Why Homebuilder Relationships Are a Hot Commodity for Security Dealers
Homebuilders have begun to see technology as an asset again. Now’s the time for security dealers to capitalize by becoming valued partners.
Now that the U.S. housing market has found a stable equilibrium, bouncing back from the low point of 2009, new home construction is a focal point of revenue for many residential security dealers.
But some still struggle with how to formulate a solid working relationship with builders. According to one luxury homebuilder, a leading residential systems provider and a top smart home manufacturer that SSI queried, there is no one-size-fits-all solution.
But the working relationship built by Arthur Rutenberg Homes, AAMI and Lutron might be a model for others to follow in the residential home security and controls space.
Some advice ahead for residential security systems dealers includes full transparency, leveraging brands and determining builders’ competitive vs. profit incentivizing; a sidebar also looks at a two-stage contract business model.
Housing Is Back & Brands Matter
Recent reports show that U.S. housing starts have nudged back up over 1 million starts. That’s double the number from 2009. It certainly is not where it was before the housing collapse, but dealers now know that those high housing start numbers were unsustainable.
It was also not healthy for technology because the market was so hot that new homes really did not need the technology; homes were going to sell quickly no matter the amenities. With that increase in housing starts, the percentage of builders offering home tech amenities has risen dramatically since 2009.
Areas like home automation and energy management systems are now offered by 24% more builders than back then according to the joint National Association of Home Builders/Consumer Technology Association (NAHB/CTA) “State of the Builder Technology Market Study.”
Likewise, lighting control — often implemented as an added security measure because of the on/off scheduling ability — is now offered by 19% more builders. It’s a trend that David Weinstein, vice president of residential sales for smart lighting and shading control leader Lutron Electronics, has seen on the rise.
Weinstein adds that brand awareness is still the dominant influencer for dealers at the high end of the market because they are “still putting together best-in-class solutions,” he notes. “As we go down into the semicustom and midmarket production world, I believe the role has changed somewhat.
There is a strong need to build consumer awareness and confidence around some of the brands as it relates to products with apps that control the home and the Internet devices throughout it. Builders, always, if they are doing a good job selling quality, are going to try to align themselves with brands that they know have a reputation for quality and reliability.”
John Globetti, president of ARBC, the largest franchiser of Arthur Rutenberg Homes, a high-end homebuilder based in Clearwater, Fla., attests to that. “We try to be on the cutting edge with whatever we offer. We want to offer the latest and greatest,” he says.
“What we’ve seen is that there have been so many technological advances — from Apple iPhones to other products — it has increased consumers’ exposure to technology and brought so many new players into the market that the costs have come down, and the complexity of installing and operating these systems has been simplified.”
Rutenberg Homes builds in Florida, Georgia, North Carolina, South Carolina and Alabama. Its average buyer is in their mid-60s. “Their fear used to be that they did not know how to use these devices. But now they are so simple to use, the value of the devices has risen,” Globetti says. “It has been a win-win for us.”
Weaving Tech Into Sales Process
ARBC’s integration partner is AAMI, a 24-year-old custom integration and security company based in Naples, Fla. The firm addresses new and existing homes in the residential space, and focuses on bringing technology that offers a lifestyle benefit to its customers.
John Toscano, COO, says there is still education that needs to be done with entry-level/mid-level builders. “We still have to explain how technology can fit into their blueprint especially as it relates to price. But once you get into semicustom and pure custom, you don’t have to explain it as much for several reasons: the builder is better educated, the technology is more in the forefront than it has ever been, and the clients are actually asking for it.
The builders are trying to stay on top of the technology more than ever because clients are asking questions about it. Technology is part of our lives now so it seems to be a natural integration for the home.”
Toscano estimates that about half the time the company deals with builders who are not being driven to look at technology but then approach AAMI asking about it.
He says often this is driven initially by a potential homebuyer walking into one of the builder’s model homes and asking about a particular technology they may have seen in a competitive builder’s home, and whether the builder offers it as well.
“If it is a builder who is already using technology, we as integrators are reinforcing how easily technology can be implemented into the building process,” Toscano says. “The difficulties of integrating technology into the building process that they might have experienced before do not exist today.”
Rising Percentages of Equipment Being Installed
Meanwhile, the percentages of new homes that have installed various technologies have also risen dramatically since the Recession. For example, home networks rose double digits from 37% of homes to 48%. That was followed by strong increases in energy management, lighting control and home automation.
“Our buyers typically do a cost-benefit analysis on the amenities, as well as look at how easy to use and simple to understand the technology is,” says Globetti. “We have found that the simple, more value-driven amenities are the ones that people tend to gravitate toward.”
By “simple” Globetti means the day-to-day operation by the client. “If I don’t use something for a couple of months, I forget my password and my steps on how to use it. ARBC buyers are mostly those purchasing second homes, so they don’t want to be gone for four to five months and forget how to operate their lighting control when they get back. So simplicity of use is important.”
At ARBC, video surveillance systems, lighting control and home automation are the most in-demand offerings right now, according to Globetti. Arthur Rutenberg Homes has a standard package that consists of the “groundwork” or infrastructure that allows the homebuyer to add any technology he or she wants.
ARBC works with AAMI and introduces the integration company very early in the process so Toscano can get an idea of how tech savvy the buyer is, what they want, and custom design whatever technology they want integrated into their home.
According to Weinstein, home technologies can really be divided into two larger categories: “legacy” technologies that many have been trendy at one time, like home theater; and networked control-related technologies that are experiencing strong rates of increase today, namely home automation, lighting control, energy management and surveillance.
“Those strong growth categories are being driven by greater simplicity, reliability and the broader embrace of life-style enhancement through technology,” he says.
Weinstein adds that the rate at which a builder migrates from simply being interested in offering some sort of home technology to adding it as an option to then making it a standard amenity in their new homes is faster today than it has ever been.
He points to the particular value proposition in that lighting control, energy management and automated shades have become coveted enough they do not greatly affect that all-important calculation of cost-per-square foot of a home.“That is why I think you are seeing the penetration numbers go up so fast,” he adds.
Read on to find out the top reasons builders carry certain tech amenities.
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