Attrition is associated with deterioration. It refers to loss and destruction of something, eg. loss of customers and personnel.
In business, customer attrition is a serious matter. It undermines the company’s efforts to grow, which is why companies make it a point to learn the reason for the customer’s decision to go with another supplier or service provider.
The reasons for customer attrition can be categorized as voluntary and involuntary. If a customer willingly decides to go with competition, the company knows that it has to step up in order to beat the competition. Those reasons must be determined so that adjustments can be made. Usual reasons include pricing, service, and product quality. On the other hand, a loyal customer might leave due to reasons beyond their control such as relocation, which making it not feasible to stay with the company, or even death.
A high attrition rate does not always mean a business will go under because if more there are more new customers than the ones leaving, then the vacuum will be filled. However, even then it is important to address high attrition rates. It is better to keep old customers coming, even while getting new ones every day.
To determine the impact of customer attrition to a company’s financial status, financial firms compute for the Recurring Monthly Revenue (RMR).