With an economic downturn upon us, lenders and other businesses need tools that will assist in mitigating the risk of losses. More sophisticated consumer segmentation can improve the effectiveness of collection strategies and tactics, allowing lenders to focus their efforts on targeting the right customers at the right time. Findings from a study on consumer behavior conducted by TransUnion reveal how customer segmentation based on a consumer credit report can be improved in terms of their risk and propensity to pay, giving businesses clearer direction on practical steps to address financially vulnerable consumers for better outcomes.
Identifying a customer’s lifetime value and the crucial key to maintaining a strong business relationship over that lifetime, some businesses and lenders are placing a greater emphasis on the customer experience at the collections stage. It is now seen as a form of customer assistance rather than simply a collections exercise. This can mean taking several factors impacted by information on a consumer credit report into account:
- Economic Trends
- Multiple Lenders
- The Customer’s Payment History and Hierarchy
- Affordability, Cash Flow, and Payment Options
- Timing and Approach
Consumer assistance strategies can be essential for building long-term loyalty and leveraging a realistic and grounded approach to improving effectiveness. With businesses’ collections resources likely to be stretched, success will depend on understanding how to prioritize financial products with the right customers.