Redefining Your Residential Business Strategy

The home security market is undergoing a series of important changes now – all of which will have an impact on the way alarm dealers sell home security systems.

Some of the trends include:
• The mass market continues to expand, but Tyco’s difficulties have changed the sales practices of ADT in a way that may help the independent dealer
• As the home market expands, it creeps ever closer to its penetration ceiling (all markets have penetration ceilings), and this alters market potentials
• 9/11 has changed the way some homeowners see the need for home security. For example, panic rooms are now being promoted (see page 124)
• The rising prominence of the security industry has attracted other classes of trade, and those already in homes installing other devices and systems are asking about security systems

While mass marketers have been investing advertising resources to promote their low-priced home security systems, the independent dealer has been left to ponder a strategy of how to sell new home security systems at traditional price points compared to competing offers of $95 and even less. While this is occurring, the home market is taking on a different character that the independent dealer may or may not see plainly as one of those strategy options.

A Market More Layered Than Ever
One of the options I recently examined involves the impact that record low interest rates in the banking industry have had. Homebuilders have been encouraged to borrow heavily in order to buy property tracts for new home construction.

This trend has been ongoing since the stock market bubble burst in March 2000 and the Federal Reserve began lowering the federal funds rate to spur the economy.  It has enabled individuals and families to borrow money to buy these new homes and to remodel existing homes by refinancing mortgages at lower interest rates.

In both cases, individuals and families purchased whatever electronics were installed in new homes, or in many cases, had new electric and electronic systems installed as part of their remodeling. One of the more popular additions to these homes is home entertainment, particularly audio and home theater systems. The professionals who install these systems are typically audio/video dealers and home automation dealers and integrators.

Recognizing that the home security market is now more layered than ever, should a security dealer enter the home networking and automation market to take advantage of the trend in high-end security systems, where installations can be profitable, or protect the monitoring accounts and contracts that may exist from being taken over? This choice has to be made.

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