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How To Fight Attrition
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    One of the biggest problems facing alarm companies today is their attrition rates.  How should you fight attrition?  There are several strategies that have been used by various companies that have helped in maintaining or lowering their attrition rate.  But before applying any of the below strategies it is essential for a company to determine its attrition rate.  Without quantifying your attrition rate, it will be difficult to see the impact of any strategies used to battle attrition.

    Technology  
    One way to effectively prevent or minimize attrition is to use the newest technologies available.  While affordability of a system always plays a role, clients are mostly persuaded by the new, most efficient system out there.  By ensuring that your company is presenting the newest technology to their customers, it prevents the possibility of losing customers based on product alone.  Even more important, companies such as AT&T are now beginning to penetrate the security industry and will likely look to steal customers away by offering superior technology or service.  Thus, making sure that your company is using the newest technology available is an effective measure to fight concerns of other security companies or companies looking to enter the industry.

    Resources
    Customers do not usually base their decision on whether to engage a security company or continue using it’s services on one factor.  That is why it is extremely important to provide a high level of service by having proper resources and capable employees.  The main point here is that management should make sure they provide the company with everything it needs to promptly and efficiently service their accounts.  Making sure your company has the resources it needs to offer effective service, such as hiring intelligent and experienced employees, is essential to keeping your attrition rate as low as possible.

    Marketing to High Quality Customers
    Marketing strategy plays a big role in a company’s attrition rates.  By focusing your marketing efforts on high quality and credit-worthy customers, a company will be in much better position to predict as well as minimize its attrition rate.  High quality customers tend to remain using the services of a company they already use so long as that company does not give the customer a reason to look for a different security company by offering terrible service.  Additionally, with credit-worthy customers you do not have to worry nearly as much about defaults on payments, which of course only raises a company’s attrition rate.  While most security companies do not have the luxury to pick and chose who they market to, it is important to try marketing to high-quality customers to battle the fight against a rising attrition rate.

    Create an Account Retention Team
    While this strategy could be costly and impractical for some security companies, especially small ones, it has been a successful tactic when used by companies in the industry.  Just like the marketing strategy above, implementing this strategy requires a company to dedicate money and time.  One company who successfully used this method created a team, and gave the team broad authority to correct problems through credits and disbursements.  By providing customers immediate responses to any type of attempted cancellation, the company was able to maintain a low attrition rate.  The point behind this strategy is to exploit the extremely short period of time between when a client cancels then vacates and a new resident moving in.

    Customer Satisfaction
    Another key factor in maintaining or lowering your attrition rate is by ensuring that your customers are satisfied with your service.  This can be done by periodically sending out customer surveys or contacting customers to ask if they are satisfied with your services and any improvements they would recommend.  If a customer responds that he is not happy with your company, it allows you to identify the reasons behind customers terminating your services.  Moreover, by asking for recommendations, the customer typically feels a stronger attachment to your company and is more confident in the services your company is providing them.  Clearly not all customers will respond to such surveys, but most likely enough customers will respond making this strategy worth the cost in order to fight attrition.

Contracts
    Not only is using the right contract an essential ingredient to protecting your company legally, it also is a major ingredient to maintaining low attrition.  Well-written contracts prevent customers from switching to a new company since they are well aware of the binding relationship they have entered into with your company as well as the negative consequences of ending that relationship early.  By using a poorly-written contract, customers will feel more comfortable switching companies due to the absence of legal repercussions.  Moreover, a well-written contract also sets out the payment details and allows you to refer to its terms in customer disputes.  Without the terms being set out prior to the customer using your services, it could be hard to savage even the smallest of issues that arise in such relationships.
    
Jesse Kirschenbaum
Law Clerk  
Kirschenbaum & Kirschenbaum
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comments on attrition

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Ken
    I read the comments about attrition and find it interesting that so few people really understand it let along how to measure it. There are countless industry experts who still get it so wrong. The comment from Donna Byrd about Bob Harris of http://www.attritionbusters.com/ was right on. I attended one of his seminars in Las Vegas at a vendor program they invited me to. He had my full attention once he made the statement that it generally costs us over $30 to replace $1 when we fail to save a customer. Bob's seminar that day gave me a wealth of information on exactly how to save more customers from cancelling and also exactly how to overcome lower prices offered by competitors. Between Ken Kirschenbaum, Bob Harris and Michael Barnes we have a really well rounded knowledge of how attrition works, how to slow it down and how to even take advantage of others who do not understand it. I would like to see them all on a panel of some kind at an ISC show or something. The Bob Harris seminar that day made me money and is making me money even yet today. So have you Ken. Come on and let's make something happen with you three. The industry can't afford not to at least listen to you guys. Especially right now!
Gerry
Empire Security  
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Ken:
    Love the email newsletter.  My comments on attrition calculation…if you care to post.
    Our favored approach to calculating attrition is to divide the Gross Lost by the Weighted Average for the period, and express the percentage on an annualized basis.  Additionally, we like to see this calculation done both for the number of accounts/customers, and also for RMR…with a preference for RMR if only one is calculated.  For instance, if looking at a single quarter, you would take the total number of accounts or RMR lost, times 4 (in order to annualize) and then divide by the average of the beginning and ending number of accounts or RMR for each of the three months.  Going to the extra trouble of averaging the monthly amounts is worth it, as this offsets any distortions that can occur due to unusual changes in the account/RMR base weighted more heavily towards one end of the period.  Total lost, for all reasons should be used for the numerator.  The only exception would be anything you can chargeback in connection with an acquisition.  The resulting Gross Attrition Rate is a great place to start.  Calculating separately how this rate is affected by such things as Resigns, Transfers, Rate Increases, and Add-Ons and Upgrades is highly useful, and can allow for comparisons with others that prefer to show various forms of Net Attrition, and to provide additional insight into the behavior of your customer base.  As mentioned, it is helpful to do this on both an RMR and a customer/account basis, as each can be valuable depending upon the circumstances.  If only one is to be used, we prefer RMR as it is most closely tied to overall financial performance.
Mike
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I agree with the comment on Bob Harris—he does a great job and is an entertaining speaker

Jeff Smith

Commercial Division Manager