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The term “attrition,” which is most familiar in the context of human resources or personnel, is also used in sales. Attrition as a sales term refers to customer loss and retention. Customer attrition directly influences profit and growth. Understanding and tracking customer attrition helps businesses improve customer relations, develop marketing plans, meet sales goals and gain increased market shares.
Customer attrition also is referred to as “churn” and “defection.” Businesses involved in sales, whether products or services, need to understand which customers are likely to leave and why. Many develop strategies or predictive models to improve customer attrition rates. These models are developed by understanding what makes a loyal customer and what makes customers defect to another business.
Sales professionals examine the sales pipeline to determine when and how customer attrition occurs. The sales pipeline tracks the sales process from lead generation to closing the sale. Representatives identify each step in the pipeline and attempt to improve the likelihood that customers will remain through each step, such as the sales pitch and the follow-up, and purchase the product or service. An extended view of the sales pipeline, or one which goes beyond closing the sale, is customer retention. Businesses that seek to retain customers through effective customer relation practices attempt to improve customer attrition rates.
Silent attrition refers to the loss of customers who leave without expressing their discontent with a sales practice or customer service issue. These customers might respond with moderate dissatisfaction on customer surveys. For instance, a health insurance customer might feel frustrated with attempts to reach the customer service department and defect to another insurance company. This silent attrition occurs because the company is unaware or unresponsive to the customer’s unhappiness and does not have an opportunity to prevent the customer from leaving. The customer is gone with no explanation.
Some businesses, such as hotels, use attrition clauses to control customer attrition and recoup a portion of the costs related to processing the sale. Hotels and conference centers use attrition clauses to specify the damages to be paid if the group does not use the services detailed in their contract. Groups reserve a block of rooms for a meeting and might also contract for catering and other services. Damages apply if the group cancels, changes to another venue or otherwise uses fewer services than they contracted to use. Attrition clauses are intended to mitigate the hotel’s loss of revenue.
Gail Sessoms, a grant writer and nonprofit consultant, writes about nonprofit, small business and personal finance issues. She volunteers as a court-appointed child advocate, has a background in social services and writes about issues important to families. Sessoms holds a Bachelor of Arts degree in liberal studies.