ATTRITIONTHE SILENT KILLER

Amy Kothari

President and CEO

Alarm Capital Alliance

October 23, 2014

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Attrition directly impacts

KEY INDUSTRY METRIC

Health

Profitability

Ultimate value of your security alarm company

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Attrition

KEY INDUSTRY METRIC

Will be a primary focus of potential

buyers and will directly influence the

price they are willing to pay for your

company

*But one of the most misunderstood

concepts in the industry

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Attrition

QUICK OVERVIEW

What it means

How to calculate

Why it’s important to maintain a rate at or below industry standards

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Definition

WHAT IT MEANS

Attrition simply means losing

customers you once had

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Definition

WHAT IT MEANS

But to understand how to define it within the context of our industry, we need

to look at attrition RATES...that is, how many customers do you lose over a

PARTICULAR time period and how does that compare to the total number as

a percentage

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Attrition Rates

WHAT IT MEANS

There are two ways to look at ATTRITION RATES:

1. Gross Attrition

2. Net Attrition

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Gross vs. Net

WHAT IT MEANS

Lost Accts + Past Due

Total Accts

Lost Accts + Past Due – Gained Accts*

Total Accts

*Incorporates the accounts that a company has gained which directly replace those that have canceled. For example, a new

customer that moves into the home of a canceled customer would offset the cancellation.

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Gross vs. Net

EXAMPLES

If: L=10; P=2; T=100

Gross Attrition = 12%

If: L=10; P=2; G=10; T=100

Net Attrition = 2%

10 + 2

100

10 + 2 - 10

100

= 12%

= 2%

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Three Key Strategies

OK, NOW WHAT?

Track it

Deal with it proactively and constructively

Prevent it from the start

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Why bother?

TRACK IT

Regularly monitor short and long term attrition rates because:

It costs more money to get a new customer than to keep one

If you want to sell, you’ll get more for your accounts

You can spot small problems before they become HUGE

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TRACK IT

“Ordinary” results from issues

outside of your company’s control

Ordinary vs. Extraordinary

LIFE EVENTS

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Ordinary vs. Extraordinary

TRACK IT

“Extraordinary” occurs either

when customers cancel

accounts for reasons related to

your company’s performance or

a competitor wins over an

account

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Best Practices

TRACK IT

To get a clear picture of attrition and how to address it:

Create a script of questions for employees to uncover reasons

Establish standardized cancel codes for tracking purposes

Keep detailed account records for each customer throughout lifecycle

of the relationship

Reconcile cancelled accounts in billing and central station on a timely

basis

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Develop tactics to combat each cause

DEAL WITH IT

Competition

Moves

Non-Use

Non-Paying

Customer Experience

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Customer experience is paramount

DEAL WITH IT

Implement the highest standards

View employees as brand ambassadors

Add value for FREE

Get Feedback (NPS Survey)

Check in on a regular basis

If necessary, let go with grace

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Sales practices are critical

PREVENT IT

Ensure sales program is aligned with business objectives

Implement SOPs

Build a great sales team

Focus on qualified leads/referrals

Focus on the CUSTOMER, not the SALE

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Summary

OWN IT

Understand It

Track It

Manage It

Prevent It

And you’re well on your way to creating a high-value business!

THANK YOUFrom your friends at

Alarm Capital Alliance

888-885-8656

alarmcapital.com