The Importance of Loyalty Programs for Better Collectibles and Customer Relationships
The financial industry is on the cusp of a new era. FinTech companies have disrupted the market, giving customers more choices and easier financing options. These new-age companies have capabilities like better digital prowess, a high degree of personalisation, and flexible payment alternatives.
Among these capabilities, loyalty programs have been highly profitable in collections. For FinTech companies needing debt recovery services, effective collection programs can even turn overdue accounts to high collectibles.
Role in Collections
Attracting a new customer can cost five times extra than retaining one. This is why loyalty programs are crucial for ensuring a profitable business. Extending payment cycles, adjusting the billing, working out a payment schedule (with offers) are various strategies that boost collections.
Programs that waive certain parts of the bill are also successful. Sometimes, these offers make the difference between retaining big spenders or losing them. Ten Speed Press learnt this the hard way with Amazon. Ten Speed was owed over a million dollars by the e-commerce giant. When Amazon requested an extension, Ten Speed refused. Amazon instantly removed all Ten Speed Press’ books from the Amazon website and the result was a loss in the millions. Ten Speed Press immediately complied with Amazon’s payment proposals. While this is an aggressive strategy, it is important to find a middle ground so customers don’t take undue advantage of lenient collectors.
Role in Customer relations
Modern customers and businesses both cherish personalized services and experience. Good loyalty programs can contribute to the overall customer experience and make them feel valued. Research from Bain & Company shows that a 5% increase in customer retention can lead to more than a 25% increase in profit.
From account-based membership rewards or a personalized program, loyalty programs drive brand affinity. In cases of overdue accounts, they foster trust and even open up possibilities for cross-selling.
A loyal customer is also a lower flight risk, meaning they will pay up on time and require fewer touchpoints from debt recovery agencies. They generate long-term revenue through repeat purchases and referrals.
Characteristics of Good Loyalty Programs
A well-crafted loyalty program in the banking and financial services industry should :
- Nurture strong customer relationships
- Increase customer retention
- Boosts revenue, profits and customer lifetime value
- Improves collectibles and reduce follow-ups from debt recovery services
- Be a powerful differentiator from competitors
Many international players already have solid loyalty programs that reward customers that pay regularly. Take CitiBank’s “thankyou” initiative, for instance. The reward system lets customers redeem points against merchandise, travel, gift cards, existing balance or even make a donation to charity.
It is also important to have programs like these for customers with bad payment habits. The right offer can be the nudge that converts them to regular payers and loyal customers.
Getting It Right
Effective loyalty programs need to be more than just perks for customers. Like CitiBank’s program, they need to emotionally engage customers via a variety of channels. In a world where customer attention is easily divided, a bank that is able to offer genuine value-addition is sure to grab eyes.
Adding a personalized, human touch to every customer touchpoint is the need of the hour. It can help bond with customers directly and reduce the number of overdue accounts.
For instance, a customer who has trust in their lender may call support to discuss alternative payments. Adding other innovative layers to the system, like having native speakers pitch, and handle programs for local customers, can help leverage such situations.
An effective loyalty program must also pay attention to customer needs, expectations and demands. Allsec’s debt recovery agency and collections professionals are trained to deliver purposeful customer journeys. Our deep domain expertise helps us understand customer requirements and pitch loyalty programs that hit the right chord.
With our credit risk management and customer experience services, you can increase collectibles while retaining loyal customers. Reach out to us to know more.