Understanding the Champion/Challenger testing strategy
As the economic world continues to change, collection strategy testing becomes increasingly important. Champion/Challenger strategy testing is performed using a sample segment and the results provide a learning tool for determining which collections strategies are most effective. This allows strategies to be tested before rolling them out across the entire portfolio. The purpose of this experimental element to collections strategy management is to observe the effectiveness of new strategies, support continuous improvement of collection approaches and facilitate adaptability to changes in consumer behavior.
The methodology behind testing is simple. First, the current environment should be assessed to identify specific areas for potential improvement. Then, a test plan is designed. The test plan should, at a minimum, include well-defined objectives and goals, proposed strategy design, determination of sample size, operational considerations, execution approach, success criteria, and evaluation timetable. After the framework for the test plan has been outlined, running “what if” scenarios will improve refinement of the collections strategy.
In the next phase, implementation occurs following the directives of the test plan. Evaluating strategies commences after implementation and continues throughout the duration of the test. This includes analyzing metrics established during the test plan phase to identify trends and changes as a result of the new challenger strategy. The challenger strategy is declared the new champion if the test achieves or exceeds expectations.
However, before proceeding with the new champion strategy over the entire portfolio, carefully consider any operational constraints that might hinder the success of the strategy on a grand scale. Once these operational constraints have been identified and their impact assessed, the new champion strategy should be executed.