Rick Brokaw Managing Partner of Vintage Security, LLC• 1982 – 1996 Austronic Security, Columbia, MD – Started as install helper at $4.00/hr and ended as GM with 80 employees, UL Central Station and over 10,000 customers• 1996 Republic Industries purchased Austronic – Company went from 150 installs to 400 per month via mass market methods• 1998 SecurityLink - Ameritech purchased Austronic from Republic – Regional Operations Manager of 26 branches from Tennessee to Connecticut• 1999 Southwest Bell purchased Ameritech – Retained position with new ownership• 2000 Cambridge Security Purchased SecurityLink – Retained position with new ownership• 2001 ADT Purchased SecurityLink – Resigned to start Vintage Security• 2001 Started Vintage Security• 2012 – 15,000 monitored alarm customers – 80 employees – 2 offices around Washington D.C. – 77% Residential/23% Commercial – Significant concentration in Homebuilding/Home Technology market 2
Did you know…. There are many other educational classes about our industry that are far more interesting than this discussion of reducing attrition HOWEVERNothing is more important than growing your RMR Base!! Attrition is a true indication of your company’s health! 3
• RMR Multiples range from low 30x for an account base of less than $50,000 RMR to low 50x for greater than $500,000 RMR companies• An account that pays $30 a month is representative of approximately $1,200 of your company’s valuation at a multiple of 40x• At a rate creation multiple of 25x, a $35 per month customer costs the company $875 to create. 4
What is Attrition?Simply stated:• Gross Attrition is the loss of RMR by cancellations and reductions stated as a percentage by month. To annualize, multiply by 12ExampleBeginning RMR = $100,000Cancellations = $1,000Reductions = $100($1,000+$100) / $100,000 = 1.1%Based on the information above, the company would have a monthly attrition rate of 1.1%, or an annual attrition rate of 13.2% (1.1% x 12) if they lost RMR at the same rate all year 5
Know Your Enemy!• Our industry averages approximately a 12% attrition rate – Are you an average company or a good company?• Know your rate of attrition by cause/reason• Vintage cause/reason codes for cancellations – Moves – Bad Debt – Do Not Want – Acquisitions – Models Sold – Lost to Competition• Decide on a strategy that fits your company – Personnel Responsibility – Personnel Focus 6
Other Evaluation Methods• Attrition by: – Commercial/Residential – Acquisition Company – Year account originated (Age of Account) – Accounts with/without maintenance – Accounts with/without interactive services – Price reductions/changes 9
Focus on Reducing Attrition• Moving (vacating premise, death, etc.) – 38.84%• Bad Debt – 22.42%• Do Not Want – 22.33%• Lost to Competition (service issues, etc) – 2.91%• Models Sold – 3.56%• Acquisitions – 9.94% 10
Moving – 38.84% Go After The New Occupant• Disconnection Form gathers info and directs recapture efforts• Sales Team Focus – Specific people for reconnections/takeovers• New Occupant Letter within 30 days• New Occupant Postcard every 180 days after initial letter• Gift Certificate to encourage your customer to select your company for their next residence Although this attack will not slow attrition by moving, it will alleviate loss of accounts (Net Attrition) 11
Bad Debt – 22.42%• Immediate and compassionate phone response to customers with financial hardship – Work It Out!• Have a concise, organized and well managed collection procedure and Stick With It!• Finally, don’t sell to people who can not afford – Consider credit checks and salesperson chargebacks if account defaults in 1st year – Give price break for 5 year accounts – Offer auto-pay to allow customers easy, no-hassle payment process 16
Collections Procedure Vintage SecurityDAY DESCRIPTION 1 Bill 30 Late Statement 45 1st Phone call from Vintage Security 60 60 day late statement with 1st letter 70 2nd Phone call from Vintage Security 90 90 day late statement with 2nd letter. 120 120 day late statement with 3rd letter. 145 Certified letter from Vintage Security 155 Monitoring cancelled; account closed; sales rep is charged back if account within the 1st year. Accounts submitted to IC for intense collections, including credit reporting to all 3 17 credit bureaus.
Do Not Want – 22.43% Customer Doesn’t Value Your Service!• Have specific people designated to handle cancellations• Speak to the customer about value not contracts• Honest, reliable and easy services – No Voicemail Jails – Never place on hold – Be Positive!• Quality Controls – Billing Response Card – Service Response Card – Call after every install• Communicate with customers via newsletters• If you lose them, don’t close the door – Send a disconnection letter keeping reconnection possibility available in the future, say Good-Bye with a smile 18
Lost to Competition – 2.91%• Sales, Install, Service, Monitoring and Billing must be high quality and customer focused• Employees treat customers as management treats employees• Do your employees care?• Do your employees have the power to give great customer service?• Does your company approach all decisions from the customer’s perspective?• Does your management get involved when customer relationships are weak?• Never leave an unhappy customer without expending your best efforts• Senior Management knows each and every disconnect 22
Account Cancellation Form Done By: Jessica Sales Person: Phil Kruer Monit Acct #: 1234567 Customer #: 1234 Cust Name: John SmithCustomer Info Install Address: 123 Main Street County: City Laurel State MD ZIP: 20723 Premise Telephone: 301-555-1234 Alternate Telephone: Passcode Written ConfirmationVerification Date Received: 5/3/2012 Date Received: 5/3/2012 Initials: JM Initials: JM John called in w/ verbal passcode. He is selling home and moving to SC. Thanked us for our service for 7 years.Reason Contract: Out Allied: $15.00 MIC: 84 Tellular: $0.00 Lgth of Cont.: 36 Vintage Inter: $0.00 RMR: $15.00 Tot Monit: $15.00Account Info Bill BOC: No Date Billed: Intitals: RSP: $0.00 Chargeback: No VIP: $0.00 Write off: No Test/Inspect: $0.00 Refund: $0.00 Tot Maint: $0.00 Old Customer New Owner Name: John Smith Name: Harry Homeowner New Address: Phone #: 410-555-9876 Alt. Phone #:Moving Info Alt Phone #: Gift Certificate Sent: Current Resident Letter Sent: Balance of Contract Billed: Recon Letter Sent: Computer: Monit CXL: Vint Inter/Tell: VIP:Office Use Comptroller: Approval GM: Comm. ADJ: Salesperson: Phil Kruer Date Given: 5/3/2012 A/R #:Reconnection Test Date: Monitoring #:Lead Info New Cust. Name: Harry Homeowner 1st Phone#: 410-555-9876 Settlement Date: 2nd Phone#: n/a 23
What Is Your If you want your customersCompany’s to be happy, Quality your people Culture? must be happy! 24
Sales-Installation-Service-Monitoring-Billing• Install Quality Control after every install by individual on phone who gives the GM all unhappy responses• Service Response Cards/Contest• Billing Response Cards• Newsletter – Do you have email addresses for your customer base?• Monthly information on new products/happenings• No Voicemail – Live person answers the phone in less than 3 rings in every department 24/7 365 days a year• On Call Service and On Call Sales within 15 minutes of contact – On Call Tech has 15 minutes, Management has 15 minutes and then General Manager• Maintain same day-next day service for routine calls• Customer satisfaction contests and recognition monthly and at company functions 25
How Sticky Are Your Monitoring Services?• Offer Informational Monitoring services to give your customers more reasons to stay with your company• Interactive Monitoring (Alarm.com, Total Connect) – Smart phone notifications with alarm, video and texts – Weather on keypad – Control HVAC and Lighting – Lock and unlock doors• Cloud Based Access Control (Brivo, Keyscan, Honeywell) – Requires no customer infrastructure – Access to system from anywhere – No network support – Automatic updates – Automatic notification of system troubles to your company 29
RMR Make It Easy For The Customer• Auto-pay from bank account or credit card• $1.00 per month discount for auto-pay• Offer discounts for annual and quarterly billing• Establish simple, easy to sell maintenance pricing that eliminate unexpected costs for customers• Enforce quotas in sales for auto-pay and maintenance agreements• Avoid non-RMR deals that divert your company focus 30
Don’t Let The Competition Takeover Your Company Bigger = Less Flexible = Poor Service Do everything they do with much better service! Fight them for every account! 31
Upgrade Program For Customers With Good Pay History• Residential Service Update/Additions Description Regular NEW 5 YEAR CONTRACT EQUIPMENT CREDIT Out of Contract (New 5 Year Contract) -495.00 5th Year of Contract (New 5 Year Contract) -370.00 4th Year of Contract (New 5 Year Contract) -245.00 3rd Year of Contract (New 5 Year Contract) -120.00 NEW 3 YEAR CONTRACT EQUIPMENT CREDIT Out of Contract (New 3 Year Contract) -345.00 5th Year of Contract (New 3 Year Contract) -270.00 4th Year of Contract (New 3 Year Contract) -195.00 3rd Year of Contract (New 3 Year Contract) -95.00• Commercial – Negotiate and be flexible 32
Summary• Track and Evaluate cancellations and prepare a strategy to attack each area of disconnections• Focus your company on Customer Care – Upper Management sets the example!• Avoid Non-RMR sales that divert focus from RMR growth• Focus your company on growing and keeping RMR with as low a Rate Creation Multiple as possible• Reward your employees when they demonstrate superior customer care (Don’t miss the little things)• Make sure upper management demonstrates a willingness to get involved with Customer Care when needed• Empower your employees to make decisions to satisfy your customers• Embrace new technology that enhances RMR growth and keeps your competitive edge against all others• Channel cancellations through capable, friendly and creative personnel who will save accounts, not process the cancellations• Sell Service Agreements• Offer auto-pay with billing notifications• Evaluate your company’s sales, installation, service, monitoring and billing from a strict customer perspective – Make it very easy for the customer• Grow your RMR! 33
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