The five keys to successful reminder letters
"This is the sort of English, up with which I will not put."
Winston Churchill, a master communicator, poking fun at a written report
Imagine a car finance company which, among its customers, has at least two obvious types. One type is "boy racers". The finance company can generalise about them that they tend to be young, single, with few responsibilities, few assets, little thought of the future, and a negative "don't care" attitude to the legal process and the consequences of damaging their credit record. The second type is "South Auckland families". These borrowers tend to be older. They have kids and jobs. They're often of Pacific Island background and have strong religious beliefs. Their understanding of written English is probably below that of the average customer.
So these are two very different and distinctive types of customers. When their accounts are overdue, the chances are that our hypothetical finance company sends both types the same standard overdue letter. We think that's a mistake.
We've just done a major rewrite of our seminar on this subject. As we tend to do with our training, we've gone outside the bounds of credit management to borrow ideas from other disciplines - marketing, advertising, psychology, publishing and journalism. Here are five keys to success in reminder letters.
- Use letters in the right circumstances. Much of the other training we do is focused on how to talk to debtors on the phone. In credit management, the temptation is to send a letter to avoid the stress of a confrontational phone call, but phone calls generally work much better than letters. Letters have their place - most obviously, there are some debtors who can't be contacted by phone and there are some creditors who have too many debtors to ring - but we've probably all fallen into the trap of spending half an hour on an ineffective letter when a five minute phone call was the answer.
- If the text is too small and you make it too hard for people to read, they won't bother. So the first challenge with any written communication is to get people to read it. One of us got a marketing letter from an airline a few years ago that made an interesting noise. Naturally it was opened first. The noise was a packet of "hundreds and thousands" - the coloured sugar sprinkles that go on kids' birthday cakes - and the airline promised that there were hundreds and thousands of reasons to use its services. Design, typography, colour, the look of the envelope, and attention-grabbing tricks like that of the airline, all help determine whether your letter is read or thrown straight in the bin. You need to understand how people read letters. They generally start with the heading, then skip to the bottom and look at the signature and read the PS.
- Understand your debtors and tailor your bulk letters as much as possible. Different customer types will respond to different threats and incentives, different types of language, different ways to attract their attention. Self-employed, small business owners are likely to have different attitudes to those of accounts payable clerks in large businesses. Why send them both the same overdue letter? Marketing people look at two different types of characteristics of customers. One is 'demographic'. In terms of individuals these are the tangible characteristics such as age, sex, family size and age, occupation, education, religion, language spoken and read, ethnicity, and life stage. In terms of businesses, it is the tangible characteristics of the businesses (size, industry, etc) and the people in those businesses you will deal with (owners or employees, sex, job title, education, etc). The other type of characteristic is 'psychographic'. How easily offended are they? What is their attitude to being in debt, familiarity with the law, knowledge of business, and so on?
- Structure your letter to explain the benefit of what you want them to do (or detriment of not doing what you want them to do) then tell them exactly what it is that you want (and when and how). It's very easy for creditors to fail to spell out the benefit/detriment properly. They assume, for example, that the customer knows what it means to have a judgment against them. Generally, you need to go further in terms of consequences. "And this means that this will be on your credit history on the Baycorp database for five years and that creditors who check this will be likely to refuse to lend you money to buy a phone, a car, a house, or other goods or services..."
- And lastly, you need to know how to make your writing easy to understand. We like Churchill's example, at the start of this article. Another of our favourites is, "In case of fire, do not use lift." We have seen people read this message next to a lift call button and waver, wondering whether they are supposed to use the lift. It's much clearer, but not quite as impressive-sounding to say, "if there is a fire, do not use the lift." In this case, it actually makes the message longer, but usually, shorter is better. Most of us have an almost overwhelming desire to sound clever and impressive, and to this end we use as many fancy words and phrases as we can come up with, and stretch our sentences until they are as long as they can possibly be, generally by adding extra clauses and phrases, but also by adding clichés - hackneyed phrases - and redundancies and by repeating ourselves again and again, ad infinitum.
So that's the theory (or at least the short version of it). In practice, you need to spend a long time agonising over the letter, and get plenty of "second opinions". Get it right and you'll save yourself a lot of phone calls. And with that, we've written all the words we're allowed to write for this article. Up with more the editor will not put.
Peter Hattaway - peter@hattaways.com - is a director of Hattaways, specialists in credit management training and consulting - www.hattaways.com - and Christine Toner christine@toner.co.nz - is a trainer and independent marketing consultant.