Music Trade Review

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OCTOBER 31, 1925
THE
MUSIC TRADE
REVIEW
Music Dealers' Collection Sales and
Their Collection Problems
Liberal Credit but Strict Collection—Watching the First Payments on a Lease Account — The Collector
Who Is Also a Salesman—How Music Stores Use Colored Collection Notices—The Past-Due State-
ment—Telephone and Telegraph Collecting — Fifth Article in a Series by J. K. Novins
OR the collection of the instalment ac-
count the music retailer has at his com-
mand three important instruments: the
collection notice, the personal collector, and the
telephone and telegraph.
Before describing how these instruments are
used the writer will make clear one important
principle of instalment collections. It can be
put into these words: When you maintain a
liberal credit policy do not fail to practice strict
collections.
The writer knows of one successful instal-
ment house in a large Western city which prac-
tices this policy. It is liberal to the extent that
it readily opens accounts with transients, but it
has suffered little or no loss on that account.
A rule followed by the credit manager of this
establishment is: If the account is one month
overdue it can be overlooked, although the
usual notice is sent. If the account is two
months overdue a good reason is expected.
When three months overdue the account is in-
vestigated. Definite action is taken when the
account is four months overdue.
Another practice followed by this concern is,
when a customer falls behind in payment for a
good reason, such as illness or unemployment,
the date of the next payment will be moved
ahead two or three months, as the case may be.
Strict Collecting Means Increased Sales
The fact that you are strict in collections does
not mean that you will lose sales. Just the con-
trary holds true. Not long ago Mr. H. G.
Smock, credit manager of J. Mandlebaum &
Sons, Des Moines, Iowa, wrote letters to eigh-
teen stores in as many cities, which were known
to him to maintain strict collection policies. He
asked them how strict collections affected their
sales. Fourteen out of the eighteen stores re-
plied that strict collections had actually resulted
in increased sales.
Experienced instalment collection men will
tell you that the best time to collect your ac-
count is when the customer has the greatest
amount of satisfaction out of the merchandise.
They also say that as long as the instalment
customer is employed there is every chance in
the world to collect the account, no matter how
hard-boiled he or she may be.
The credit manager of the Schmidt Music Co.,
Davenport, la., watches the customer's first five
payments. If the customer shows a tendency to
be tardy then the collection man knows that he
must give special attention to this account. He
also watches the customer's purchases during
that period of time.
One of the faults of collection procedure prac-
ticed by retailers is that too often the delinquent
account is charged off to profit and loss. One
concern makes it a practice never to charge off
a delinquent account. It believes that the very
fact an account is charged off tempts the col-
lection department to let down in its efforts to
collect that account. One account recently col-
lected by that concern was seven years old.
The Collector-Salesman
Also, instalment houses have gotten away
from the practice of sending hard-boiled col-
lectors after delinquent accounts. One concern
makes it a point to send out an experienced
salesman to collect accounts. Part of the time
he spends in the store, selling. In this way he
gets to know the customers intimately, and he
makes use of this knowledge when he goes out
collecting.
F
In one store, located in Davenport, la., at the
time a customer makes an installment purchase
there is an understanding on the spot whether
it is agreeable to the customer that a collector
should call regularly. This is important, as
many of the stores' customers hail from towns
across the Mississippi—Rock Island and Mo-
line. Very often they prefer to save the car-
fare to bring them to the store in order to make
their payments. Of course, when a customer
falls behind in payments, the collector is put on
the job whether the customer likes it or not.
Colored Collection Cards
T. P. Foote, credit manager of the Knight-
Campbell Music Co., Denver, Colo., claims that
the color of the collection notice is often effec-
tive from a collection standpoint. When a cus-
tomer, whose account is overdue, finally noti-
fies Mr. Foote that a payment would be made
on a certain day a yellow card is immediately
sent to that customer on which is typewritten:
"We have your communication promising
payment on
(date) and your account
has been set ahead to that date, at which time
we shall expect payment."
However, if at the designated time the cus-
tomer does not make the promised remittance,
he receives a pink card on which is typewritten:
"You promised to pay.
"If you have not already remitted at the time
this memorandum reaches you, please do so at
once."
"I've found," says Mr. Foote, "that these two
cards bring results. 1 think it's the color
scheme that attracts attention. By the time
the second card reaches the customer he begins
to wonder what color is coming next. The
point is, it worries him and he thinks about it
all day, which is what we want."
Another instalment collection man told th' 1
writer:
"When the instalment account is opened I set
the date for the first payment, and I impress
upon the customer the necessity of making
payments promptly. I do not send a reminder
until after the first payment has matured. I
allow five days for reply, after which I send the
customary series of letters, and if these do not
bring results we send a collector."
The Past-Due Statement
An Iowa concern sends three letters, but
the third letter usually brings results. It is en-
closed in an unusually shaped envelope, and
on the envelope is printed a post-office box
as return address. It attracts more than usual
attention, and keeps the delinquent wondering.
At any rate, you are sure this letter will not go
into the waste basket unread.
A retail concern in Denver sends the cus-
tomary statement on th*e first of the month.
During the middle of the month a past due
statement is sent. The statement is orange
colored and square shaped. Over the name of
the retailing concern appears: "Past Due State-
ment." Across the past due amount entered
on the statement is printed this line: "This
statement shows only 'past due' portion of your
account." In special cases the credit manager
will stamp on the face of the statement: "If
we do not hear from you will draw on the
(name of bank) for $
Please protect
draft." This threat of drawing a sight draft
very often proves effective.
How to Use Telephone and Telegraph
This credit manager also uses the telephone
and telegraph to great advantage. He finds,
after long experience, that the best time to call
the customer is shortly after lunch, or in the
morning. It is not good practice to call him
over the telephone late in the afternoon, because
he cannot then give the matter any attention.
He will promise to take care of it first thing
next morning. The chances are he will forget
about it over night.
Telegraph Work
As for the telegraph, he follows this proced-
ure: After the customary correspondence re-
garding the past-due amount, a definite date of
payment is requested, and this the customer
promises. However, not hearing from the de-
linquent on that date, a letter is mailed, and when
no reply is received to this final letter a tele-
gram is dispatched, reading, "Prompt reply to
letter of
imperative."
This is effective for two reasons. First, the
wording of the telegram; foreshadows definite
action, which the delinquent fears, especially
as he is kept in the dark as to the nature of the
action. Second, no reference is made of the
account in the telegraphic message. Were the
credit manager to make such reference, the de-
linquent would have reason to feel embarrass-
ment, because in the average rural community
the chances are that a telegraphic message will
soon become public news, and perhaps tend to
work harm for its recipient.
A similar problem has grown out of the use
of the telephone in collection work. What the
delinquent fears most is to be called in refer-
ence to the account over the party line, so that
his neighbors can overhear the conversation.
Tricks of Telephone Collections
"The party telephone line brings a curious
factor into the collection of bad accounts," says
a telephone official. "Firms often receive com-
plaints from customers who have been called
about their accounts over party lines. But in
most every case where complaint has been re-
ceived payment has been received therewith.
It would appear in such cases that this objec-
tion is overruled by reason of the success of
embarrassing can-pay debtors into paying. The
play upon the customers' pride, however, must
be adroitly done in order not to offend."
The Union Outfitting Co., of Omaha, Neb.,
a big instalment house, uses the telephone con-
siderably as a means of collecting over-due
accounts. In the morning the collection man
draws up a list of those he desires to call over
the phone regarding their accounts. He hands
the list to the girl at the switchboard, and she
calls each number in the order listed, connect-
ing the collection man as she gets the party.
This practice saves the collection man's time,
and enables him to call up many delinquents
during the course of the morning.
"Silent Telephone"
The Union Outfitting Co. also uses what is
known as the "silent telephone," that is, a
private telephone not listed under the firm's
name in the telephone directory. When the col-
lection man calls up a delinquent to learn that
the latter is "not in," he leaves this "silent tele-
phone" number. In due time the delinquent
calls up. Were the collection man to leave
the firm's regular number the chances of the
delinquent calling back would be very slim.
This idea saves the collection man unnecessary
calls.
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