Knowing Electronic Payers' Preferences and Habits Makes for Great Customer Relationships
Doing business on the Internet continues to grow in popularity. Consumers in all segments of society are comfortable with purchasing goods and services and making payments through various electronic channels.
A recent report by Javelin Strategy & Research found that 62% of consumers now pay bills online, and an additional seven million households are forecast to begin paying bills online by 2013. People are also increasingly comfortable with online bill presentment; 69% of consumers view their bills online and six million more households are forecast to start by 2013.
When it comes to paying the electric, gas, or water bill, however, people have been somewhat slower to go electronic and paperless. A sizable group of traditionalists still prefer to write checks and save their printed bills and receipts. In fact, more than half of utility payments were still paper in 2008, according to a report by Chartwell Inc.
The missionary work of winning over those check writers and enrolling them as fully electronic payers must continue for all billers, not just those in the energy industry. But bringing as many customers as possible into the electronic world is just the first step.
To get the best return on investment in an electronic payments solution -- and that means delivering that best customer experience at the lowest cost -- utilities need to deliver the levels of responsiveness and service that meet the needs of four different types of electronic bill payers that we have encountered:
- Convenience Seekers.
These categories are not inflexible. People move in and out of them with regularity. It may be something as troublesome as illness or a layoff, or as prosaic as an address change or an extended business trip, that moves a given customer from one segment to another.
Such movement, and the behavioral changes it engenders, can make it difficult on the utility company, who must be ready to adapt quickly to people's changing circumstances.
Additionally, needs and behaviors can vary within each segment even while the overriding attitudes are constant. But because payers do not stay in the same behavioral cubbyhole, the utility company must remain flexible and agile with the payment options that it offers.
To do the best job possible, both for business and for customers, your electronic payments solution should be able to address the full spectrum of payers' needs. To illustrate, let's examine the four behavior profiles of the different types of electronic payer, what it takes to serve them well, and why they are important.
Convenience Seekers -- The Low Effort Payers
All convenience seekers want their bill-paying experience to be one that requires little time and effort. When it's time to make the payment, they want to take care of it as quickly and as painlessly as possible. They don't want to go through a complicated process of authentication. The "choice payers" among them want to have a menu of payment options -- online, IVR, credit card, mobile web.
Some convenience seekers are fans of online banking, preferring to pay through the bank's web site so they can take care of many bills in a single online session. Others tend to like the IVR payment method, especially when they've waited until the due date and want to avoid a late fee. That is also why they value same-day posting.
Convenience seekers usually want to keep getting their statement in the mail. They are not yet fully enrolled, paper-free e-payers. But a lot of them will get there eventually, so make their experience as effortless as possible.
Relationship Builders -- Where Familiarity Matters Most
Relationship builders are, generally speaking, the most desirable and profitable class of electronic payers. They are the closest members of the company's "family." As such, they are the most readily approachable for matters relating to service management and possible cross-sell opportunities, and they are receptive to interactive, two-way communications.
These payers are the ones that use the web the most and paper the least, making them "green" and environmentally friendly. It costs less to present their bills because most of them will agree to turn off their paper bills. They tend to pay at the same time each month, often by automatic ACH deduction and in advance of their due date, which increases the billing company's cash flow and lowers its risk.
Relationship builders appreciate consistency and predictability, and they want to be valued and appreciated too. This means that they expect strong authentication requirements that will safeguard the personal and banking account information they have entrusted to the company.
Refund Receivers -- Be Quick, Thorough, and Accurate
Refund receivers are current and past customers who are due a refund or are carrying a credit balance. They value convenience and accuracy in their transactions. The best approach in these cases? Disburse the funds to them electronically, using the capabilities and information already resident in the electronic payment solution. This is less expensive and gets payments to customers much faster. It also spares them the aggravation of repeatedly entering or reciting such basic data as address and phone number, which can happen if there are systems from different vendors for incoming and outgoing payments.
Occasionally when refunds are due, escheatment laws -- which exist to ensure that property is not left in limbo and ownerless - come into play. They vary state by state and can be difficult to understand and to manage internally, especially if there are customers from several different states. Having a third party manage this part of the process can speed things up and help avoid legal snags.
Payment Avoiders -- Special Care Brings Financial and Reputational Rewards
Payment avoiders are customers who are chronically late and need more than just gentle prompting, and those who have missed one or more due dates and are struggling to keep current but cannot quite get there despite best efforts.
Shutting off the power or the gas is always an option for the former category of payment avoider. But it's a different story with the occasional late-payer, whose household may be operating with a "delinquency budget" in hard times. Offering these folks a way to make a payment arrangement that fits their budget is effective and appreciated by the customers. It can help them stay reasonably current. The utility makes fewer costly truck rolls; the customers avoid frustrating service interruptions.
There's a lot at stake here. Since the recession began, we have seen a rise in the percentage of late payers of all types of bills. Our survey of October 2008 showed that nine percent of households were 30 or more days late in paying their electric, gas, or water bill. This was a sharp increase of 18% from a year earlier. Additionally, five percent of surveyed households had their utility service shut off for non-payment. Charge-off rates within the utility industry increased 55% from 2006 to 2008.
The customer who is financially strapped will generally pay the mortgage first. Then come payments on other loans, insurance premiums, and utility bills. So the utilities, while fairly high in the pecking order, still have to compete with other vendors for their share of the customer's shrinking wallet. A flexible and responsive billing system can bring a measure of advantage in this competition.
Late payers who are making a sincere effort don't like to receive phone calls and dunning letters. They react more favorably when their biller is non-confrontational. The best way to do this is to give them ample information and financial advisories through electronic channels and have an online system that can do more than just accept payments.
Our survey of payment preferences by delinquent customers showed that 39 percent more households preferred paying delinquent bills by the web than paying regular monthly bills that way. The electronic payment solution should allow them opportunities to take steps such as updating contact information; setting up a payment arrangement; making a partial payment or a promise to pay; informing the company of a prior payment; or negotiating a payment amount.
Of course, not all customers stay delinquent. They will appreciate and remember any extra efforts to "work with them" through the rough patch. It will be even better if the billing system makes it easy and allows them to move back to the relationship-builder category in an effortless non-event.
In summary, not all electronic payers are equal. The best payment solutions cater to the different behaviors, preferences, and habits of the people who pay their bills through various electronic channels. Such a solution meets and serves the customer well at every stage of the billing cycle: from acquisition of the first electronic payment through full enrollment to paperless billing and payment status and, if needed, in times of delinquency or returning a credit.
Utilities that can provide their customers an integrated experience that addresses and adapts to meet those attitudes, preferences, and habits will reap the greatest financial payback from their investment in an electronic payment solution.