TRG Associates has just released the 2012 results from its Attrition Measurement Study, which it produces each year in association with the Central Station Alarm Association (CSAA). Now in its 12th year, the latest installment includes results for more than $263 million of recurring monthly revenue (RMR) as reported by security providers of all sizes from across the United States, Canada and Europe.
As John Brady explained to me during an in-depth interview for SSI’s July issue, this year marks the first time the study has eclipsed $200 million in RMR. That interview was conducted just prior to the final accounting of the 2012 results. Before we get to some of the highlights, here’s a quick explanation from TRG to define “net” and “gross” attrition: The report measures the number of customer RMR losses (gross attrition) and the offsets to those losses through resigning like customers/locations and other increases in the RMR related to the same base of customers (net attrition). Got it? Onward then to a summary of 2012 results as provided by TRG.
With the U.S. economy continuing to strengthen and international economies still struggling to rebound, the average residential/commercial gross attrition figure increased from 11.18% in 2011 to 11.53% in 2012. The average residential/commercial net attrition rate increased from 9.08 % in 2011 to 9.34% in 2012. TRG attributes the uptick in both metrics to the increase in commercial attrition while residential net attrition dipped to 8.99% in 2012 compared to 9.17% the previous year.
The 2012 study tallied attrition numbers from more large companies ($500,000+ RMR) than in previous years. These firms reported an uptick in gross attrition and a more significant increase in net attrition, 9.02% in 2011 to 9.5% in 2012. Mid-market ($201K-$500K RMR) companies/regional branches saw a dramatic decrease in both types of attrition: gross of 8.77% and a net of 6.63% in 2012 compared to 9.46% and 7.83% in 2011, respectively. Smaller companies ($3,000-$50,000 RMR) experienced a decrease in gross and net attrition for the second consecutive year while the overall RMR size of that group continued to increase.
The most significant factor attributed to the reduction in residential net attrition (8.99%) in 2012 was the impact of increased “moves” activity, which rose to 37% in 2012 from 33.9% in 2011. TRG ascribes this improvement as a sign that the U.S. economy continues to strengthen as the housing market recovers. Participating companies reported an increase in the “no longer using the system” category (11.6% in 2012 versus 7.6% in 2011), while “lost to competition” decreased slightly (11.4% in 2012 versus 13.5% in 2011). The latter still remains one of the leading reasons for attrition. Also noteworthy, “collection/non-payment” decreased slightly to 18.6% in 2012 vs. 19.1% the previous year.
Here’s another indication of an improving economy: more firms reported instituting price hikes in 2012 while “forgiving” only a portion of those increases to keep a customer, and a majority of them stuck. Thus, RMR reductions decreased across the board to 4.5% in 2012 from 9.1% in 2011. Consider all that in light of the fact in 2011 security providers were reducing their RMR per customer in order to prevent cancellations.
In other highlights:
- The dealer sourced segment experienced a decrease in gross and net attrition for the fifth consecutive year.
- The mass market segment experienced a decrease in net attrition; 8.69% in 2012 versus 9.14% in 2011.
- The commercial segment experienced an increase in net attrition and gross attrition while exceeding the residential attrition rates for the first time in three years.
Publicly available RMR and attrition data for ADT, as well as another unnamed top publicly held firm (Tyco Integrated Security?) was gathered to provide a broader perspective of industry trends in 2012. The additional data helped facilitate TRG’s finding that net attrition results jumped from 9.5% for the participating larger firms up to 11.66% inclusive of the publically held entities. The latter percentage was still lower than 2009’s 12.29% result.
TRG also found there was a swap in positions as residential net attrition outpaced commercial after factoring in the publicly held entities. Inclusive of those two security giants, commercial net attrition decreased from 11.83% in 2011 to 10.38% in 2012, while residential net attrition increased from 11.44% in 2011 to 12.02% in 2012.
All security providers are invited to participate in the study. It’s free to partake and TRG emphasizes the strictest of confidentiality is maintained. Visit trgassociates.com to access the full 2012 survey results and learn more about including your company’s data in the 2013 installment.
For a deeper discussion about attrition trends and related topics, I encourage you to check out my “Hot Seat” interview with John Brady. You can read it here.
Rodney Bosch | Managing Editor