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Building a successful debt-collection service can be one of the best decisions you’re ever going to make in your business. Today we’re going to take a look at what you should consider when trying to market your services.
While debt-collection agencies work in a challenging niche, there are numerous ways to succeed in their specialized field. I’ve written below about some of the best debt collection marketing techniques that will help your company generate leads and maximize those leads into sales.
Why Debt-Collection Service is a Unique Business
Lucrative
In addition to collecting debts from delinquent accounts, you also collect fees from the people you assist in recovering their debt. According to the International Association of Professional Debt Arbitrators, collection agencies earn an average of 27% commission on the amounts they successfully collect on debts.
Low start-up capital
The software costs money, but other than that, there is no need to spend a lot when starting. You might even already have some of the supplies you need at home or office.
It’s easy to get started
Anyone can start a debt-collection business in their spare time or right away if they want to work full time. The most important thing you need is a state license that will allow you to legally collect debts for other people. State laws vary widely and each state requires different steps for getting your license.
Industry in high demand
People with delinquent bills need help collecting their money, so there will always be a high demand for collection services.
Limited competition
Only licensed collection companies can perform this service, which means there will not be a lot of small businesses competing with you for jobs.
Tapping into an established market
The debt collection industry is an established and profitable one, so if your business concept gains popularity quickly, you should have no problem tapping into an existing market. This is commonly cited as one of the benefits of starting a debt-collection business over a new one. There are already people in the industry looking for services to help them get paid on their outstanding debts.
Selling customer data
Debt collection agencies can also sell customer data to other businesses for use in marketing campaigns or direct mailings. The customer data could be lists of people who owe money (names and phone numbers), or it could be lists of people who have paid their debts on time (names and addresses). This can serve as a great source of revenue for your business, especially if you’re willing to share your customer data with other businesses.
Main Debt-Collection Service Business Challenges
Expense
Debt collection is not cheap. Even if you opt for an outsourced model, expect to set aside a chunk of your profits every month for payment service fees and other costs associated with collecting debts.
Disputes
The Fair Debt Collection Practices Act (FDCPA) protects consumers from aggressive debt collectors who engage in abusive behavior or fail to follow proper protocol when collecting debts. Because of this law, many consumers dispute debts that they believe are inaccurate or unenforceable. These disputes can tie up your time and resources as you attempt to resolve the situation.
Time commitment
A successful debt collection agency requires a lot of work. You’ll need to spend lots of time sorting through paperwork and making phone calls.
You have to be licensed
Debt-collection agencies must be licensed by the state in which they operate, so you’ll need to check with your state’s attorney general’s office for specific licensing requirements. Failing to obtain proper licensing can result in fines and penalties that can put you out of business.
Insufficient manpower
Another challenge in running a debt collection agency is insufficient manpower. You might not have enough staff members to help you with all the tasks needed for collecting debts. This makes it hard for you to ensure that everything gets done in time.
Legal issues
A debt collector may find himself in court if there is a lawsuit filed by the debtor. The collection agency may be asked to turn over all documentation and records related to the call made by the collector. This will also include calls made by other employees of the same company. Sometimes, even if there was no legal action taken against them, collectors may still be asked to testify in court regarding their actions while attempting to collect debts.
Dealing with difficult people
A large number of people who are contacted by debt collectors are annoyed by the fact that they are being contacted at all. This is why debt collectors need to develop a thick skin and be able to communicate professionally with people who are frustrated or even hostile towards them.
Selecting the right clients
This is probably the most important challenge of all. If you select your customers carefully, you will be able to stay in business, but if you choose your customers poorly then you will lose money and go out of business.
Dealing with out-of-date information
The information that you are given about your customers may be old, so you need to verify the information with your customer before starting any recovery process.
Pros and Cons of Debt-Collection Service Business
Pros
- You can work this business from home or another location of your choosing.
- You will get to choose your hours, work from home, and set your income targets.
- Work in a field that is most suited for you and that thrives on the latest technology.
- You will not have to spend a lot of money on office décor because you get to work from home and only need basic equipment such as a high-speed internet connection, a computer, printer, and fax machine.
- Your clients are those who need debt collection services so they are more likely to be cooperative.
Cons
- The problems you need to deal with can be tough and there is no room for error.
- You need to understand the ins and outs of the collection industry if you want to succeed.
- You need to familiarize yourself with the laws and regulations governing the collection of debts.
- You have to work long hours and weekends, particularly when starting.
- Dealing with complaints.
- Ensuring that you do not break the law.
Best Debt-Collection Service Marketing Strategies
Use lead generation
Lead generation is the process of attracting new customers or clients to your business by identifying potential leads and converting them into sales.
In addition to being a useful marketing strategy in any business, lead generation can be particularly valuable for small businesses that don’t have large marketing budgets.
Treated properly, lead generation can be an excellent debt-collection service marketing strategy tool that allows you to turn your regular customers into raving fans.
Here are some tips for using this strategy in your business:
1. Know your audience. The first step to successful lead generation is knowing who you’re talking to, says Diana Franklin, founder of The Lead Generation Coach. “You have to know exactly who you’re trying to reach,” she says. “You have to be able to describe them in detail — what they look like, where they live, their income range, etc.” You can never be too specific with lead generation, so take the time to study the results of your customer demographics analysis (also known as psychographic profiling) and use that information when deciding which types of content to create.
2. Create an ad that addresses their concerns and needs. Debt collection services are geared towards those who are in trouble with their creditors, so make sure that the ad is clear about what services you offer, how much they’ll cost, and who can receive them. Don’t get too long-winded though; people only have so much attention span when it comes to reading ads, so keep it simple. The goal is to pique their interest and get them to call or visit your website where they can learn more.
3. Create a sequence of emails; that will put them into something of an elevator pitch and then help guide them through a process where they realize that you’re the solution to their problem and you’re going to help them fix it in the most cost-effective way possible.
4. Don’t spam them. Make sure that you are giving value and letting them know that you are there to help them find a solution and not just there to get their money or try to trick them into thinking that they need something else from you.
5. Be extra helpful. When you talk to customers and clients on the phone or through email, focus on their needs rather than yours. When they mention how much they like shopping online or over the phone, ask them what they like best about shopping in those formats. If they say they like talking to customer service representatives when they purchase something.
Attend networking events
The main goal of networking is to make powerful connections, leave the event with a few business cards, and follow up when it’s appropriate.
Everyone knows this, but it’s not often put into practice. Treating networking like a job is an excellent way to promote your debt-collection service marketing strategy.
Here are some ideas on how to do this:
- Prepare in advance. Before you go to an event, make sure that you know who will be there and why they’ll be attending. You can find out this information by doing a bit of research online or by asking someone who has been before. This will help you come up with questions that are relevant to the event and the attendees. It will also help you think about who might be interested in your business and how you can approach them in a way that would make sense for them.
- After the event, follow up. When you return from an event, start by compiling a list of all the contacts you met while you were there. Make sure that they can remember who you are and what your business is about (if they don’t, then maybe they weren’t interested). Now, reach out to each person individually and send them an email thanking them for their time and mentioning something specific that was discussed during the event.
- Wear casual clothes. You want to be comfortable talking with people, but nobody expects you to wear a suit unless it’s required by your company or you know there will be other attendees who will expect it. Business casual works best for most debt-collection service providers; just make sure you’re not wearing anything too revealing or inappropriate.
- Don’t be pushy. Networking events are a great way to introduce yourself to new people and make connections but resist the urge to force conversation or sell them on your services right off the bat. Don’t try to sell something at every opportunity, and don’t ask outright why they work with their current debt collectors instead of contacting them directly later on.
- Connect with thought leaders in your industry. People who have been in business for a long time have valuable information they can provide you. Help them by listening carefully and asking insightful questions. They’ll appreciate the fact that you took the time to listen and will be more willing to help you out down the road if it’s something you need.
Create urgency
Being aware of the importance of creating urgency when it comes to debt collection can help companies generate more revenue and improve customer satisfaction.
According to an article from the Wall Street Journal, a study by the University of Pennsylvania’s Wharton School found that “positive urgency” is more effective than negative urgency at promoting positive behaviors. Positive urgency entails presenting information in a way that encourages people to act quickly, instead of merely reminding them of the potential consequences if they don’t.
Companies need to present their debt collection services invitingly so as not to alienate customers who are unable to pay off their credit card debts immediately. For this reason, it is ideal for debt collection agencies to create a sense of urgency by pointing out strategies that customers can take advantage of to resolve their financial issues. By suggesting actionable steps that they can take, such as lowering their monthly payments and making higher monthly payments, debt collection agencies can increase the chances that their clients will be able to resolve their financial issues once and for all.
Execute a “neighborhood” campaign
Neighborhoods are a great place to look for new clients. And, as a debt-collection service, looking for new clients is an important part of your marketing strategy.
Most people and businesses are very good about paying their bills on time and keeping up with the damage that can occur to their credit score from unpaid debts.
However, there will always be people who don’t pay their debts and won’t negotiate with you concerning the payment. The best way to collect on these debts is to go door-to-door in the neighborhoods where the individuals or businesses live or work.
Keep these tips in mind when you’re speaking with potential clients at their homes or businesses:
- Make your neighborhood campaign personal. In addition to the face-to-face encounters, make sure you’ve also incorporated this into your mailings and other marketing materials. If possible, include a “neighborhood” phrase on your website.
- Tailor your approach to the neighborhood. Depending on the area, you may have to take into account community standards and expectations when designing your campaign.
- Keep your message consistent. Make sure that the image you’re portraying is clear in all of your marketing materials.
- Know where to focus your efforts and budget. While it’s important to cover the entire neighborhood, don’t overlook certain areas of town or demographics that may be harder to reach than others.
Target properties that are in default
If you are a debt collector, you have to find properties that are already in default. You can do this by having your staff go out and canvass for these properties or by having your attorney send you a list of defaulted properties from the courts.
Pro tip: If your county is one of the few counties in the state that uses an electronic lien system, you can use this information to help find defaulted properties.
Once you have the addresses, set up driving routes around the county and start contacting property owners at these addresses personally.
Keep track of how many accounts you get on each driving route. Once you feel that you have enough data, calculate your conversion rate (the ratio of how many contacts it takes to obtain an account). This should give you a reasonable number of contacts per account.
Another strategy is to contact the title companies directly and ask them if they have any lists of defaulted properties that they refer to collections agencies. You might also be able to squeeze some referrals from attorneys who handle foreclosures.
Get more business through referrals
Business referrals are the lifeblood of any business. Without referrals, you’re at the mercy of cold calling and advertising, which are expensive and can often be ineffective.
Trouble is, as a debt collector, you’re not in a typical business. The people you talk to are usually extremely busy, and they don’t have time to chat with you about how much they like your service or whether they know anyone else who could use your help. So how can you get more business through referrals as a debt-collection service marketing strategy? In this post, I’ll walk you through seven actionable tactics we’ve used to generate hundreds of new clients from client referrals.
1. Focus on customer service. The number one reason customers refer to an agency is that they’re pleased with the service they’ve received. There’s no better way to encourage customers to recommend an agency than by providing great customer service. Providing excellent service doesn’t mean keeping collections calls short; it means spending time on each call listening and understanding the customer’s needs and concerns. It means educating clients about their rights and responsibilities so they’ll make the right decision about paying debts owed and calling back when problems arise.
2. Make customer-service training a priority. If your employees don’t understand how to resolve customer issues, you shouldn’t expect customers to refer other people to your agency when they encounter similar problems. Provide ongoing training so employees know what it takes to build long-term relationships with clients.
3. Treat each referral as a new lead. When you get a referral, it’s essentially the same as getting a lead from a different source. Treat it like one, whether the person is an old contact, someone you haven’t worked with before, or someone who’s simply heard good things about your debt collection service.
4. Keep track of all leads and referrals. Make sure that you set aside time regularly to follow up with all of your leads, whether they come from referrals or not. You should also be sure to keep track of the number of referrals you get and follow up with those, too. Make it easy for people to refer you. If you’re working as a debt collector, it can be hard for people to know exactly what it is that you do. The easier you make it for people to share information about your services with their friends and family, the more likely they are to help you stay in business by referring business your way.
Be responsive and proactive
Being proactive about debt collection can keep you out of court and improve your overall customer relations.
Be responsive: Clients want to know that they have been taken care of. Keeping up with emails, phone calls and messages sends the message that you are attentive to their needs. The more responsive you are, the less likely they will be to be frustrated or upset with your debt collection efforts.
Be proactive: Do more than just wait for your client to get in touch with you. If you know how often they typically pay their bills, schedule a reminder for yourself to follow up periodically. This can help prevent late payments from happening in the first place and take some of the stress off of both you and your client once it’s time to collect on an unpaid bill or account.
Final Thoughts
Your debt-collection service is essentially a business. Its business model is dependent upon the collection of money from overdue accounts.
Whether you are a marketing company or a debt collector, you know that there are many ways to reach and capture your audience’s attention.
The best way to start is by deciding what you want to achieve and identifying your audience. From there, develop an integrated marketing strategy that will draw your audience in, and keep them engaged with your services.
