Bill-Me Marketers Seek Cost Cuts in Collection
"The postal rate increase has forced the collection departments to think of other, less-costly means to affect collection of the high-volume, low-ticket direct marketing industry products," said Direct Marketing Credit Association president Robert Hawkins, who also is senior director of credit operations at Rodale Inc., Emmaus, PA.
The DMCA is a trade group of credit professionals from major mailers in the bill-me segment of direct marketing including Bookspan, BMG Columbia House, Scholastic, International Masters Publishers, Reader's Digest and Publishers Clearing House. Hawkins addressed more than 100 credit and collection executive members and guests on the topic of decreasing collection expenses at the DMCA holiday meeting last month.
In an interview with DM News, Hawkins explained two measures that many bill-me marketers are shifting to in order to defray costs.
Typically, marketers have used what is known as an "increasing-in-tone" letter series or "dun letters" as the main method to collect payment from consumers along with third-party letters and collection agency involvement. With the letter series commonly consisting of six to 10 First-Class mail pieces that cost 38 to 50 cents, it adds up, Hawkins said.
Bill-me marketers are trying electronic bill presentment and payment, which is just what it sounds like: the e-mailing of customer statements and the ability for consumers to make payments online.
"EBPP has become the buzzword for this industry and others as a result of online shopping," Hawkins said. "Now, more and more companies are looking to EBPP for the non-Web business as well."
Of course, a company needs the consumer's e-mail address and permission to use it in order to send bills this way but, like the DM industry at large, bill-me marketers are building their e-mail house files. Some even offer incentives to customers who sign up.
"One of the issues that we run into with electronic bill presentment and payment is that it has to be permission based, so you need folks to give you their e-mail addresses," Hawkins said.
Marketers with younger customer bases tend to have an easier time, he noted. For example, a company like BMG Columbia House has a large customer base that interacts with it entirely online.
"Rodale has found that their book buyers are a little bit behind the curve in regard to conducting business online as many are older people who are not yet fully into computers," Hawkins said. "It's a well-known fact that younger people use the Internet more for purchasing and bill paying, but we are seeing an increase in the number of our customers that do so every month."
As a result, he said, Rodale has a growing percentage of house file e-mail addresses.
One thing the company has done is add information about paying online to all of its paper billing statements, Hawkins added.
Rodale is planning for EBPP and looks to launch it in the second quarter of 2006.
Statement segmentation is another initiative bill-me marketers are trying in order to save money on collection attempts.
"The normal procedure in the bill-me marketing world was pretty much that everyone gets the same number of collection letters," Hawkins said. "What statement segmentation can do is allow us to do modeling to see what kind of payers individual consumers are. If they are bad payers, then it doesn't make sense to send a lot of expensive First-Class mail trying to get them to pay."
The process uses internal customer data along with external credit data to build a model and score it by likelihood that a consumer will pay.
"A low-scoring customer may not be worth more than two or three reminders before writing off and placing with a collection agency that specializes in this work," he said. "On the other hand, a high-scoring or 'good' customer may be worth the extra efforts as well as an upsell or higher credit limit."
Rodale also plans to begin statement segmentation this year.