The entry of telecommunications firms and utilities, as well as the evolution of home automation technology have changed the residential security market.
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With the exception of a subtle change here or there, the residential security market was relatively simple and straightforward for decades. A home owner looking to secure their property with an alarm system would call a dealer for an estimate. That dealer would send a sales rep to the home owner’s residence for an evaluation to discuss with the prospective client what they needed in terms of equipment and monitoring. Based upon the home owner’s decision, a standalone alarm system would subsequently be installed on the premises. This business model still holds true in many cases, but the market has changed dramatically over the last few years.
A new report out this week from IMS Research has found that consumers’ views on home security have changed. The entrance of telecommunications firms and utility companies to the industry has brought the concept of security as an add-on service to the market. These companies believe that they can sign-up customers who have either never owned a security system or are unsatisfied with their current service provider through their bundled services model; the thought being "I’m already purchasing my cable, wireless and Internet from them, what’s another $20 for security going to hurt." Just this week, AT&T, which formally entered the market earlier this spring, announced that it is opening a new 10,000-square-foot flagship store in Chicago that will feature the first retail demos of its new security offerings.
Not everyone is convinced, however, that these companies can make the home security business model work for them. Earlier this year, I spoke with longtime industry analyst and Imperial Capital Managing Director Jeff Kessler, who said that while many of the financial roadblocks that prevented telcos and utilities from being successful in the market previously are no longer an issue, they will still need to overcome the poor reputation that precedes many of them have when it comes to service.
"The incremental costs of adding security to an existing customer are not that high. Things have changed for the better for these companies," he said. "It remains to be seen how much market share they can take, when their reputation as a service provider has been so poor. How many people are paying more than $200 or $250 a month for a triple-play and thinking they’re getting their money’s worth, particularly on the service side."
Another trend that has had big impact on the industry is the evolution of home automation and the proliferation of smartphones. What was once only a luxury that only the rich could afford, home automation technology has become an integral part of nearly every new alarm panel that hits the market these days. It seems consumers are no longer satisfied with just an old fashioned alarm system that arms and disarms when they leave or return home. They now want the ability to control their thermostat, turn lights on or off and read the day’s news headlines all in the same system. And not only do they want to be able to do this at the panel itself, they want be able to do it remotely from their smartphone.
Of course, this technology revolution has not caught many alarm dealers off guard and some have even embraced the idea of moving beyond the installation of just security alarms. A prime example of this is Utah-based Vivint, which changed its name last year from APX Alarm to reflect the company’s strategy of not just providing residential alarm systems, but home technology services.
The challenge for the industry, however, is letting home owners know that telcos and utilities are not the only companies that can provide them with the level or services their looking for.
"I think the main thing we’ve been concentrating on is educating our customers and educating the market that we’re in that we provide these services as well," said Jim Callahan, president of Atlanta-based Ackerman Security Systems in a previous interview with SIW.
While companies such as AT&T and Verizon have been rolling out their security services on a trial basis in select markets throughout the country up to this point, you can be sure if their initial efforts are successful, they will unleash a nationwide marketing blitz the likes of which the industry has never seen. However, traditional alarm dealers should be well-positioned for this barrage and be able to differentiate themselves and their level of service from the competition.