ADT 2012 Annual Report Download - page 97

Sales and Distribution Channels
We utilize a network of complementary distribution channels that includes a mix of direct and indirect. In
fiscal year 2012, we generated just over half of our new customers through our internal sales force, including our
phone and field teams, supported by our direct response marketing efforts. We generated our remaining new
customers in fiscal year 2012 through our authorized dealer program and, to a small extent, through agreements
with leading homebuilders and related partners. As opportunities arise, we may also engage in selective bulk
account purchases, which typically involve the purchase of a set of customer accounts from other security service
providers, sometimes including competitors.
Our national sales call center (inbound and outbound) closes sales from prospective customers generated
through national marketing efforts and lead generation channel partners. Our highly trained telephone sales
associates work to understand customer needs and then direct customers to the most suitable sales approach. We
close a sale over the phone if appropriate, while balancing the opportunity for up-sales and customer education
that occurs when a sales representative works with the customer in their home or business to fully understand
their individual needs. When the sale is best handled in the customer’s home or business, the sales center
associate can schedule a field sales consultant appointment in real-time.
Our field sales force of approximately 3,900 sales consultants generates sales from residential and small
business customers through company generated leads and leads generated by our field sales force as well as
customer referrals and other lead “self-generation” methods. Our field sales consultants undergo an in-depth
screening process prior to hire. Each sales consultant completes comprehensive centralized training prior to
conducting customer sales presentations and participates in ongoing training in support of new offerings and the
use of our structured model sales call. We utilize a highly structured sales approach, which includes, in addition
to the structured model sales call, weekly monitoring of sales activity and effectiveness metrics and regular
coaching by our sales management teams.
Our extensive dealer network, which consists of approximately 400 authorized dealers operating across the
United States and Canada, extends our reach by aligning us with select independent security sales and installation
companies. These authorized dealers agree to exclusivity with us for security related services. We train and
monitor each dealer to help ensure the dealer’s financial stability, use of sound and ethical business practices and
delivery of reliable and consistent high-quality sales and installation methods. Authorized dealers are required to
adhere to the same high quality standards for sales and installation as company-owned field offices. We provide
dealers with a full range of services designed to assist them in all aspects of their business.
Typically, our authorized dealers are contractually obligated to offer exclusively to us all qualified alarm
accounts they generate, but we are not obligated to accept these accounts. We pay our authorized dealers for the
services they provide in generating qualified monitored accounts. In those instances when we reject an account,
we generally still provide alarm monitoring services for that account by means of a monitoring services
agreement with the authorized dealer. Like our direct sales contracts, dealer generated customer contracts
typically have an initial term of three years (two years in California) with automatic renewals for successive
30-day periods unless cancelled by either party. If an accepted alarm account is canceled during an initial
guarantee period, generally twelve to fifteen months, the dealer is required to provide an account with equivalent
economic characteristics or to refund our payment for their services for generating the account.
Additions to our customer base typically require an upfront investment, consisting primarily of direct
materials and labor to install the security and home/business automation systems, direct sales costs, indirect sales
costs, marketing costs and administrative costs related to installation activities. The economics of our installation
business varies slightly depending on the customer acquisition channel. We operate our business with the goal of
retaining customers for long periods of time in order to recoup our initial investment in new customers, achieving
cash flow break-even in slightly less than three years.
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