What’s P1’s vetting process to evaluate new technologies so you have cutting-edge and not bleeding-edge? How do you balance innovation and maintain reliability out there?
Whall: We’ve got a couple things to deal with. First, the leader always comes into play, and I’m kind of a slow adopter. So you’ve got to take that into account and say, “You just can’ t just put your head in the sand, Tim.” So I always make sure I got what I call my wizards — my engineers — and their job is to get excited about every little thing. And I never like to be caught off-guard. If I hear about something new from somebody that’s not one of my guys, I’m like, “Hey, fellas. How did this happen? We’re having a monthly update and your job is to fill my head with everything that’s possible under the sun, as well as your recommendations of how far away it is.” So that’s kind of how we always try to keep a balance of what’s out there. But at the end of the day, it’s the client that kind of drives the bus for us, and most of our clients don’t have the risk appetite to invest in any bleeding-edge type of solution. The clients demand solutions that are predictable and minimize the risk for failure. I haven’t sat in front of anybody that says, “Hey, Tim, if it doesn’t work, no worries. At least we gave it a shot.” They want the stuff to stay ahead for sure. And being a company like P1, we also get the benefit of being a big buyer with the manufacturer, so we’re closely involved with their teams. They’re reading out to us on a quarterly basis what’s in design and what’s next generation, and giving us a little bit of a peek behind the curtain in terms of what’s coming out. I feel like we’re able to keep a real close eye on what everybody has, what is available, what is being offered. For me, what’s always going to carry the biggest push is if I see my sales team saying, “Hey, we’ve got a request for this.” It’s like that cloud storage. I hear that more than anything else right now. You know, “Hey, Tim. What can we do there? How do we meet the demand for almost unlimited storage at reasonable fees?”
How do you reconcile the importance of referral business versus marketing campaigns? With so many different media avenues out there, how do you determine the most effective marketing strategies?
Whall: It’s something we talk about all the time, so word-of-mouth is and always will be first and foremost in the marketing strategy for us. We definitely believe in the power of a brand, not just brand awareness, but the brand experience and its power to drive market penetration, and it’s been good with me throughout my career. There is no better way than when consumers are talking to other consumers about who they’re using. But we wouldn’t have made such a hard run to get [Chief Marketing Officer] Jamie [Haenggi] to join our team if we didn’t think we needed a subject matter expert on what is the best use of marketing dollars. When we evaluate our marketing programs and their ability to drive brand awareness and recognition combined with cost-effective lead flow, certainly the Internet can be a good tool to reach a broad audience. Direct mail is sometimes used for specific targets, like a resell or competitive takeover. Jamie’s just got a wealth of experience in this space, and much of it from her time at ADT and then four years running things at Vonage. She’s actually got some creative things in mind for us that she’s been pitching us for some time here to give a shot in 2012. This year, it’s comforting to have an expert in marketing in your ear who you have the confidence in when this person tells you you’re going to get this.
I like to say, “How do we put more science into the art of selling?” If you just take it all as art and you get what you get, that’s not very comforting for a business. With us, we’re fortunate that she’s with us and she’s leading that attack for us. Each month she kind of runs through how we’re spending the money today. The question I always ask her is, “Jamie, if you had an extra $1 million, what would you spend it on next?” And the answers just spit right out of her mouth. And then I look at what we would expect to get from that and how do we spend the exact amount of money where if I spend more, I get diminishing lead flow at a higher cost and yet I still get the growth that I want. That’s kind of the seesaw we all play in that market arena. But I’m pleased at what she’s done with a limited budget so far. I’m very excited to say that with the growth, we’ll be able to put more to this area as we go forward.
How important is it to you that P1 participates in industry causes and concerns, whether it’s via trade associations, being in committees, and even beyond that in terms of community service activities?
Whall: That’s probably the most interesting thing that we’ve got here. As a large company, you have somewhat of an obligation just to be participating, if nothing else just to sell your view on things, whether you believe you’re getting back or not. Now, I think that the different groups and different associations do offer different value back. Recently Don Young joined the board of CSAA. We feel that’s a very important one for sure. I think he’s actually on a couple of committees. I don’t subscribe to having a full-time person participating in them. I like putting some different folks who might be valuable in that particular regard, and I do think we’ve got value coming back from them. In terms of community events, that’s just big for each of the branches. Nothing that the employees are going to do makes them feel better about working here. They pick their own community event, you pay them to take the day off and they go and do something good for somebody. They always send back the pictures and the written testimonies of what was done to help someone out. It does just as good for your employees to feel good about the organization they work for as well as you’re helping somebody in need. So, I’ve always seen that to be a good strategy for the organization. I never believed in having one cause. We’ve done a good job in the past 18 months getting a lot more folks signed into the organizations. It was a little surprising we weren’t in most of them for such a large organization. Of course, because of your size, there is always a fee structure that comes with us, and I always like to say, as new owners to the firm here, size isn’t everything. But we were able to negotiate what I think is fair.
Are there opportunities for independent dealers or security companies to collaborate in anyway with P1? Is there a dealer program through the monitoring services? What are the opportunities there?
Whall: We kind of doubled up our wholesale business there and as we look at subcontractors, we’ve got a nice base of 4,000 alarm companies and people that we can be reciprocal to. They’re giving us their business to monitor for them or take care of some of their 24/7 things that they do, so we look to reciprocate with them as well. We do not run a dealer program of any type, so we do keep our retail as our retail business. They are brick and mortar, but we have had a need to go out to find a subcontractor certainly in some of the towns where we don’t have a physical office. It’s been a real nice thing here. It’s been a pleasant surprise. P1 is our relationship with the guys and gals that we do the monitoring for out of our CMS grouping.
On the CMS side, you keep that fairly separate from my understanding because you’ve got the third-party services to what could be perceived as some competitors to P1. That’s something, I imagine, that you’ve got to stay sensitive to and keep those things as separate as possible.
Whall: No question. It makes a lot of sense that we answer the dealer. It’s a separate division. They’re paying us for a service, and we want to respect what they’re looking to get out of the relationship, and we have to be very cognizant of that as they’re going to market. That’s a business that’s been pretty steady in terms that really mirrors the industry growth rates, so if the dealers are able to grow just a little bit, we have a nice growing business on our end. Price compression on that is a problem as anywhere else out there, so we’re always looking for new opportunities to add value and use our ability to do some of the R&D and transfer that back over the CMS to the smaller dealers so they have the opportunity to take advantage of it. So if the price remains the same, they are getting better services or more services for their dollar.
When you look at those recurring revenue-type monitoring services, what are some other opportunities you see emerging?
Whall: There is a lot to do with the handheld device type of things and the remote access for their customers and things we can bring to them that maybe can come at a better economic price point than they can get on their own. Some of it is us using our leverage to provide advancements for them that, again, they would see a financial benefit to working with us to go through, whether that’s on simple things like an equipment purchase or more importantly there are some services. I know our team there has a couple of initiatives they would like to roll out to their dealers as new offerings this year.
As you look out there, are there any specific variables that you see that if this happens it could affect us poorly, or if that happens it could affect us positively? Especially in an election year, I would think there might be some of those factors you have your eye on.
Whall: Yeah, we spend a lot of time on all the different kinds of construction. We noticed multifamily housing construction is going to be up 15% to 18% this year, and that’s a good thing for us. We’re kind of a leader in that space, and we see that as really positive in terms of how we’re judging our success could be this year. Most of what we’re doing in our verticals doesn’t depend on the vertical itself expanding or growing. It’s really us expanding our presence there. All of us keep a close eye on this economy. It’s hard to open that business section and not see some turmoil somewhere with some issues. The good news is a lot of the firms have now gotten through some tough times. And you have to ask if you’re able to grow more easily, is it the market growing or are you just reaching your potential and getting closer to the size you feel you should be? I think we have less exposure than most in this arena, but we’re clearly like everybody else and looking for some sort of recovery in the economy. If we see that, it’s all tailwind for us. It’d be interesting, as you said, in an election year to see how things play out for us.
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