Written By: Eric Johnson, President and CEO of AnswerOn, Inc
AnswerOn has been analyzing customer behavior for over 16 years and our scientists have been leaders in this field long before AnswerOn was founded. Our approach is straightforward – “We will tell you who is going to leave, why they are going to leave and what you need to do to save them” ™. Our algorithms and models have been tuned and trained to look for small differences in subscriber behavior correlated to attrition risk. We are an algorithm as a service company, meaning we can work in any environment with no need to purchase equipment or make changes in your infrastructure.
One of the challenges in attacking attrition in the Security industry is agreeing on a definition for attrition. There are basically two types of Churn commonly mentioned: 1) Gross Attrition and 2) Net Attrition. Both definitions rely on a common denominator of the total number of accounts owned over the last 12 months. The differences lie in whether or not you offset the losses with the accounts gained. The gross attrition will always be higher than the Net attrition assuming any new accounts are gained (which we hope is always the case). For the purposes of this post, we will assume we are discussing gross attrition.
Similarly, in defining gross attrition, we need to look at “addressable” and “non-addressable” types of attrition. Examples of “addressable” attrition include: customers who cancel service to go to a competitor because of customer service, competitor marketing activity, and even non-payment. Examples of non-addressable attrition include moving, death, divorce, etc.
These distinctions are very similar to the Telecommunications industry evolution into prepaid, prepay and postpaid wireless service. The first response in that industry was to hold your phone number hostage and demand you sign a multiyear contract. When subscribers rebelled because they could not change carriers and keep their phone number, the FCC mandated number portability. AnswerOn worked for many of the large Telecommunication providers during this period. One thing that is often overlooked is that holding the subscriber hostage in fact did not reduce attrition and fueled additional resentment for the wireless providers. More extensive legal contracts are not the answer.
So what can you do to fight attrition?
Your first step is to try and define what kind of “addressable” churn you are experiencing. Since RMR (recurring monthly revenue) is one of the prime movers of your company’s value, determining the ratio of addressable vs. nonaddressable attrition is important. The first two tenets of AnswerOn’s company mission accomplish this.” 1) We will tell you WHO is going to leave and 2) WHY they are going to leave.” These two steps primarily focus on gross and addressable attrition. To do this, we build advanced prescriptive models that analyze the data using our tuned algorithms, which are focused on changes in subscriber behavior. These models are built based on customers’ past behavior and used to predict future behavior.
The third tenet is really the most important: 3) “WHAT you need to do to save them”. AnswerOn develops and implements programs customized to each subscriber engaging them to stay. To facilitate this proactive touchpoint, we strive to build a total lifecycle profile of a satisfied and dissatisfied customer. We have found our algorithms and models increase the likelihood of a dissatisfied customer to become a satisfied customer by as much as 600%.
AnswerOn has the unique tools and experience to help security companies build their RMR and bring value to your company. Please contact us for a demo.