When something happens, I’m not satisfied knowing what happened. I want to know why it happened. If I don’t know the why behind something, my knowledge of the event/subject feels incomplete and useless. To me anyway. 🤷‍♂️

This trait largely has served me well, but if I’m being honest, it has also created some challenges over the years. Frustration from co-workers? Almost certainly. Wasted time chasing data on some quixotic quest to find the perfect solution? Definitely. 

I find it way too easy to get “lost” in data. I’ll spend time chasing details only to realize that what I find doesn’t really make an impact. Or - even worse - I realize that I have no idea whether it will be impactful or not. 

I’ve learned over the years that the best analytical tools are often the simplest ones. We’re going to embrace that hard-earned knowledge today and focus on perhaps the simplest tool: the concept of funnels. 

If you’re new to this concept, read on. I hope you’ll make this a cornerstone of your analysis strategy moving forward. 

If you live for funnels and already have your dashboard with them open as you read this, stick around for some important reminders and some new twists on the concept. 

Let’s get started.

The funnel is a visual representation of how many accounts move through each stage in a process. By analyzing how many accounts reach each step in the funnel, we can find “leaks” and improve our processes over time. 

The beauty of the funnel is its simplicity. It reduces complex processes down to their component parts. 

You know the old adage about how you don’t really understand something if you can’t explain it simply to a novice? That applies here. Thinking in terms of funnels allows us to easily understand the exact impact that changes to our processes will have on outcomes. It also forces us to design simpler processes that are by nature more repeatable.

To illustrate, let’s look at an example:

This the most basic possible recovery funnel. We have a pool of consumers we are trying to reach. We’ll be able to contact some portion of them (Right Party Contacts or RPCs). A portion of these RPCs will result in promises to pay. A portion of these promises will turn into actual payments. If we multiply the bottom of the funnel (payments) by the average payment amount, we will find the total amount collected. 

The funnel is a nice visualization, but the true power of it comes from the (very basic!) math behind it. The result - total amount of payments - is the outcome of a simple algebra equation:

Total Amount Paid = # Consumers X RPC Rate X Promise to Pay Rate X Payment Conversion Rate X Average Payment Size

This allows you to predict the future and see the exact impact that potential changes would have on your recoveries. When you have dozens of potential options, it’s hard to know which lever to pull. This helps you make the right decision consistently.

I find that three frameworks work best when using the funnel to drive decision making:

Let’s break these down in kind:

Plugging Leaks in Your Funnel

Once you build and monitor your funnel, you’ll quickly find where your baseline for each KPI sits. Using this baseline allows you to quickly identify if something is amiss. If your recoveries are down, use the funnel to find where the drop in production (leak) is occurring, then dive into how you can course correct. 

Finding the improvement that will have the biggest impact

Using the funnel example above, let’s pretend that we are choosing between three hypothetical projects: One that could boost our RPC rate to 35%, one that could boost our RPC Conversion Rate to 30% and one that could boost our average payment size to $170. Using the funnel equation makes it easy to find a clear winning option: 

Option 2 results in the biggest increase in recoveries, which makes it the obvious choice. This assumes, though, that the ease, likelihood of completing and cost of each hypothetical project is the same. Which brings us to the next framework…

Finding the improvement that is the easiest to implement. 

This one’s pretty self-explanatory. Find that low-hanging fruit and pick it! Because you are using the funnel equation, you can easily predict the outcome that any change will have. This makes building an ROI projection on the potential project a breeze.

Once you understand the concept of a funnel, you can create unique funnels specific to unique processes. Let’s explore some examples:

This is another fundamental funnel that is essential when evaluating the performance of a contact center. I’ve found that the simplicity of this tool works great when communicating coaching points to our team. Use this funnel, plus the funnel equation, to communicate exactly how much more your team/agent will recover if they implement the strategy you’re recommending.

Pro Tip: Build a filter into this funnel to evaluate performance across portfolio or by team/agent.

This funnel evaluates digital communication (typically email and/or text) results. Use strategies should focus on how to improve open rate and click rate. Login rate and conversion rate are also great metrics to focus on if the goal of your outreach strategy is to drive online self-service.

Pro tip: Focusing top of funnel typically works best here. It’s often far easier to change the content/style of your messages than to redesign your online portal.

This funnel evaluates legal process results. Use strategies should focus on shrinking the gap between accounts eligible for legal review and actually moving forward in process so you spend less time and expense reviewing accounts that will ultimately be a waste of time. Increasing post-judgment payments is naturally a north star metric as well.

Note that I didn’t include KPIs here. That is solely because the terms got too wordy to fit in the visual.

Pro tip: Level this funnel up by comparing costs against collections at each stage in the funnel.

What’s next?

Think about your processes. Which ones can be modeled using funnels?

Be creative. I bet there are great examples outside the obvious ones. While writing this, I thought of another one that I’m excited to build: Employee recruitment and retention.

When A/B testing email strategies, focus on testing the subject line first. After all, recipients will never click links or make payments if they don’t first open the email. Only start A/B testing the body content of your emails after you’ve dialed in the subject lines that work.

ICYMI: Highlights from last week’s edition. Click here to view the entire post.

Are we on the same wavelength? Check out EngageARM.com for free resources, networking, and in-depth tutorials to help you build a highly-effective recovery department.

I’d like to close this with a quick ask. If you enjoyed this, please share with a colleague. Even better, take advantage of the referral program (linked below). If you disliked it, let me know why. All feedback is good feedback, after all.

Cheers,

Nate

EngageARM.com