The Influence of Readability of
Demand Letters on Debtor
Response and the Moderating
Role of Debtor Characteristics
An Exploratory Research
Esmee Heesters s2208695
Master Thesis Msc. Marketing Management and Intelligence First supervisor: Dr. M. Keizer
Second supervisor: Dr. J. T. Bouma
2 | 05-07-2016
Introduction
› Lack of response of debtors in the debt collection industry (Lea, Webley & Walker, 1995; Mewse, Lea & Wrapson, 2010)
› A lot of attention in the media after research of Bureau Taal saying that 60% of the Dutch
population cannot comprehend the average written communication of the government and companies
› Creditors can create more profit
Research Questions
1. What is the influence of more readable
written communication sent out by creditors
on the level of debtor response?
2. Does the number of debtors who respond to a
more readable letter differ between debtors
with different characteristics?
Data
› Charge free demand letter and first demand letter
› Response of letters send in March and April 2016 (more readable) compared to response of letters send in March and April 2014 (less readable)
› Data collected by a creditor
› Debtors from a Dutch healthcare insurer
› 10.084 records and 9.836 debtors
6 | 05-07-2016
Methodology
› Readability measured based on readability formulas:
§ Coleman Liau Index
§ Automated Reliability Index
› Debtor response measured based on:
§ Payment incidence and amount
-Type-II tobit model
§ Creditor engagement (contact incidence)
-Logit model
› Separate analysis for the charge free demand letter and the first demand letter
Results: Charge Free Demand Letter
Table 1: Type-II Tobit model
Table 2: Logit model
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Results: First Demand Letter
Table 3: Type-II Tobit model
Results: Debtor Characteristics
Table 5: Overview of significant effects, +/- indicates a positive/negative effect
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Discussion and Implications
› Negative effect of readability
§ Theoretical explanation:
-Stronger reactions due to processing fluency (Miller, 2010)
§ Practical explanation:
-Comparison with 2 years ago
Limitations and Future Research
› Limitations:
§ Comparison with two years ago
§ Not one on one generalizable to debtors in other
markets
§ Readability formulas not perfect measurement
tool
› Future research directions:
§ Send the letters to two groups of debtors at the
same time
§ Adjust and analyze the readability of the demand
letters based on the new LIN-Index which is currently being developed for the Dutch language
(Pander Maat, 2012)
12 | 05-07-2016
References
› Lea, S. E., Webley, P. and Walker, C. M. (1995),
“Psychological factors in consumer debt: Money management, economic socialization, and credit use. Journal of economic psychology,” 16(4), 681-701.
› Mewse, A. J., Lea, S. E. and Wrapson, W. (2010), “First steps out of debt: Attitudes and social identity as predictors of contact by debtors with creditors,” Journal of Economic Psychology, 31(6), 1021-1034.
› Miller, B. P. (2010), “The effects of reporting complexity on small and large investor trading,” The Accounting Review, 85(6), 2107-2143.
