ADT 2012 Annual Report Download - page 96

transmitter generally worn as a necklace or wristband by the client. In the event of an emergency the transmitter
allows the client to summon assistance via a two-way voice system that connects the client’s home telephone
with our emergency response center, where dedicated PERS monitoring specialists relay information to the
appropriate local emergency responder, including police and fire departments. We offer customers the option to
install the PERS unit themselves or to have one of our trained field staff perform the unit set-up.
In addition to monitoring services, we provide technical services to our customer base for routine
maintenance and the installation of upgraded or additional equipment. More than half of our customer base is
enrolled in a service plan which generates incremental recurring monthly revenue. Purchasers of our electronic
security and home/business automation systems typically contract for ongoing system monitoring and
maintenance at the time of initial equipment installation.
Most of the monitoring services and a large portion of the maintenance services that we provide to our
customers are governed by multi-year contracts with automatic renewal provisions that provide us with recurring
monthly revenue. Under our typical service agreement, the customer pays the initial installation fee and is then
obligated to make monthly payments for the remainder of the initial contract term. The standard agreement term
is three years (two years in California), with automatic renewals for successive 30-day periods unless cancelled
by either party. If a customer cancels or is otherwise in default under the contract prior to the end of the initial
contract term, we have the right under the contract to receive a termination charge from the customer in an
amount equal to a percentage of all remaining monthly payments. Monitoring services are generally billed
monthly or quarterly in advance. More than half of our customers pay us through automated payment methods,
with a significantly higher percentage of new customers opting for these payment methods. We periodically
adjust the standard monthly monitoring rate charged to new customers. From time to time, we also may adjust
the monthly rates of our existing customers.
Customers and Marketing
We serve more than six million residential and small business customers throughout the United States and
Canada. Our residential customers are typically owners of single-family homes, while our small business
customers include, among others, retail businesses, small-scale commercial facilities and offices of professional
service providers and similar businesses. We manage our existing customer base to maximize customer lifetime
value, which includes continually evaluating our pricing and service strategies, managing our costs to provide
service to customers and achieving long customer tenure. Our ability to increase average revenue per customer is
derived from, and largely dependent on, our continued introduction of additional features and services that
increase the value of our offerings to customers.
To support the growth of our customer base and to improve awareness of our brands, we market our
electronic security and home/business automation systems and services through national television
advertisements, Internet advertising, including paid search, yellow pages, direct mail and social media tools. We
continually work to optimize our marketing spend through a lead modeling process whereby we flex and shift our
spending based on lead flow and measured marketing channel effectiveness. We utilize a variety of third-party
referral providers who generate leads and sales referrals for both our direct sales team and our authorized dealers.
Our partner lead generation methods include agreements with affinity organizations such as USAA and AARP,
third-party referral companies and, in some instances, co-branding arrangements.
We are constantly trialing new customer lead methods and channels in an effort to increase our customer
base and drive greater penetration within homes and small businesses without sacrificing customer quality. We
continually explore opportunities to provide ADT-branded solutions through additional third parties, including
telecommunications companies, broadband and cable companies, retailers and public and private utilities.
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