In business today, there is a rush for efficiency via robotic practices, strict adherence to procedures and AI technology. The factor which is often forgotten, your customer is a human being with access to the funds to pay you. Their experience with you must therefore be one that encourages them to keep communicating and paying.
The problem is that a human is a messy, complicated entity. As such, they require different and specific approaches to motivate them into you to achieve your objectives. In other words, you must always identify what is important to your customer and seek a win-win situation for both parties. Do that well and you will lead to increased efficiency in your business’s operation, cashflow and profits, plus potential gain a valuable customer.
The fundamental fact is; sales, credit management and debt collection roles are all sales-orientated even though each party has different professional perspectives and products. That point of view may seem strange to some people however it is not so hard to see because another party’s debtor is now the debt collector’s customer. Remove the “debtor” label and replace it with “customer” and you can start to see how a mindset which is required. If you can do that you will be focused on selling a winning proposition for both the customer and your business.
It often appears such thinking is not paramount in many management teams, irrespective of the size of their businesses because their approach reduces the customer to a number. As a result, each individual customer’s needs are forgotten as management often forgets their customers are either managed by, or are humans that may be affected by a number of complex issues at any one time.
Failing to acknowledge these factors, often leads to negative and unforeseen consequences which are a distraction from the main objectives of selling a profitable deal for both parties.
Recently I came across the term “connectivity literacy” ➀. Whilst this term came from the IT world, I believe this term equally applies equally when dealing with our customers. After all, if we cannot communicate properly with them, we are unlikely to achieve a win-win situation for both parties.
When it comes to understanding psychology, based on my experiences, there are two main developmental streams; one is from the academic world, the other is from the professional and business worlds. Both streams are based on the same principles of trial, research and practice in action and found to work successfully in the majority of situations.
When I went back to university 30 years ago to study adult education, I came across the works of Edwin Guthrie ➁ and Abraham Maslow ➂
Two of Edwin Guthrie’s thoughts are applicable in all dealings with our customers, which basically articulates that:
- adults learn on the first association; and
- to break a habit or way of doing, you need a major event.
In Guthrie’s first example, this means your first contact is critically important in dealing with our customers as it sets the tone of the relationship you wish to create. If you contact them in the incorrect manner, you can easily put them offside and the hard work and extra costs begin to mount up. Contact them politely, and make them feel safe and confirm you are prepared to help them, you then have the opportunity to work out the best way forward that creates the win-win strategy.
In recent times, this creation of a safe communication environment is critically important as many people now felt so unsafe, especially since COVID. Businesspeople and individuals now are psychologically damaged because of their circumstances such as, cost-of-living, climate change, political, cultural differences, etc. As a result, they are looking for safe environments to communicate and manage their problems.
In the second example, you need an “event” to break the previous habit, which has normally been unhelpful in achieving the desired result. For instance, a slow payer asks for an increased credit limit, then this is a perfect opportunity to renegotiate a trading arrangement.
When dealing in a debt collection situation, Gurthie’s major event comes in to being. After all, the debt collector was not the original party which changed the trading relationship with the customer. When the original owner of the debt sent the debt to the debt collector’s business, they changed the whole customer/supplier arrangement.
Guthrie’s “… major event” has now occurred which allows the debt collector to work with their customer on developing a new agreed payment arrangement to clear the debt. Complete this arrangement effectively and you create a win-win objective for both parties.
Maslow’s hierarchy of needs; which is the psychological theory that proposes human motivation is based on a pyramid of five needs that must be met in order from the bottom to the top.
On studying this theory, you can appreciate how important it is that your employees’ needs are covered in their work environment. After all, an employee who is happy, feels safe and has some authority of their work, generally provide positive results for their employer.
A sales customer, those seeking providing a credit facility to the above customer, and a debtor, all have similar needs as presented in Maslow’s theory. They too want to feel safe, that their needs are understood and respected, and they can achieve a positive result for themselves.
Nowhere is this theory more important than in the debt collector and debtor situation. After all, when the creditor sent the debt to a debt collector, Guthrie’s example of an event to break a previous bad habit has been enacted. That is good news for the debt collector, because they can start the debt collection process with a clean state and work to create a new payment arrangement.
If the debt collector can then make the debtor, there is every chance that the debtor:
- will feel safe,
- can liaise with the debt collector from a fresh perspective,
- can make new agreed payment arrangement or advise if there are any existing problems not dealt with between the debtor and their former creditor,
- feel good about themselves because they are starting a new positive payment agreement, and if possible,
- find new ways to pay the debt off quicker if circumstances permit.
If these objectives are achieved, there is every chance a win-win outcome will be achieve with a minimum of further energy, time and cost.
I fully realise that the above references are old and very simplified examples of more current psychologists and their work. In my view however, these strategies have worked for me during my career. I believe these older references are still valid today and will be so in the future.
Finally for the time being, we must deal with the “elephant in the room”, technology. Today, many of your customers may like to use technology rather than talking to another human which is your employee. There is nothing wrong with this desire.
The problem for many which use technology is that they must feel safe and believe that the technology also works for them. A great customer service ethos also extends to the use of technology as an interface between your business and its customers. If the customer believes it works for them, they will continue to do business and not waste your employees’ time with additional work and questions. Get the process wrong, all sorts of negative issues apply.
A word of warning however. Your customer may also use the technology against your business, particularly if you are a debt collector. With government legislation expanding against debt collectors in particular and other businesses where the “hardship” situations can be valid, you must include in your terms of trade, warnings that if the customer does not respond to emails and other correspondence, your business reserves the right to make contact via other means.
Note, I am not a lawyer qualified to write the terms mentioned in the last sentence. You should therefore always seek professional help to make sure your words and terms do not contravene your country’s or state’s jurisdictions and legislation.
In Conclusion
The basis of all effective sales, credit management and debt collection relationships and success, starts with understanding the psychological needs of your business’s employees and customers.
Most importantly, you will need to understand that your CUSTOMER is not a ROBOT. The fact is that your customers are a human being with access to the money to pay you!
Understanding the importance of connectivity literacy is essential in each situation because if you cannot communicate with your customer on a level which satisfies their needs, you may not be able to sell anything.
Today and in to the future, increasingly business thinking is and will be driven by automation strict adherence to procedures, efficiency and management’s approach to business is just a numbers game. However, such measures do not always tell the full picture of business success or failure.
Too often, preserving the human touch that builds trust, loyalty, and long-term success is essential and can lead to many benefits of success if properly understood and measured.
REFERENCES
➀ Connectivity literacy
Basically is the knowledge and skills needed to get and maintain reliable and affordable internet and voice services.
➁ Edwin Guthrie – An American behavioural psychologist - Wikipedia
➂ Abraham Harold Maslow - An American psychologist who created Maslow's hierarchy of needs, a theory of psychological health predicated on fulfilling innate human needs in priority, culminating in self-actualization. Wikipedia
Want to know more? Feel free to contact Kim at kim@creditmatters.com.au, or 0411 649 261, or have a look at what we offer via our website at www.creditmatters.com.au
