The technology world is ever changing as consumers clamor for the slimmest flat-screen TV, flash their new iPhone™ and show off their eco-friendly car in the center of their driveway for all to see. For those of them who own homes, that mentality carries over.
These homeowners — particularly the affluent — want it all, and they want it in the comfort of their home. They may want security that includes the ability to monitor their residence while away, as well as myriad other conveniences and luxury features. For example, the push of a button draws automatic shades, lowers the temperature and initiates surround sound in each room.
Even with the housing market in a depression, security dealers targeting residential business can take advantage of this technology-hungry market. The demand for advanced home automation and entertainment is not only creating a “smarter” home, it is creating a smarter security dealer as well.
Those who jump on the opportunity to diversify their offerings are seeing a greater response from residential customers. In a suffering economy, it is an attractive way to ensure better business health.
Home Entertainment in Demand
Combining home entertainment and security solutions is at an all-time high, according to R.J. Hirshkind, product manager for residential and commercial A/V, telephony and central vacuum with global wholesale products distributor ADI. Due to economic woes, Hirshkind says homeowners are not being as extravagant, and instead are reinvesting in their homes.
In a recent report by Dallas-based research firm Parks Associates, nearly 85 percent of residential security dealers were offering their customers integrated control systems. Lighting and audio systems peaked second and third at 77 percent and 74 percent, respectively. The popularity of these systems has helped dealers find success outside typical security systems installations.
“While security continues to play a part in the consumer’s buying decision, many of these other systems have now outstripped security as a major part of that buying decision,” says Chuck Stevens, vice president of business development of Carlsbad, Calif.-based product manufacturer Linear LLC.
Bob Gartland, president of AVAD, a wholesale distributor based in Van Nuys, Calif., says the demand can be radically different based on the homeowner’s base knowledge.
“I think it’s one of the reasons why the business has never been able to articulate well,” Gartland says. “It is such a moving target based on price-point and consumer knowledge.”
Scott Sturgess, director of product marketing, intrusion and fire products, for ADI, says many homeowners may not be aware of the solutions available to them. “That’s where it is our responsibility as a distributor to offer education to ensure dealers are well trained on the technology, and feel confident in offering these integrated solutions to customers.”
Parks Associates found the demand for home theater was ranked the highest (49 percent) among other select home control systems in 2007. Audio systems have also been in high demand by homeowners (43 percent). Gartland has noticed a steady trend in homeowners expecting entertainment systems in their home. It is one that has changed dramatically in the past five years.
“For the consumer, those systems that are most affordable, and/or have the widest range of pricing options are in the greatest demand,” says Stevens. “Security systems, structured wiring systems, multiroom audio, intercom systems and home theater are affordable options for most consumers. Most of these systems offer a good, better or best solution.”
High-End Homes Stay Profitable
A growing part of entertainment system installations is occurring in the production market where the security dealer has a solid relationship with the builder. Those dealers have the advantage of being in the house from the start and can capitalize on multiple systems offerings.
Fortunately for dealers, even with a struggling housing market, the wealthy will always have money, says Sturgess.
“If I look at my categories of business, home automation is still growing in a tough economy, and it is growing at a fast pace. That tells me to some degree, higher-end home automation is less affected by the economy,” he says.
Dealers and residential systems integrators that can focus on higher end homes are retaining a steady flow of business.
Offering home automation systems that control lighting, temperature, cameras, music networks and security allows these installers to secure the electronic programs offered by these builders.
“Builders look for the completeness of the integrator’s offering before choosing him as their preferred integrator,” says Stevens. “Forward-thinking integrators are packaging these systems together and selling them on the basis of one point of control.”
Tapping Into Existing Customers
While the penetration in high-end homes has gone up significantly, according to Gartland, those not working on expensive, custom homes are having a difficult time.
“The dealers that were doing production predominantly working with builders are really struggling. I think that’s the hardest hit part of the market,” he says. “It’s going to be difficult for them to change the housing market dynamics. They need to go back and mine their customers to do upgrades and add things.”
With new home construction at an all-time low, dealers can’t focus solely on the high-end home construction market. Mining existing customers for retrofits and remodels is still going to be a staple. Fortunately, devices that allow for integration and control of several systems from one focal point in the house can be easily customized for security, audio, video, home automation and lighting control.
“They need to take on other kinds of work so they can keep their company and their resources intact. When the business starts to turn, they will still be in the position to take those opportunities on,” says Gartland.
By offering surround sound, whole-house audio, lighting and temperature control to established customers, Stevens says an integrator that becomes a retrofit specialist should have a leg up on the competition.
Getting on Their Level
John Knox, president of Life & Property Security Systems, an installing contractor located in Knoxville, Tenn., believes it is essential to educate the customer on his or her home automation options. When it comes to offering his customers a whole-house solution, Knox, whose company captured SECURITY SALES & INTEGRATION’s 2007 Residential Integrated Installation of the Year (see the July 2007 issue), takes the personal approach.
“I bring them to my own house and just show them what all is out there,” he says. “They generally don’t understand a lot of it, but they do have a better feel about it when they can see it work. That’s been my key to success in selling.”
People are no longer looking to shop for their home systems through a multitude of people, says Knox. When they build a home, they want to deal with the least amount of contractors possible. Those who can provide the right solutions through a single service will most likely land the job.
Diversify Your Offerings
While many integrators are slowly emerging in the growing technology and home automation trend, the key is to educate yourself and your customers, and then jump in.
“If you’re not in this market, you’re probably going to be a dinosaur, and may already be one,” says Knox.
In order to succeed in the future, Stevens says those in the residential market need to diversify their offerings.
“In trying economic conditions the ability to provide a wide range of systems should aid in the stabilization of this business. The bottom line: Adding more system capabilities to one’s business should help boost the profit potential for the business,” Stevens says.
Taking the next step forward requires an effort in educating yourself. Dealers who are confident in their knowledge and their product, will be able to inform homeowners on a smart buying decision and make the sell.
“Our goal is to provide dealers with the tools and education to become a one-stop-shop for the homeowner,” says Sturgess.
ADI focuses on helping dealers diversify their business to win new sales opportunities in a competitive market. ADI has been able to provide training classes and seminars to dealers to ensure they are up-to-date with the latest technology.
AVAD invests in an integration partners campaign where its vendors work together at an engineering level to produce products that interface and interconnect without complex programming, says Gartland. With a little additional training and some work with the manufacturers, dealers can easily migrate into the home automation and entertainment market.
Rebound on the Horizon?
“The desire to install entertainment in homes is still very much alive, and I think it may take a couple of years for that market to completely rebound, but I’m certain that it will,” says Gartland.
With the ability to install, adjust and service a larger menu of systems, integrators will be able to successfully tackle this market and create a new source of revenue.
According to Hirshkind, with a little self-diligence, integrators are taking the appropriate steps to build on their existing skills.
“It’s about taking the next minor step through basic training. It is not gigantic steps,” he says.
And when the housing market turns around, integrators will be optimally positioned to take advantage of the opportunities.
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