Cover Story: What Do Your Residential Customers Really Want?

Integrators with their fingers on the pulse of the residential market say the days of selling burglar alarms are going the way of residential wall phones. There may be a small market for them somewhere; however, serious RMR will come from Internet and smartphone-based security services. Big telcos like AT&T and Comcast are positioning themselves for that future. To survive and thrive, security dealers need to get there first. 

Currently, there is somewhere between 20-22 percent residential market penetration in the security business. “We need to get to the next 20 percent of the market,” says Mitch Brozik, founding partner of Secure US. Founded in 1993 and based in Morgantown, W.Va, the company provides services to more than 10,000 customers throughout the region. In May 1998 the company opened its own UL-listed monitoring center and 16,000 square-foot corporate office, but Brozik still sees himself as one of the little guys and he works hard to keep the company and its customers tied closely.

Crime is up nationally. Generation Y is very connected. They want to be able to arm their systems, change room temperature, unlock doors or monitor their children when they return from school. “We are seeing more connected services,” Brozik says, noting the trend to smartphones, iPads and similar devices. “It is helping us penetrate the next layer of the market,” he adds.

“The lifestyle component continues to be top-of-mind for consumers,” says David Hood, director of business development at EPS Security, Grand Rapids, MI. Founded in 1955, EPS now has 200 employees working out of six branch offices. Hood notes that the younger generation of homeowners is busier than ever and technology-based systems appeal to them.

 

Features Your Customers Want

Indeed, cellular connectivity, IP-based systems and video are all the rage. Yet Electronic Security Association (ESA) president John Knox is wary of selling technology for technology’s sake. “I qualify customers first,” he says. “Figure out whether they need these services — will new services enhance their life? Tell them that it’s not as easy and seamless as the ads claim. I explain the limitations of the services.”

Hood says video is very hot in the commercial market in Michigan and is catching on in the residential sector. “There is a comfort level there,” he says. “People are embracing cameras, culturally, in their homes. They are not opposed to having a camera in the house or on their grounds.”

Using Wi-Fi to check on the children, the dog or the property is an easy sell to the tech-savvy customer. “The biggest secret to success is telling the customer why they should buy,” Knox says. While he never would go negative on a competitor, Knox makes sure the customer knows that the high-tech system installer will have access to his home or office network — the same one the customer uses for online banking and the like. News reports are full of stories about people who opened ports on networks and did not protect them. The recent “baby cam” brouhaha is a good case in point.

“There are limits to who people will trust,” Knox points out. “I’d never say the other guy is not trustworthy. But most security firms have a 10-year track record with their clients. Clients see us as people they can trust.”

 

Marketing + Technology = Success

One recurring theme among successful residential dealers is the need to reach the customer — to let them know about all the nifty technology that will take them beyond simple intrusion or fire alarms into the 21st century.

Judo techniques might work: use the big guy’s power against him. “A lot of little guys are frustrated when the big boys act like they invented technology like remote-control thermostats or door unlocking,” Knox says. “Little guys know they are not only capable but a lot better at doing the same thing — b?ut little guys don’t have the marketing budget to compete,” he adds.

The answer, Knox believes, is to leverage marketing efforts into your own local sales effort. “My personal experience is pushing these services in our newsletter and telling customers we’ve been providing these ‘new’ services for a decade,” Knox says. “You’ve got to touch your customer more now.”

“People you would never have guessed were interested will respond to a billing insert and look for a 4G upgrade,” Brozik says. While he agrees that many small shops find it hard to market the way big guys do, his company is proof that it can be done successfully. Secure US calls it their “Get Connected and Protected” package and advertises it in newspaper ads, on the radio and in bill inserts — it all leads to higher RMR.

Part of Knox’s overall strategy is to build a customer email list to help them contact the faithful. “We figure they are likely to open an email from their alarm company,” Knox says. 

Brozik says the way to keep customers “sticky” is to provide the personal, local service that brought the customer to the table in the first place. “A lot of our customers have faith in us as their local provider,” Brozik says. “We know what is going on in the community, where crime is on the increase. We have the heartbeat of the local market. We know the local authorities.”

All of that adds up when a local dealer has to sell against a big, national operation like AT&T or Comcast.

If the little guy does it right, there is no reason to be afraid of the “big guys” of the world. “People count on buying local. Nobody is happy with their big, national cellular or cable TV bills,” Brozik notes. “You really don’t have to market against it.

“Those big companies have no clue that the hard-wired system they are asking the customer to replace today cost $6,000 or $8,000 a few years ago,” Brozik adds.

 

The Right Platform

Just as you can miss your train if you are standing on the wrong platform, a security dealer looking at the right technology but basing it on the wrong platform, may see marketing efforts go for naught. “Take advantage of the sunset of 2G technology,” Hood recommends. He notes that the industry is about 18 months from the end of 2G as a supported technology. “We have several thousand accounts we are upgrading from 2G to 4G,” he continues. “We are leveraging that account time to educate customers on Z-wave technology.”

The key is the up-sell potential on existing systems. Add to that the glitz factor for new customers who discover the ability to control systems with a touchscreen pad and other Z-wave technology and the salesperson has an excited customer.

Brozik is sold on IP. He notes the short, if happy, life of 2G cellular. “4G will have its sundown, too,” he says. “What then? It will be difficult to change over your customer base.” He says that, when 4G has its downturn, it will be easier to manage systems via the Internet.

Don’t be afraid to charge for the modern services. Everyone knows a certain segment of customers will shop on price; yet, Brozik says that the best customer is one with some money in the game. “We don’t do the large, free systems,” he says. Instead, he has no problem asking a customer to pony up $750 for a full package that includes door, glass breaking, smoke and other protection with 4G communications. He then charges a small, $24.95-a-month payment. Those customers see the ongoing value of the service they get and already have a capital investment in their home system. “They’re the ones who are going to keep their service and use it,” he says.

 

Service, Service, Service

Brozik has no problem selling against cable TV companies. “Have you ever waited for your cable repairman to show up sometime between 12 and 5 p.m. next Thursday?” he quips. “If your family needs to be protected, we provide strong response right away.”

It is that kind of service that keeps the customer happy. “We are trustable, dependable and take care of our people,” Brozik says.

Hood would agree. “We welcome the cable companies with their bundled solutions,” he says. “The cable companies are bringing more awareness to the market. If they can help us grow the security market from 20 percent to 40 percent — even 30 percent — that is great!”

EPS prides itself on having customers or potential customers talk to a real, live person within 30 seconds. It is that kind of response that makes the homeowner feel secure and in touch with their local business operator. Even more important, Hood says, his company lets every customer know that they background check and drug test installers and assure they are not felons. “We do not subcontract our labor,” Hood adds, noting that many people are uncomfortable with trusting a “cable guy” with their life safety system. “I would never slam the competition — just put the question out there for a customer to consider,” he says.

 

Other Threats to Your Success

It is not all gravy — for one thing, there is a growing do-it-yourself (DIY) market for thermostats and other security and home automation equipment. For another, service and maintenance can be expensive. “I know we can get more RMR,” Knox says. “The scary part is figuring out the right amount.”

Knox fears that, even today, dealers are not charging enough. “I’ve been doing this for 10 years and I never felt we were charging enough,” he says. “I know it is too low right now.”

Operating expenses can eat an integrator’s profits and then some. Where it takes one service tech to support a traditional customer, it can take five for the high-tech customer. Rather than a visit every year or two to replace a battery or add a door alarm, high-tech customers are apt to call every time there is a quirk with camera access or a router’s lights flash. It is not just phone calls but truck rolls that can eat up revenue.

Customers can revolt, too. While most people will appreciate remote video — who hasn’t been in a boring meeting and hopped on their smartphone just to see what the dog is doing downstairs — other features might not be the long-term winners they appear. Energy management is effective; but how often does one really need to change the thermostat from 500 miles away?

Whatever happens, Knox emphasizes that dealers and integrators have to keep in mind that their business is protecting the things most precious to their customers — their lives and their property. “Answer your phone. Be there for the client. Don’t become a gadget seller,” Knox encourages. While he admits they will have a tougher row to hoe, he says he doubts that firms that do not offer high-tech are dead as dinosaurs. “Remember to take care of the important things first and you can survive,” Knox concludes. “It will be tough to continue as a traditional service provider and you are in danger of losing customers — but you can survive.”

Curt Harler is a technology writer and regular contributor to SD&I magazine. You can reach him at curt@curtharler.com.

 

SIDEBAR: Home Automation By the Numbers

$19.15 billion

The total market value of home automation & controls in 2012

Source: MarketsandMarkets’ "Home Automation & Controls Market by Product & Geography (2013 - 2018)" report

 

$48.02 billion

The projected total market value of home automation & controls by 2018, an estimated annual growth rate of 16.9%

Source: MarketsandMarkets’ "Home Automation & Controls Market by Product & Geography (2013 - 2018)" report

 

2.3 million

The estimated number of new smart home installations in North America in 2013, an increase of 66 percent year-over-year

Source: Berg Insight

 

78%

The forecasted annual growth rate of the home automation market in Europe over the next five years

Source: Berg Insight

 

68%

The number of Americans polled who say a home security or automation system increases the value of a home.

Source: ADT 2013 Safety Data Index

 

$300.7 million

2012 global revenue of the Home Energy Management market, which is projected to grow to $1.8 billion in 2022

Source: Navigant Research Report, “Home Energy Management”

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