Business Essentials: Managing Attrition

Attrition is a fact of life in the alarm business. But very few companies measure and manage attrition as a key metric in running their company day-to-day. ore than having a direct effect on the value of your business at the time of sale, your attrition rate can be an important indicator of critical issues that may be hidden otherwise. So beyond just measuring, let’s talk about managing your attrition.

And to do this, you need to start with a deceptively simple question: Why are you really losing accounts?

There will always be factors out of your control, as in the case of death, financial issues or out of market moves. These are “ordinary” attrition factors.

But there are several “extraordinary” attrition factors that left unchecked, can ruin your entire business.

Poor Sales

We’re not talking about lack of sales, we’re referring to making too many of the wrong type of sales. This happens when your sales team signs up customers without qualifying them first, misleads a potential customer or pressures a sale without giving the customer enough time or information to make a decision.

The result is a higher percentage of customers lost in a shorter than normal period of time. The dangerous part is not the lost sale as much as the hidden costs. The lost time and expense of acquiring and activating that account, as well as the lost opportunity cost that could have been focused on a customer that is a better fit – these are costs that can never be regained.

Squandering time and money on low-quality sales is a poor use of your limited resources.

Demographic Issues

You may not be in control of changes in your market area; an aging population, decreases in job opportunities, a shift in economic development – but you are in full control of how to react to it.

Increasing attrition can be a signal to look closer at the trends, patterns, and threats emerging in your own backyard.

Do you need to shift your target market? Or adjust your offering to meet the needs of the changing attitudes in your current area? Maybe it’s a geographic answer, maybe it’s serving a different income level. The important thing to do is ask yourself, “what is it costing us NOT to change?”

Competition

Having a competitive offering isn’t just for new sales, it can be pivotal to keeping existing customers as well. Are you including the most advanced technology in your marketing? You can be sure whether you are or you’re not, your competition is. Automation services, including text notification and remote arm/disarm, are commonplace today, so you should be prepared to offer them.

A lot of companies were hit hard with higher attrition numbers this past year when they were forced to upgrade their customers from 2G. The decision to make an investment in updating an existing customer’s old panel vs. letting them go was a tough one! In many cases, competition made it tougher by offering a free system with all of the bells and whistles. Pretty enticing to a customer who’s alternative was to pay several hundred dollars for an upgrade to stay with you.

Making sure the services and equipment you offer are competitive, and then staying in touch with customers often so they know it, will help create loyal, “sticky” customers.

Service Challenges

Assuming you are making a good sale to the right customer, a high or increasing attrition rate can serve as another pointer – this time to issues with customer service and delivery.

Look closely at your operational procedures. How consistent are they? How many surprises, customer complaints or miscommunication problems crop up? Improving your service processes is not just an efficiency exercise, it can stem and in some cases, reverse your attrition rate. Good processes can create long-term fans in place of disgruntled “former” customers.

Let’s look at the value of managing attrition in another way.

How hard are you working to replace the lost revenue due to attrition? If you only focus on the front end sale, that is an expensive proposition. If that sale is lost to attrition, you get no more value out of the effort you put in.

By turning your attention toward some of the root causes we just discussed, you can reduce your attrition rate, and thereby keep a customer far, far longer.

The return for your effort grows over that customer’s lifecycle, and multiplies with each new customer retained – that’s leverage!

For a more in-depth look at the essentials of attrition – how to calculate an accurate attrition rate, the important difference between gross and net attrition, and what these rates really mean in terms of revenue and account value in an eventual sale – download our white paper, “Attrition, the Silent Killer”.

Of course, you can’t manage what you can’t measure. To help you with that, we’re currently offering our Attrition Calculator for free. Download it below and make your task of ongoing attrition measurement – and management – a lot easier.