Why Residential Is Ready to Rebound

For the first time since Dallas-based research firm Parks Associates began studying security in 1988, there is a statistical drop in the percentage of homes monitored. The number fell from 19.5 percent in 2008 to 17.5 percent in 2010. While 2 percent seems a small differential, when considered as the percentage of all monitoring lost, the number jumps to 10 percent.

The reasons for this decline are a weak housing market for new starts; weak to very weak market for resales; general economic conditions (unemployment, foreclosures, etc.); and stable crime rates following several years of declining rate.

The latest findings are the result of two surveys conducted by Parks earlier this year of 6,100 and 2,516 broadband (BB) households (HHs) about their security systems. It follows surveys completed at least once per year between 2003 and 2010. Respondents were queried about the presence of security at home, providers used, satisfaction, and other information.

[IMAGE]11745[/IMAGE]Parks Associates pegs the presence of any electronic security system in U.S. primary homes for the beginning of the year 2010 at between 21 percent to 23 percent. Monitored security is present in 17 percent to 18 percent of U.S. households, meaning that between 75 percent and 80 percent of households with a security system subscribe to a monitoring service.

Those that don’t have monitoring either never had it or concluded after the end of a contract that it was no longer necessary. The reasons for that decision are diverse, but include: feeling safe in their home; saying it was too expensive; and deciding they did not use it enough.

Despite the grim statistics, the security industry has held up well compared with multiple other industries. This is particularly notable when considering that, since 2007, nearly 6 million homes have either been foreclosed or on the docket for that eventuality. If 15 percent of those had monitoring, those homes account for nearly 900,000 subscriptions lost. Drops in sales of some electronic products in 2009 easily topped 20 percent and the security industry fared much better than that. Many industries not connected to electronics had an even tougher time; just think retail and restaurants.

Helping the revenue side of the security industry coin, at least for major providers, were increases in average monthly monitoring fees. The industry went from an average monthly monitoring fee of about $29.50 in 2007 to nearly $35 in mid-2010. While on a simple percentage basis, this represents a nearly 20-percent increase, in real dollars to any given average subscriber, this is about $60 more per year — not enough to cause cancellation by stalwart steady subscribers.

Based on the findings and keen analysis of Parks Associates, SSI’s 2010 Residential Market Report provides ideas for minimizing attrition, selling more to existing customers and leveraging exciting new services to attract new business.

6 Ways to Beat the Downturn

Simply understanding which customers are at risk is a help to providers and dealers alike when addressing waffling or uncertain customers at the time of new contracts. However, Parks Associates believes more action and better solutions than simple awareness will benefit the industry.

Following is a set of recommendations, no single one appropriate for every dealer, but certainly at least one of the possible actions may benefit any dealer:

Consider adding IP benefits and devices to your bucket of offerings as upgrades or upsells. Excitement over possibilities available by using an IP platform for monitoring services and access is increasing. There are, indeed, valuable benefits from a service platform that can include security, control, access, energy monitoring, and even health applications. Emerging players such as iControl, uControl and Intamac prepare to seize share or act as complements to traditional security with new benefits to existing security provider customers as traditionally perceived and for categories such as energy and controls.

While from the consumer’s perspective today security is about standard security capability, opportunities for enhancements are possible from IP systems and also from offering networked cameras and the like. For core security customers, added benefits may be enticing — as long as they do not have to work too hard to realize their benefits.

Today, the valued and paid-for features are intrusion alerts, with fire alert ranking second. The third and fourth most common features are panic buttons and chimes, the former a “peace of mind” feature and the latter an everyday alert to the arrival or departure of family and friends. None of these are new.

On an incline, however, are alerts to a cell, PC, home phone or some combination thereof. Even more encouraging is the high value placed on this feature by its users. After asking respondents to select features present on their security systems, they rated the features they currently have on a 1-7 scale with 7 equaling “Extremely valuable.”

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