Use the Psychology of Collections to Collect the Debt & Keep the Customer
To be successful in a collection call, you need to discover the problem and resolve the issue. Overcoming objections is an important part of coming to a positive resolution for everyone. However, skills communicating with people are truly the key to success. Your customer will continue to come to you if they are treated with respect and dignity. The individual making out going collection calls must find a positive way to work with your customers to get you paid. By using Transactional Analysis to structure your collection techniques and procedures, you can accomplish just that.
Transactional Analysis is one of the most accessible theories of modern psychology. Transactional Analysis was founded by Eric Berne, and the famous ‘parent adult child’ theory is still being developed today. Transactional Analysis has wide application in clinical, therapeutic, organizational and personal development, encompassing communications, management, personality, relationships and behavior. Whether you’re in business, a parent, a social worker or interested in personal development, Eric Berne’s Transactional Analysis theories, and those of his followers, will enrich your dealings with people, and your understanding of yourself. This report covers the history of Transactional Analysis along with Transactional Analysis’s underpinning theory as it relates to collections.
Throughout history, and from all standpoints: philosophy, medical science, religion; people have believed that each man and woman has a multiple nature. In the early 20th century, Sigmund Freud first established that the human psyche is multi-faceted, and that each of us has warring factions in our subconscious. Since then, new theories continue to be put forward, all concentrating on the essential conviction that each one of us has parts of our personality which surface and affect our behavior according to different circumstances.
In 1951 Dr Wilder Penfield began a series of scientific experiments. Penfield proved, using conscious human subjects, by touching a part of the brain (the temporal cortex) with a weak electrical probe, that the brain could be caused to ‘play back’ certain past experiences, and the feelings associated with them. The patients ‘replayed’ these events and their feelings despite not normally being able to recall them using their conventional memories.
Penfield’s experiments went on over several years, and resulted in wide acceptance of the following conclusions:
The human brain acts like a tape recorder, and whilst we may ‘forget’ experiences, the brain still has them recorded.
Along with events the brain also records the associated feelings, and both feelings and events stay locked together.
It is possible for a person to exist in two states simultaneously (because patients replaying hidden events and feelings could talk about them objectively at the same time).
Hidden experiences when replayed are vivid, and affect how we feel at the time of replaying. There is a certain connection between mind and body, i.e. the link between the biological and the psychological, eg a psychological fear of spiders and a biological feeling of nausea.
Understanding TA will allow your staff the ability to work with happy and disgruntled customers in a professional manner.
Everyone has three ego states. They consist of the Parent, Adult and Child states.
By understanding Transactional Analysis you will be able to handle most situations professionally and in your best interest. The psychology of collections is very simple. Once you understand the basis of why people react the way they do, you can get them into the adult Ego State and use their problem solving and objective train of thought to come to a positive resolution.
Once you have been trained on the facets of TA, your customer service abilities will improve in all areas. This benefit will ultimately lead to more solid payment arrangements and happier customers.
Everybody has three ego states. When you can understand what ego state a person is in, you can work towards achieving your objective with your adult ego state. All three-ego states make up who we are. The Parent Ego State comes out early. We hear children take control and go into their parental ego state early in life. We also can see when children are reasoning and objective and in their adult ego state. This ego state usually takes a little while to develop. If a child has reasoning and objective thinking, they are usually deemed mature. That’s because all three-ego states have developed, and they are aware of making logical decisions. Collections can be easy once you understand the psychology behind it.
The Parent Ego State is where I see most collection calls fail. The collector tries to be judgmental and controlling. They usually get the customer into the Child Ego State. The customer then lies and is generally on the defense. You get a lot of broken payment arrangements because the customer said whatever he had to, to get the collector off of the telephone.
It is easy to slip into the Parent Ego State during collection calls. You must teach yourself to ask information gathering questions, who, what, how, etc., and not be judgmental. These are areas where a conversation could begin to slip and the customer could become defensive. By being aware of the customers Ego State you can get the conversation back on track and deal with resolving the account.
By using the Adult Ego state during collection calls, the collector can refer back to the signed credit and financial agreements and reason with the customer with what was set up and the importance of following through on their obligations. They can use negotiation and mediation techniques that will allow them to work out some sort of arrangement with the customer. Being professional and objective in a collection call will leave your staff feeling comfortable with the intimidating task of calling people for money. The collections will no longer go on the back burner, they will become a daily priority. This is necessary for the success of any business.
Can you reason with a child while their having a tantrum? Rarely.
When a customer becomes irate, you need to discontinue the conversation, and have somebody else deal with the customer. There is no way to reason with somebody once they have lost control. These are extreme cases and require you to take close note to where the problem arose. Sometimes there are just personality conflicts where you are unable to deal with a particular customer. The secret to resolving these situations is immediate response by another one of your staff that has the authority to resolve the issue at hand. Once a customer is passed on to another employee, the customer will be primed to go into the Adult Ego State. The customer will have cooled him or her self down and will be looking for someone to reason with. If you use this theory, you will resolve a lot of these situations before any problems arise.
By using information gathering questions, you can get more than a yes or no from your customers, and you will get the information you need to solve any problems. Objective and logical thinking keep people calm and open to further discussion. Once things have opened up, you can then verify information that you have on file and update all contact information as to not lose communication with the customer. Let the customer speak their peace. Collections are 80% listening and 20% talking. By learning the reason behind your customer’s problem or concern, you can address it logically and come to a reasonable resolution that satisfies both parties. Sometimes it really helps to understand the situation your customer is in and give them an opportunity to suggest a solution that fits their means.
If you validate the customer’s account during collection calls, they will give more feedback and generally a few more disputes. These disputes can get resolved early and we will run into fewer problems when the accounts are sent to third party collections. By gathering contact information and finding out why the account has not been paid, you open up additional lines of communication. The goal here is to create a feeling of responsibility with the customer. They will be more likely to set up an arrangement for payment.
By using Transactional Analysis you will be more professional and fully trained to handle problems and issues before they get out of hand. Collections is a sensitive business, and I have found by using these techniques you will collect more accounts and have less problems.
Our collectors have been trained in TA and have shown fantastic recoveries with zero complaints. In 20 years we have had no valid state complaints filed against us. That is a record we are very proud of!!