Customer relationships are the foundation of a company’s success, but if customer assets are escheated to the states as unclaimed property, those relationships could be at risk. Studies by Bain & Company show that acquiring a new customer can cost five times more than retaining an existing customer and increasing customer retention by 5% can significantly increase a company’s profits.
Millions of dollars are escheated annually. This results in angry customers and lost profits, especially when it is their retirement or savings account. It is therefore important to understand the steps a company can take to reduce the risk of escheatment and increase its’ customer retention rate.
Escheatment occurs when accounts are deemed dormant, which occurs when there has been no “owner-generated” activity on the account for a specified period of time (the dormancy period). If the account owner does not affirmatively act to remove the dormant status of an account, by law, the account must be escheated to the state of the owner’s address once the dormancy period for that type of property has expired. Generally speaking, dormancy periods range from 3 to 5 years.
A 3-year dormancy period may seem like sufficient time in which to reestablish contact with an account owner. However, the time-frame for action is actually shorter, as companies generally do not begin to initiate proactive communication with dormant account owners until the account has been inactive for at least 24 months. Leaving the account inactive until the performance of statutory due diligence (which occurs between 2 and 12 months before escheatment), generally results in up to 80% of those accounts being escheated.One of the best ways not to lose contact with customers is to perform an inactivity outreach campaign. These campaigns can generate contact with up to 60% of the population as they occur months after the account is deemed inactive and not years.
The following are some points to consider when implementing an inactivity campaign.
- Develop policies and procedures to address inactive accounts within a year of going inactive. Don’t wait years to reach out to inactive accounts.
- Use all available search resources by leveraging a combination of databases, including those from multiple credit bureaus, real estate records, phone records and the National Change of Address system.
- Provide customers options to respond. Web and IVR options help drive higher response rates as they are simple and immediate relief to the owners.
- If relationship managers or advisors are used, incorporate them into the contact generating process as they are close to their customer base.
- Send multiple communications using varied communication techniques (e.g., email and regular mail)
Due to the potential impact on account retention and revenue, reducing the number of inactive accounts is increasingly critical for companies. MarketSphere Unclaimed Property Specialists supports the endeavors of holders to reunite owners with their funds before they become unclaimed property. Contact Us today to learn more about our due diligence, Owner Outreac, and Deep Search services that support your business initiatives.