Given the challenges facing the sector, Income Collection represents one of the main focal points of this work, alongside repairs demand, digital self-service and gas service access. In line with our commitment to evidence-based practice, we encourage the use of randomised controlled trials (RCTs) wherever possible. This is the second instalment in a series of RCT case studies we have implemented to test the effectiveness of simple ‘Nudge’-style adaptations to arrears communications.
Overview
For the organisation behind this trial, customer contact is a central pillar of the income collection strategy. The fact that a customer has made contact demonstrates a basic level of responsibility and commitment to resolving the debt. Furthermore, customer contact allows income collection officers to take a more tailored approach to resolving the case successfully.
This trial applied changes to existing debt recovery communications based on three well documented behavioural principles: simplification, fear appeals and emotional content.
There is a wide range of psychological barriers preventing customers from engaging with organisations to which they are indebted[i]. For the social housing provider involved in this study, increased customer engagement was one of the key elements in creating a more tailored approach to debt recovery.
As with most income collection functions, there was a recognition that there are customers who can’t pay and those who won’t pay. A reliable method of differentiating between these two scenarios will enable more tailored and effective intervention.
This trial was used to elicit the most basic demonstration of responsibility and commitment to resolve the debt (contact), as the foundation for more reliable ways of differentiating the can’t pays from the won’t pays.
Simplification
Our own research has shown that arrears communications and letters tend to be verbose, vague and poorly designed. Using basic information design principles to inform the use of colour, icons and content hierarchies, we redesigned existing letters to aid instant comprehension and enable a clear, specific behavioural response.
Negative Vs Positive Emotional Content
In addition to testing the simplification techniques referred to above, we also incorporated two contrasting messages, focusing on Positive and Negative consequences of inaction.
The Negative intervention was designed around a ‘Fear Appeal’ and the threat of losing one’s home; the Positive intervention was designed around a positive depiction of the future and the prospect of a ‘debt-free life’.
Negative
Positive
The sample comprised all tenants who were due to receive the second letter in the organisation’s arrears escalation process.
Each participant was randomly allocated to 1 of 3 trial arms, with two intervention groups receiving either the Positive or Negative condition, and a control receiving the existing stage 2 arrears letter.
An average of 51% of the sample contacted the organisation over the course of the trial.
However, there were large and significant differences in favour of the intervention groups.
Testing showed the results to be highly statistically significant (p=<0.001) with both interventions being significantly different to the control.
If you’d like further details on this case study or would discuss how the application of behavioural insights and evidence-based innovation could impact your organisation, leave a comment on this article or PM me directly.
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[i] Collard, Sharon (2013). Working Together: Understanding Motivations and Barriers to Engagement in the Consumer Debt Marketplace. Arrow Global, Bristol.
[ii] n=547
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