Selling Home Automation with Security

In today's market, the security dealer has to sell so much more than just security. That's the message from the world of home automation, at least. SecurityInfoWatch.com caught up with Tom Pickral of Home Automation Inc. (HAI) to discuss what the market looks like, what kind of technology is hot, and how to sell integrated residential technology.

[Editor's note: Despite seeing HAI's New Orleans area location flooded by Katrina, Pickral says the company is up to speed again, working out of three different facilities, VPNing its way to stay in touch, and back to the business in a manner that's as "usual" as one could be after losing a facility to a flood.]

Tom, for our dealers that have been specific to the security marketplace, can you bring us up to speed on how security and home controls/home automation have changed in recent years?

To get back to when we started (HAI began in 1985), we were focused on the smart house side of the business, but to be viable as a company, we started offering security with our products. Now, years later, I think what we're seeing is a consumer shift away from a security, with a lot more interest in full-house custom solutions, such as lighting, automation, touch screen controls, and high-speed Internet access.

So we're seeing a shift away from traditional security dealer delivered systems, and over the last 20 years, homeowners have become much more empowered by their home automation systems. We've always offered telephone access and now they're able to use their cell phones. Our industry began the initial shift from making security guys being the lead control of someone's home, to allowing the homeowner to control their home, whether that's from their cell phone or from their computer.

The next step in the change is that we're moving away from the security industry offering the monitoring and notification services to the utility companies beginning to offer these services. Soon, the phone company or the homeowner's ISP may provide these services. These big companies are focusing on all the services they can provide inside the home -- their bundled packages. With them integrating home services, these companies are looking at products that can be integrated inside the home, and that's where security and home automation come together. It took us 20 years to realize that what we have to provide to the homeowner is a central home control system.

You indicate that maybe security isn't the chief selling point of a central home system. What is?

The components are comfort, convenience and safety. The customer isn't just asking for security. We know they tend to want security systems after they've been broken into, but until then, they're mainly seeking convenience in the home -- ability to automate lighting, control the HVAC system when away from the home, know when their kids got home from school.

What's hot today?

I think it's the touch screen controls. But people are also very interested in the camera/video interfaces to those touch screens. People also are very interested in whole-house audio, and they're always interested in saving money through energy management. And, yes, they want security, too.

Is there a way to put a number on how well the industry is doing?

There are some analysts, but they often paint a too-rosy picture of our industry. However, I will tell you this: We did around $10 million in sales in 2005 and we're expecting to approach $20 million in 2006. And we know this growth is coming because consumers are finding out about these products, not just because dealers are selling it. The dealers are becoming interested in these products because they are following the demands of the consumer.

Some people projected that this industry would grow from $3 million to $3 billion almost overnight. That hasn't happened yet, but the home automation industry has been growing modestly. We're now in a position of mainstream consumer acceptance and now it can expand through the market.

Can you tell us about the marketplace and whether that is changing?

It typically has been an upper-end offering. But I do see that changing. People really want these kinds of products, and it's not just the wealthy homeowner. It absolutely is making a shift to the affordable housing market. We saw a developer in Texas using our technology whose homes were prices from the $120Ks to $130Ks. Affordability has changed; these systems can be appropriate for any of today's homes, from the trailer home up to the mansion.

While the products are definitely designed for professional installation -- and we make it a point to support the dealer channels -- we've had interest from companies like Home Depot and Lowe's to offer these products. That's how the market is changing. And these products are going to become even easier to install.

Dealers selling this kind of technology need to think about the buyer of today. What factors are changing with the potential buyers?

Generation X and Generation Y are going to have an enormous impact upon the marketplace. Because homes have become so expensive, we're seeing most people are buying homes now in their early to mid-30s. Even though that may be a little later than it had been in the past, this generation is much savvier. They grew up around this technology. They grew up with Ethernet connectivity, using email alerts and seeing cell phone tie-ins. They've been able to email video clips. And if the price difference for their home to have these kind of control functions is only a few hundred dollars, then what are they going to do?

All that said, these systems still do not sell themselves. Faced with things like upgraded countertops, upgraded flooring, unless someone is selling one of these systems, you will get a lower response.

The market, in many ways, is still in its infancy. It's really just getting started after all these years, regardless of what the sales numbers were this year. And eventually we think we'll find a central home control system in every home that's built.

In close, what would you tell the residential security dealer who may be starting to look at home control product sets?

I'd say every security dealer needs to understand what these products offer because eventually that's going to be what they have to offer. Today's buyer is looking for more than just security.

Automation and integration is what's going on in the industry today. To remain competitive in the industry, they'll have to learn these products and offer these kinds of products, or else they'll be run over by their competition.

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