Study reveals decline in overall attrition rates

Monday, October 1, 2007

OLD SAYBROOK, Conn.--TRG Associates, a management consulting firm specializing in the electronic security alarm industry, recently released its 2006 attrition study. Now in its sixth consecutive year of publication, and reporting more than $60 million in RMR, the study includes attrition numbers from approximately 75 participating companies of all sizes across the United States, Canada and Europe, according to John Brady, president of TRG Associates.
The study aims to provide the industry with a better idea of where customer losses are occurring and to highlight the reasons customers are leaving. "One of the dynamics that are characteristic to all of the businesses in this industry and one of the least understood, but most critical, is the attrition, or the loss of customers," said Brady. "We wanted to help management teams get their arms around attrition and manage the losses, and in the meantime benefit the industry by submitting their information to TRG on an annual basis."
Confidential for participating companies, the study divides the attrition results based on region, company size, customer source and customer type.
Overall, 2006 demonstrated an overall reduction in gross attrition numbers for the second year in a row, according to TRG, falling from 11.6 percent to 11.56 percent. The Southwest experienced the most significant improvement in gross attrition, while the Northeast experienced the most significant increase. The impact of gross attrition losses can be offset by re-signs of customers and other increases in RMR, resulting in net attrition. Brady believes companies are starting to reevaluate how they reduce their net attrition rates by focusing on the locations where they've installed their systems. "Net attrition is going down because companies are becoming more focused on following up with the home, which is their customer, not the people living there," he said.
In 2006, the Midwest experienced the largest reduction in net attrition, down 1.23 percent.
Mike Polizzi, president of American Burglary & Fire Inc. located in Fenton, Mo., which monitors about 10,000 accounts, says his company tracks its attrition rates in-house on a monthly basis and did not participate in the study. The data his company collected indicated that his company had experienced an approximate three-quarter percent rise in net attrition rates from 3.3 percent to 4 percent. Although these attrition rates were significantly lower than the average net attrition rates in the Midwest at 7.79 percent, it still represents a significant loss for his company, he said. Polizzi attributes the losses to an increase in gas prices, property taxes and other costs that are forcing his customers to reduce their expenses.
"When a customer ends their service we send out a questionnaire and we've found that most of it is because people are trying to cut their expenses. When we dig deeper we find out that people are happy with our services, but they can't afford it," said Polizzi. "It's tough to argue with someone when they want to protect their family, but they just can't afford to."