Arming Your Business Against Attrition
Beating back attrition by being proactive before the customer cancels.
If your company’s policy is to contact a subscriber who calls to cancel service and ask, “Why?”, that’s not enough. You need to do more, and you need to do it before that call comes in. Attrition is a problem for any industry, but in an RMR-based business it means much more. Most, if not all, of your profit is tied up in the long-term relationship and recurring monthly revenue. Additionally, the value of your business is directly correlated to your RMR under contract, so it’s a double loss when you lose the account.
Some attrition is normal and unavoidable. It’s usually also identifiable. You know when your subscriber moves, dies or might be experiencing financial hardship. You also know when competition is in your area and fairly, or unfairly, you lose the account to a competitor. Establishing a department or designating certain personnel to contact the departing subscribers can accomplish only two objectives: trying to retain the subscriber or conducting an exit interview to find out why the subscriber wants to or has canceled. These are not necessarily mutually exclusive efforts, but most likely a day late and dollar short.
Attrition is something you need to address and plan for, and against, before it happens. After the fact leaves you with only a collection option. As it is happening leaves you offering to do what you should have been doing all along (something not lost on the subscriber) or offering financial incentives. You’ll resent the latter and therefore probably continue the same poor service that caused the subscriber want to leave in the first place. Of course, you might find out that your accounts are under attack from a competitor. But you would likely learn that sooner rather than later, and you should gear up to combat the assault on your subscriber base rather than sit back and lose the accounts.
More than normal attrition is probably related to poor performance. Your investigation starts in-house; get it in order. It took you a long time to build up your subscriber base, but you’d be surprised how fast your employees can lose them for you. If a competitor has targeted your accounts, you have to take swift and decisive action. That might mean bringing a lawyer in or complaining to your licensing or consumer agencies about deceptive business practices if that is part of the problem. Once you recognize the problem, you need to take action.
What constitutes normal attrition is arguable. I’d like to put the loss rate at under 6%. You should expect at least 3%, so the margin is tight. Some believe normal for this industry is closer to 10% and up to 13%. I think that’s high unless your subscriber base consists of PERS accounts. But one accurate barometer is your historic rate. You’ve survived this long with that rate but should not be too passive about increased attrition that you can’t otherwise explain based on factors beyond your control. If you see a spike in your attrition rate, then you need to focus and take action.
Communication with your subscribers is a vital tool to foster strong and loyal relationships. The communication should be two-way. There needs to be feedback from your subscribers and you need to heed those comments. Your attitude needs to be that your subscriber is always right (unless they aren’t) and you need to figure out how to appease and satisfy their requests, when possible. Even the pains in the butt might have a legitimate gripe you should address before the malcontent spreads.
There are a few consultants who specialize in combating attrition, including SSI Editorial Advisory Board member Bob Harris of Attrition Busters (attritionbusters.com) and Bob Maunsell of Security Marketing Guru (securitymarketingguru.com). Remember that the buck stops with you, so make sure you understand the issues and what your company intends to do about them.
Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. (www.kirschenbaumesq.com). His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters. The opinions expressed in this column are not necessarily those of SSI, and not intended as legal advice.
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