It has been referred to as everything from a 900-pound gorilla to the next best way to make a fortune. “It” is the trend of utility companies entering the security industry. But whether utilities will be the salvation or the strangulation of local security dealers — or make no difference whatsoever — only time will tell.
Deregulation of the utility industry has sent these previously monopolistic entities scrambling to ensure that when the process is complete, they will not only be able to hold on to their existing customers with innovative offerings, but will be profitable as well.
A June 1997 report from the Gas Research Institute acknowledges, “Both deregulation and competition across industries require gas utilities to search for profitability in new areas that will build competitive advantages in the coming years.”
Does all this mean that utility companies are all planning to use their current lists of captive customers to take over the security industry? Not at all. In fact, according to Scott Davis, a partner with the management consulting firm Kuczmarski & Associates, Inc. in Chicago, 48 percent of the nation’s utility companies aren’t even considering offering this service now or in the future. Other industry skeptics aren’t even sure that utilities can successfully make the transition from slow-moving bureaucracies to the customer-service-driven companies security customers expect.
Of the remaining 52 percent of utility companies that are either offering security or planning to offer it in the future, the relationships created with local security dealers are likely to provide many different variables. Currently, the relationships between security dealers and utilities run the gamut from simple marketing alliances to partnering strategies to complete acquisition.
But all experts agree, the key to any deal — for an alarm dealer — is to research the situation well, decide on your goals before your first meeting and set ground rules before any working relationship commences. Depending on what your company’s goals are, an affiliation with a utility company can be a win-win situation.
Why Are Utilities and Security a Good Match?
At first glance, the correlation between installing security systems and providing utility services might not seem apparent, but there are some similarities. Customers are used to getting a monthly bill and are usually comfortable allowing utility employees into their homes.
“We did a lot of market research before entering the security business. We found that the recurring monthly revenue was the same as in the utility industry. Also, people feel safe with our company name — they know we’ll be around here for a long time,” explains Beth Wrobel, operations manager, security services for NIPSCO Security Services in Porter, Ind.
Davis admits, “The utility industry is in total flux. Every senior manager is trying to figure out how best to survive and be profitable after deregulation. Some companies are being very aggressive with their marketing, offering unique programs — generally looking for ways to increase their monthly bills. Others realize this is an issue and are mainly looking for ways to retain their customers and keep the shareholders happy. Still other companies are in the Dark Ages. They are either not reacting or are reacting very slowly to the changes going on in their industry.”
The goal of utility companies that are expanding their product offerings, according to Davis, is to get deeper into the home.
Utilities Require Different Relationships
With about 10,000 different utility companies in the United States today, there are almost as many different relationships available. As each utility comes to accept the reality of deregulation, it will have to decide on how best to enter the future. Often the location and type of ownership will rule the decision-making process.
One large utility, Entergy, started Entergy Security in 1996 with an acquisition of National Security Services. That company’s president, David Carter, is now president of Entergy Security — which is ranked as the largest electronic security firm in the South, serving 200,000 customers in 10 states, according to the company. Entergy Security has grown through a series of acquisitions, at least 20 to date.
One security company that has made a series of successful marketing relationships with utilities is Protection One in Culver City, Calif. According to John Mack, executive vice president of business development, “About four years ago, we started looking for marketing relationships specifically with energy utilities and later other utilities as well. There seemed to be a lot of potential there.”
Protection One has a marketing relationship with a number of utilities across the United States and has even put together a merger with Western Resources, which now owns more than 80 percent of the company.
This marketing relationship consists of such programs as bill stuffers with promotional offers, co-branded television spots, call center referrals, employee promotional offers, community relations offers and direct mail.
Similar Goals Are Key to Solid Partnership
There are many reasons why a security company might choose to do business with a utility company. But before actively pursuing this type of relationship, you need to make sure your goals match those of the utility. If your company’s goals include using the utility’s customer list to increase your marketing reach, but the utility is only interested in making acquisitions, the relationship will be a failure from the beginning. But, if both companies have similar goals, a win-win situation should be formed.