Throughout my career I have had countless conversations, held countless seminars and have been on countless sales calls related to retail monitoring fees and justifying them toward a sale. I can remember as far back as the late 1970s, when we sold residential monitoring for $15 per month paid annually in advance for $180. The challenge then was that many subscribers still used automatic tape dialers directly into the police departments. So essentially we were competing with what was perceived as a similar service that came without any monthly fees.
Of course, we all knew the great benefits that professional central station monitoring had over police-direct tape dialers. Although it was obvious, it still required a lot of dialogue and customer coaching to overcome the objectives. Back then I was on the other side of the coaching and I was fortunate enough to have gracious and knowledgeable leaders to guide me from the central station I contracted with at Affiliated Central Station. Eventually the tape dialer became a technology of yesteryear — partially because the tapes were an issue but mostly because one by one the municipalities stopped responding to direct-taped dispatches.
Fee Margins Lead to Market Flooding
Over the next few decades monitoring technologies and services advanced, subscriber monitoring fees increased and the wholesale prices for monitoring decreased. Some may say that this isn’t relevant to this article. I disagree and will tell you why it is important, and why it has led to another interesting development.
For as little as a 33% increase we can provide a host of services that have greater perceived value and stickiness than the base services, which have yielded millions of new accounts with a lot less zest.
It’s important because since the early 1980s, the disparity has widened between the price a consumer paid for monitoring and the price a dealer paid. But in many cases, although the technology increased, the level of service decreased. At one time we sold monitoring for $12 to $15 per month while paying $6 or $7—a nice margin and return for those who create a lot of accounts. Fast forward and the average consumer began paying $30 per month for standard monitoring over a POTS line with the dealer paying $3 or $4 per month. The industry went from multiplying their margin by two to a multiple of 10. It’s no wonder that many rushed to enter the security business.
However, it also forced the monitoring companies into competing in this commodity marketplace. I believe many trimmed and sculptured their services to fit within the prices dealers want to pay, rather than creating services that consumers want and setting the right price to it.
Dealers Now Delivering Real Service Differences
The good news is that over the past few years the actual services included with a robust monitoring offering are really improving. They are blossoming with the introduction of interactive services, remote video, home automation, electronic monitoring alerts, etc. This has allowed for some additional increases of consumer rates, but the difference is that now the services added are very noticeable. They are services that the end user can see and touch every day and that over time become so accustomed to that they can’t live without them.
So the industry is sitting in a very good place. We have a tremendous menu of newer items to add to the existing, valuable monitoring services. Plus with POTS lines as an issue it’s inexcusable to even enroll a new account that doesn’t have wireless communication or at least IP communication. Now we really have something to sell and, from what I have discovered, most of this is amenable for as little as $10 or $15 over the traditional $30 monthly fee that only brought monitoring. Imagine that, for as little as a 33% increase we can provide a host of services that have greater perceived value and stickiness than the base services, which have yielded millions of new accounts with a lot less zest.
All this is a shout to dealers that they have no excuses not to knock it out of the park and increase their subscription enrollment, while increasing RMR margins if they are offering the right packages.