Experiment - Collection Process
Experimentation in Debt Collection: A Case Study
Experiment Design
A bank could experiment with different collection strategies for customers who have not paid their credit card fees. For instance, the bank might test different call scripts, timing of calls (day of the week, time of day), or the use of different channels (phone, email, SMS).
Machine Learning:
Machine learning can be used to identify customer segments with different response rates to various collection strategies. For example, the bank could use customer data (payment history, demographics, credit score, etc.) to build a model that predicts the likelihood of a customer responding positively to a specific collection approach. This allows for targeted and personalized collection efforts.
Experimentation:
The bank can conduct A/B tests to compare the effectiveness of different collection strategies. For instance:
Call script A vs. Call script B: Two different scripts can be tested to see which one leads to higher payment rates or reduced delinquency.
Timing of calls: The impact of calling customers at different times of the day or on different days of the week can be evaluated.
Channel optimization: The effectiveness of phone calls, emails, and SMS can be compared to determine the most effective channel for different customer segments.
Attrition and Spillover
Attrition: In the context of debt collection, attrition can occur when customers become unreachable or unresponsive. This can bias results if certain customer segments are more likely to become unreachable under specific collection strategies. For example, if customers who are more likely to pay are also more likely to answer calls, the results of the experiment might be skewed.
Spillover: Spillover effects can occur in debt collection, although they might be less pronounced compared to other industries. For instance, if customers who receive a particularly effective call script share information with other customers, it could impact the results of the experiment. However, given the sensitive nature of debt collection, this type of spillover is less likely to happen.
Mitigating Attrition and Spillover
To mitigate attrition, the bank can implement strategies to increase call connect rates, such as multiple call attempts, call-back options, and SMS reminders. To address potential spillover effects, the bank can carefully design the experiment to minimize information sharing between treatment and control groups. For example, customers in different treatment groups can be assigned to different call centers or collection agents.
By carefully designing experiments and utilizing machine learning to identify optimal strategies, banks can improve collection efficiency, reduce costs, and enhance customer satisfaction.
Key Metrics for Debt Collection Experiments
Measuring the success of a debt collection experiment requires a careful selection of metrics. These metrics should align with the overall goals of the experiment, such as increasing collection rates, reducing delinquency, or improving customer satisfaction.
Here are some key metrics to consider:
Core Metrics
Collection Rate: This is the primary metric measuring the percentage of outstanding debt recovered.
First Contact Resolution (FCR): This metric indicates the percentage of debts resolved on the first contact.
Average Revenue Per Contact (ARPC): This measures the average amount of revenue generated per contact.
Days Sales Outstanding (DSO): This metric indicates the average number of days it takes to collect outstanding invoices.
Customer-Centric Metrics
Customer Satisfaction: Measuring customer satisfaction through surveys or feedback can help assess the impact of different collection strategies on customer relationships.
Complaint Rate: Tracking the number of complaints received can provide insights into the effectiveness of collection methods and their impact on customer experience.
Customer Churn: While this might be a longer-term metric, it can help evaluate the overall impact of collection strategies on customer retention.
Cost-Efficiency Metrics
Cost Per Collection: This metric measures the cost incurred to recover a specific amount of debt.
Return on Investment (ROI): This metric calculates the profitability of the collection efforts.
Operational Metrics
Call Handle Time: This measures the average duration of calls.
Agent Productivity: This metric evaluates the performance of collection agents.
Contact Attempts Per Account: This measures the number of attempts made to contact a customer.
Additional Considerations
Segmentation: Analyzing metrics by customer segments (e.g., high-risk, low-risk, demographics) can provide valuable insights into the effectiveness of different strategies for different customer groups.
Lift Analysis: Comparing the performance of the treatment group to the control group can help determine the incremental impact of the tested strategy.
Statistical Significance: Using statistical methods to evaluate the significance of the results is crucial to ensure that observed differences are not due to chance.