Study reveals overall attrition rates continue to decline

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Thursday, August 30, 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 gathers 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 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, down .8 percent from 2005, followed by the Southeast at .58 percent, and the West at .21 percent. On the other end, the Northeast experienced the most significant increase in gross attrition rates, up .3 percent, followed closely by the Midwest at .28 percent.
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, driving it down 1.23 percent, followed by the Southeast, which was down 1.07 percent, and the Southwest, down 1.05 percent from 2005. On the other end, the West experienced the largest increase in net attrition, up .39 percent from 2005, followed by the Northeast up .06 percent.
Companies experiencing the most improvement in net attrition were companies with $3,000 to $50,000 in RMR, which decreased their attrition by 1.13 percent from 2005. Companies experiencing the greatest losses in net attrition were companies with $51,000 to $100,000 in RMR, which saw an increase of 1.87 percent in net attrition.
This study also highlights the reasons customers cite for canceling their service. Similar to 2005, the largest percentage of customers cited "moved outside of market," at 29 percent, as the reason to cancel their service, followed by "moved within market" at 17 percent, "collection/non-payment" at 13.3 percent, "lost to competition" at 11.6 percent, and "no longer using system" at 11.3 percent.
For more information about the results of this study, visit www.trgassociates.com.

For more on this story, see the October issue of Security Systems News.