories A, B, C, U (lowest to

highest) Determines type &

frequency of reminders Increased frequency &

number of reminders for higher-risk

U-rated might get cut off sooner than an A-rated


3 Steps to Success

1.Identify

2.Segment

3.Manage

Courtesy: iStock


Robust Set of Billing & Payment Options

Courtesy: iStock

AutoPay

EFT

BankDraft

BrailleBilling

CreditCard Debit

Card

CheckIVR

Web

Cash

Kiosks

PrepayBudget

Bill

FixedBill

Mail


Clear Credit & Collections Policies

Delinquencies can increase dramatically if policies are missing, unclear, or ignored by employees

Communicate clearly to customers

Follow-through Train employees on

correct policy procedure Track for employee

compliance

Courtesy: iStock


Consistent Messaging

Chesterfield Utilities Consistent messaging

across all channels Everyone with utility

uses same short script Consistent with

messaging on door tags

Key to success Bad debt write offs down 82% Disconnections for non-payment down 30% Drop-box payments up 25% In-person payments up 50%

Courtesy: iStock


Assistance for All Income Levels

Level 1 text in black, always with a bullet if there are no lower-level bulleted items

Level 1 text in black Level 1 text in black

No first bullet, Level 1 Level 2 bullet in blue Level 2 bullet in blue

No first bullet, Level 1 Level 2 bullet in blue Level 2 bullet in blue

Level 3 bullet in grey Level 3 bullet in grey

Level 2 bullet in blue

Great Example: DTE Energy For all customers

United Way 211 Credit counseling Double-notice protection plan Medical emergencies; and more

For low-income customers only Case management Earned income credit Low-income weatherization THAW; and more

Source: http://www.dteenergy.com/residentialCustomers/billingPayment/paymentPrograms/payAssistance.html

Courtesy: iStock


Improving Relationships

Tacoma Public Utilities Strengthened relationship

with collection agency Quarterly meetings Collaborative effort

Made it easier to do business with TPU Made auto pay available Pay plans available 24/7 24/7 kiosks throughout

community Walk-in office

Year 2007 Totals

YTD 2008 $-

$100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000

$1,000,000

40% Net Increase in Col-lections


Committed to Company-Wide Effort

PECO Energy Customer Commitment &

Bad Debt Improvement Team established All departments involved

Aggressive goals set Collect from 47,000

delinquent customers in 3 months

Result Yielded $5 million in

revenue


For More Information

Sarah Fiebiger

Senior Analyst, Market Research Services

303-345-9126 [email protected]

mailto:[email protected]