CRS podcast ep 6: Does segmentation work and what factors need considering?
William Shakespeare famously penned the words “all that glitters is not gold” meaning just because it shines like gold doesn’t mean it will turn out to be gold. The significance of that message is as important today in Collections as it was during the 16th century when the English poet and playwright created his Merchants of Venice masterpiece.
One thing can be agreed is that people by nature and nurture are different, even those that grow up in the same house can often end up as different as chalk and cheese. Treating all accounts on a case by case basis might end up being a waste of resources, but luckily when experience and data are applied collections teams can place individuals into segmented groups to help manage them, but does this really help?
In this episode of the ‘The Biggest Questions’ series, from our Collections in the Digital Age event. We invited a first-class panel of experts to discuss whether segmentation does work and if so what factors need to be considered when segmenting.
We recorded the conversation and added it to The CRS Podcast for your listening pleasure as well as adding the direct transcripts below for you to pick over in detail.
But before we get into the transcripts let’s introduce our first-class line up of panellists:
- Gary Grey (GG) Head of Collections at Spark Energy
- Caroline Burston (CB) Operations Director at CRS
- Caroline has worked in the Debt Collection industry since 1993 and gained extensive experience at several collection agencies and solicitors’ practices. Caroline is a well-known industry figure and brings extensive compliance experience and knowledge to CRS and is also a member of the prestigious Credit 500.
- Tony Gunderson (TG) 30 years + experience in financial services
- Lisa Beeching (LB) Head of Supplier Management and Quality Assurance at 1st Central
- Lisa is currently Head of Supplier Management and Quality assurance at 1st Central Insurance and Technology managing key supplier relationships across 45 suppliers spanning all operational areas from sales through to claims.
- James Squires (JS) Business Development Director at CRS
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Does segmentation work and what factors do you consider when segmenting?
JS: “Lisa can I start with you on this one please? So, in your experience does segmentation work and what factors would you consider when segmenting?”
LB: “Yes, segmentation can work, it depends on what factors you’re looking at.”
“Certainly, from a size of debt, the profile of the customer; if you look at their criteria, certainly when you get to that legal point in the journey, have they got property and stuff that could go against it?”
“There’s a load of things that you need to think about actually from a financial point of view if they’ve got anything you can hold as collateral before going down these collection marks.”
“From a small size debt honestly, you don’t want to waste too much time with them. Anything below £50 you’re almost saying it’s not really worth the time and effort, other than a really quick automated process and let’s see if we can get it in.”
“So yes, I would segment – 1) based on value and 2) based on the financial risks of that customer and what collateral they’ve got for you.”
JS: “And I suppose that goes back to your earlier point about different journeys and making it individual to the customer?
JS: “Gary could I just ask you to give your opinion on that one?”
GG: “Yeah of course. So, we operate a champion challenge within Spark Energy we use a lot of different DCAs mainly for their specialisation, but we do have a panel of DCAs that we use on white label.”
“When we segment the data and place, it if we use Lisa’s point; look at the balance, where we can see that balance, we can put some of the competition at risk.”
“What I mean but this is: imagine we were both DCAs and you had £1000 worth of debt to chase and I had £1000. I had one account at £1000 and you had ten, well you’ve got the easiest job to do and I haven’t so when we go to the segmentation we are looking at balance, we’re also looking at contact details; the name on the account and also what part of the collections journey they might be in?”
“For example, if they are a finalised account and they’ve left a property we will segment those customers off and follow that trace and collection path that ultimately will lead to us maximising our collections performance so that’s on a very basic level.”
“When you look at it on a far more detailed level the information that we get back from the credit reference agency, as I mentioned earlier, is the key thing that we use to segment our book. So, we know if you’re a very high-risk customer, guess what your collections path is going to be quite short and actually you might skip some parts of the path.”
“So rather than go white label – second placement – pre-disconnection visit and then warrant, actually you might skip the white label and go straight through to second placement and have an expedited collections path. It’s really key that you know when you’re segmenting the book where your risks are and making sure that you’re focussing quite heavily in that area.”