Posted in Marketing and Strategy Terms, Total Reads: 587
Definition: Market Attrition
Over a period of time, due to absence of promotions, the customers’ loyalty to a brand decreases gradually. This is known as market attrition. It is sometimes referred to as the customer attrition, customer churn, customer turnover or customer defection.
Analysis of customer attrition is used by companies as one of their key business metrics. Usually, companies divide this market attrition into:
• Voluntary attrition: When customers shift to other companies or service providers, it is called voluntary attrition. Analysts concentrate on this type of attrition as it occurs due to factors which are controlled by the company (like customer-company relationship).
• Involuntary attrition: When decrease in customers’ loyalty occurs due to factors like customers’ relocation or death, it is called involuntary attrition. It is often excluded by market analysts as they are not under company’s control.
While measuring the customer attrition, analysts can divide it into:
• Gross attrition: It includes the loss of existing customers and the revenues from goods and services, associated with them, during a particular period of time.
• Net attribution: It takes into consideration the addition of customers (similar to the ones that were lost) and gives a net value by adding this to gross attrition value.
The measure of the number of customers that have left the company during a particular period of time. It is helpful in measuring the growth for subscription services. Furthermore, it gives the company a fair account of the customer satisfaction and employee satisfaction. Also, attrition rates are used by company executives to estimate the costs of the recruiting, interviewing and hiring process.
Some of the sectors that use market attrition as one of the key business metrics are:
• Telephone service companies
• Internet service providers
• TV companies
• Insurance firms
To reduce market attrition, global standards (like, The International Customer Service Standard) have been developed to showcase the best practices in customer services and to align the organizations with the focus on excellence in customer service.