Fast-growing APX Alarm of Provo, Utah, has lately raised indignation from dealers across the country, many of whom claim unscrupulous tactics used by some of its summertime door-to-door sales reps are soiling an entire industry’s reputation. For its part, APX says it is striving to become an integral member of the wider alarm community. Those efforts have included major sponsorship of the recent California Alarm Association (CAA) winter convention in San Francisco where SSI caught up with COO Alex Dunn.
Why is APX compelled to become recognized as a friend to the alarm community?
We’re the fifth or sixth largest security company in the United States. With that size and the rate at which we’re growing obviously the industry has been very good to us. We have an obligation to be a good citizen in the industry, an active participant in the industry. We believe a high tide raises all boats. As the industry is strong and vibrant, we’re going to benefit. We also feel that as we are strong and grow and bring in new lenders to the security space, and do such things that haven’t been done before, that the industry is going to benefit as well.
APX used to not retain customer accounts. Why the change in business philosophy?
Really our attempt is in the development and maturation of our company. It’s only been a few years since we started keeping our customers. We’re now committed to this long-term, opposed to a year-to-year situation where you credit the customer and then sell them. As we have a more long-term focus, we realized that we need to make sure we were a part of this great industry, that we are contributing to it, and that we are benefitting from all the great things that go on in the industry.
Describe a fundamental mistake the company has made and learned from.
One of the biggest is as a dealer for other companies your motivation isn’t completely aligned with putting on the highest quality customers that you can because you’re going to be selling that customer off. There’s usually an attrition guarantee and you’re hoping as many people as possible make it through that guarantee. But after that the truth is you don’t really care because now it’s someone else’s customer and they’ve taken over the account.
So in making the transition into a full-service residential security company, we became much more focused on creating quality customers. For example, every customer who fills out a contract must complete a pre-installation survey with someone at corporate headquarters. If they don’t pass that, the system is not installed.
APX recently received a $440 million credit facility. How will it be used?
As recent as four years ago we had no customer base; we sold all our customers. It requires a lot of capital to put on as many customers as we have without starting with a big customer base. We’re heavily subsidizing that customer acquisition and then we’re cashing in over a long period of time. The debt or the credit facility really is just about new customer acquisition. We have plans to put on 275,000 to 300,000 customers over the next two years and we have the capital now with this facility to do it.
APX raised its customer base by 30 percent in 2009, but sales were down slightly from the year before. What accounted for the dip?
About 90 to 95 percent of our customers we get through our summer door-to-door program. The biggest reason for the decline was the fact that we tightened up our underwriting process. We raised credit scores, we eliminated sub-600s. We reduced the pool of potential customers that our sales reps could sell to. The flip side to that is we created a much better customer, so the average credit score of our customers since 2008 is over 720.
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