Attrition, or customer churn, is one of the top challenges in the alarm industry today. There isn’t a company out there that has zero attrition but keeping it at a healthy and manageable pace is key in operating a successful security, fire, IoT or PERS business. So, how can you tell if you have a healthy rate of attrition? And if you discover your business has a high attrition rate, how do you minimize that? We’ll help answer these questions below.
How to Calculate Attrition
The calculation for customer attrition is fairly strait forward:
Number of customers who cancel / total number of customers.
There is no set number for a healthy amount of attrition. This will vary from company to company, but a good indicator of unhealthy attrition is if you are losing more customers than you are bringing in. If that’s the case, you need to discover what is causing the high attrition rate.
What Causes Attrition
The devil is often in the details and if you look closely enough, your customers will tell you why they are leaving. Spikes in attrition are usually an indicator that there is a roadblock or deterrent in the customer journey.
Did your company launch a new device, software, or CRM recently? Are you sure your customers know how to use the new technology? Are there bugs in the system that you weren’t aware of but now your customers are dealing with? Are your customers experiencing bad customer service? Here are the most common reasons for customer attrition:
- Bad customer service
- Technical problems in the product or service
- Bad relationship management
- Bad business fundamentals
According to Zendesk, 80% of customers will leave or cancel service after just two disappointing service experiences. Also, 75% of people will pay more money for great customer service. So, if you provide incredible service to your customers, they are more likely to stay, and willing to pay more for the experience.
Unfortunately, over half of people (52%) will share a single poor service or product experience with relatives and friends and up to 35% will leave or discontinue service after a single bad experience.
How to Stop Attrition
While some customers will often let you know why they are leaving, others may need a little extra help. Provide departing customers with an opportunity to let you know why they are leaving. You could have your sales or service teams reach out to them and ask why they are leaving and see if there is any way to bring them back. There are many instances where a simple one-on-one interaction is all the customer really needed.
You may also provide departing customers with a form or questionnaire asking why they are leaving so you can do better going forward. Always be polite, even if the customer is less than. Then review and take to heart the feedback you receive. If you notice a pattern of service or technical complaints, you’ll begin to uncover the culprit of your attrition and can start working to fix the issue.
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