Where’s the Beef? It’s in the Installation!

Smart business people realize a bird in the hand is worth two in the bush. Then why do so many alarm dealers continue to deeply discount installations and stake their future on recurring monthly revenue (RMR) from those accounts? That’s like falling for Wimpy’s line, “I’ll gladly pay you Tuesday for a hamburger today.” It’s time to stop giving away the beef!

Of course, RMR is the bread and butter for dedicated central monitoring stations, and that’s fine. However, even those companies are desperately looking for new revenue sources. For installing dealerships that do their own monitoring, RMR should be considered gravy – with installations, maintenance, system design, consulting and other services being the meat and potatoes.

The root of the problem lies with the emergence of mass-marketing sales practices in the late 1980s. While this approach succeeded in greatly increasing the overall penetration of alarm systems, particularly in the residential and small commercial markets, it brought with it a plethora of problems that continue to plague the industry today.

Zero- and low-money down deals attracted customers who may have never even considered a system. However, many of them were bad credit risks and ended up defaulting on their monitoring contracts. This strategy also made it easier for practically anyone with wire strippers to call themselves “an alarm dealer.” Consequently, more substandard systems were installed, further inflaming the already incendiary false alarm issue.

Even when the systems and installations were not substandard, they were often too rudimentary (panel, motion detector and a couple of door/window contacts) and gave owners a false sense of security. There is a big difference between an alarm system and a security system! The latter is a complete, carefully designed solution typically involving more equipment.

In addition, among the general population, mass marketing greatly devalued the expertise of truly qualified and conscientious installers. It eroded margins and reduced alarm systems to a commodity. Once profits were squeezed out of the installations, many found themselves having to cut monitoring fees as well. No one wins when it boils down to price; it is a destructive, downward spiral. Customers must be won over with value, not dollars.

While some companies have recently softened their give-it-away philosophy, and dealer programs have taken steps to weed out disreputable installers, the damage has already been done. Account attrition; a drop-off in new customers; disdain by mainstream media; investment community skepticism; disregard by lawmakers; and fed-up police departments are evidence of the hole that has been dug. Even though 80 percent of the damage has been done by 20 percent of the dealers, it has affected the entire industry.Fortunately, there is a salvation and its name is technology. Digital CCTV, access control, biometrics, perimeter protection, structured wiring home controls and systems integration, among others, are offering security system installers a new lease on life. These are the types of technologies, along with more comprehensive intrusion systems, that end users are still willing to spend money on.

Large commercial dealers and integrators already understand and profit from this knowledge.  It’s the traditional alarm dealers who must realize this paradigm shift is at hand. A wealth of opportunity is at their doorstep, but only if they emphasize professionalism and become more progressive. Otherwise, they may end up being buried in that hole.

There are some encouraging signs that such a change is underway. According to the 2002 Security Sales & Integration Dealer Survey, security contractors reported revenue source percentage increases in paid-in-full installations, upgrades and servicing of non leased systems. These are positive trends that will, hopefully, continue.

Month in and month out, SSI does its part by delivering content that explores new markets and technology. An excellent example is our special coverage on digital video recorders (see “DVRs Are Driving CCTV to New Heights”). Whether you are a dealer or an integrator, this informative section will help bring more value (meat) to your business.

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