In every competition, clash, or tournament, a winner prevails and a loser fizzles – or at the very least, someone comes in first, while another must begrudgingly place in second. From ancient turf wars to the Super Bowl, any on-the-line, outcome-oriented situation needs a decision rendered – and competitors ranked. It’s the same with your school and its default management program. Have you ever thought of your vendors in this way?

Why not?

In our last “Best Practices” article, we discussed how your school can harness the power of predictive analytics to identify default prevention trends and segment risks, build predictive models, and better forecast overall school performance. Now, it’s time to move to the fourth step of our journey to school and student success. Here, we’ll teach you how to take the important data you’re gathering about your student borrower population, and apply it to an actionable vendor testing strategy. This strategy is called the Champion/Challenger approach to default prevention, which is used in many financially-focused organizations to evaluate changes to company logic and policy. This approach also takes prime advantage of the predictive analytics software you have already launched.

What is the Champion/Challenger Strategy? 

Champion/Challenger strategy testing can allow you to test your vendors and their specified strategies by using a sample segment of your borrowers to determine which variations of practices (and vendors) are most effective for your school’s unique situation. This allows your school to adequately test strategies before rolling them out across your entire portfolio of borrowers. Employing Champion/Challenger experimentation allows you to observe the effectiveness of your new strategies and support your institution’s continuous improvement of default management and prevention approaches.

How to Employ the Champion/Challenger Strategy to Test Default Prevention Vendors 

When employing the Champion/Challenger strategy to test your sample segment, your school will first need to split a borrower cohort in half, assigning them to two different default prevention vendors. Keep in mind, you’ll need to have at least 2,000 students in a cohort for this to be a valid test. In addition, the split must be random.

By engaging in this practice, your school can determine which group (and corresponding strategy) are the champions, and which one has the challenges, creating a data-backed scorecard that measures performance for each vendor.

Additional benefits of employing the Champion/Challenger approach include: 1) Full insight into the performance of your selected vendors. If you really want to know how your vendors are performing, the Champion/Challenger approach will give you a 360-degree view.  2) Vendors who are directly competing work harder than when they have all of a school’s business. Vendors who know they are competing within a Champion/Challenger strategy will fight to keep your business.  3) The insight and justification to change vendors based on performance. If one vendor is significantly outperforming the other, you can assign everything to the better vendor, or choose another vendor to compete.

Of course, there are schools out there that find the performance differences are not large enough to prompt the firing of a vendor. That’s fine. In those examples, the leading vendor receives a larger share of new borrower assignments.

The best part about employing these strategies is that schools don’t necessary have to leverage their internal resources and do the work themselves. Default management firms who provide predictive analytics software tools can also help employ your Champion/Challenger strategy and help you with reporting and analysis.

Leverage Your Internal Resources Wisely 

Speaking of leveraging your internal resources in an impactful way – we’ll discuss, in the last step of this series, how to organize your school’s internal default management resources in a way that makes fiscal and logical sense.

Historical perceptions about default prevention have caused some schools to decide to manage it in house. However, school budgets are shrinking while performance expectations are rising – and companies that have established themselves in this industry are not like the ones that dominated the industry in the past. Instead, they’re more efficient – and get better results for their school customers, utilizing industry leading call center tools like predictive dialers, real-time analytics software, and advanced skip tracing tools. These companies also have the resources to ensure compliance in a complex regulatory environment.

Stay tuned for step five to learn how to leverage your school’s internal resources – and outsourcing critical default prevention management – to help you find solid solutions even faster.

Is your school proactively managing its cohort default rate? Read our entire Default Management series from the beginning here.