State of Residential Security 2020: Dealers Discuss Pain Points, Strategies to Succeed

Next, explain your stiffest challenges from a competition perspective and how are you reacting to that.

Hess: In Nashville, and Tennessee as a whole, we see companies come and go. They come in from outside markets and take try to take share, whether it be the residential market, SMB market or the higher-end enterprise commercial market. They try to undersell us and basically try to cut our throats. The biggest thing we’ve seen is they come in and offer the $9.95 a month monitoring or the $19.95 monitoring. We still hold a pretty good industry standard up in the mid-30s. [The customer has] Total Connect, they have automation, they have alerts.

We have a scalability as far as what we’re monitoring. The biggest frustration is trying to really educate the consumers by saying, ‘OK, you pay $9.95 but what are you getting for that $9.95?’ Relationships mean a lot in this market. We’ve been doing it for almost 20 years, so our reputation precedes us in a good way. With these guys coming in it just makes us be better in our customer service. There’s got to be a differentiator somewhere. It’s made us better in what we’re doing, just because now we have other guys fighting for that same business.

Wheeler: The stiffest competitive challenge right now in our area is the resurgence of the free system. That had gone away. Now there’s resurgence of the $99 and the $199 and the free system is back. It’s like a virus; when it comes back the second time it’s coming harder. We’re seeing not only is the customer getting two doors and a motion detector security system, but they’re getting a door lock and they’re getting a thermostat. They’re getting remote services, and they’re getting it at a reduced monthly rate for the first two to three months and then it goes up.

Then the customer realizes that they’ve got this contract they’re having difficulty with. I think it’s putting a bad name on our industry right now. It’s causing our sales staff and our teams to have to really communicate and educate our potential new customers as to what we’re really offering and the deals out there. We have to explain to them what they’re getting from us vs. what they’re getting with other companies. We’re having difficulty explaining what a security system is today and what you’re really paying for.

We run our own monitoring center vs. the DIYs out there like SimpliSafe. Your younger generation will jump ship for $1. We are constantly having to educate our existing customer base as to who we are, what we’re doing for them. It’s a marketing thing. We’re trying to re-educate everybody who we are and what we’re doing and create value in what we have.

Dobson: I think the elephant in the room is the DIY phenomenon. That’s been probably one of our stiffest competitions. As an industry, when you’re used to charging $30 to $40 a month and a 36- to 60-month contract, and some very large company with a very large marketing budget comes in at $10 with no contract, I think people take notice of that. It’s definitely a conversation that we’re having to have with our customer base. I’ll echo Christian, again; it’s just explaining the differences. ‘Yes, that’s $10 month monitoring but what are you really getting for that? What’s included with that?’ It’s those kinds of conversations that we’re having to have.

As a company, and really as an industry, we see DIY as the bad guy. I think ultimately it’s going to help us refocus. It’s going to be a good thing. It has helped our company find our sweet spot in the market and emphasize, ‘Hey, we’re the professionals here.’ We are the ones that should be having these conversations with the customer, not this do-it-yourself company. It’s really helped us to refocus as to who we are, rebrand and focus on that sweet spot of the market.

Chris Dobson, Smithville Security

Do you view DIY as an opportunity to get a device in the house and then maybe later sell a service around it?

Dobson: Yes. In our industry we’ve always operated under that 20/80 rule, where 20% of the industry is traditional, 80% is nontraditional. The DIY market is really leaning more toward that 80% nontraditional. You don’t always have to sell security right out of the gate. If you go in and sell lifestyle it is just as simple to offer a monitored smoke detector. Ask the customer, ‘Hey, isn’t it important if there’s smoke in the hallway?’ Or, ‘Do you want to know if there’s water in the basement?’ I call it the ‘gateway driver.’ Once you get that it helps you to build on all the other stuff that comes with it.

Christian, what is Guardian Systems’ perspective on DIY?

Hess: The biggest thing is there’s no indemnity on a DIY system. You have nobody that you can go after. If somebody breaks into your house, your house burns down, your smoke detector doesn’t work because you installed it, you have no one to blame but yourself. Then you have to battle the insurance company. How are they going to cover this? We use that as an analogy. ‘Yes, you can pay $10 a month, but is it worth $10 vs. $30 to know that you can hold us responsible?’ You’re going to get a professional install and the service after the sale; once you to buy a SimpliSafe system and it messes up, who are you going to call to service it?

Cheaper does not necessarily equate to it being better. We use that more as an educational piece. Then we just differentiate ourselves and build on the quality of what we’re doing. We have customers that have been on our books for eight to 10 years who call and want to cancel their monitoring because they bought SimpliSafe or whatever. They got a cheaper monitoring rate, but that’s when we have to step back and educate them a little bit. About 70% of time we’re able to retain them.

Shawn, working exclusively with homebuilders do you attempt to upsell on the systems you install?

Kirk: Every community is different. One national builder I work with requires me to put in the VISTA-20P in one development, and then I put in the Lyric [alarm system] in another development as a standard. Then there are some developments with homebuyers where we sell them a security system. Sometimes they want the free alarm system, so we’ll give them the old dinosaur screens. That’s what you get for free and you owe me $35 a month for five years. They’re like, ‘Well, why can’t I have that nice screen?’ Well, you can for an upcharge. There are certain things that work well as a package, but the homeowner may not be familiar with what integrates together. Not everything works well together. We’re trying to educate them. We never force-feed anybody. ‘Here’s what we offer you, here’s what it’s going to be. This works well as a package. If you’re interested, we can do it a la carte, we do it as package, we can do it any way you want.’

Stephen, how is Holmes approaching DIY?

Wheeler: It is something we’re dealing with month after month. I’m seeing a couple of trends. The older generation may want it. They want connectivity to their home, but they don’t want their home automated. The younger generation wants their home automated, but they want to do it. Then the middle generation is back and forth as to who is going to do that. What I’m finding in the last couple of years is the do-it-yourselfer eventually needs some professional help. At that point in time, hopefully, I’m going to be there and I will help them.

We will offer them a platform in which they can still do their own switches in their own devices. If we gave them a working platform to be able to have an app that’s going to control all that, then that’s what it’s going to do. Therefore, that’s why we’re really interested in it. We have been beta testing and alpha testing some of the new products. Going forward we’re hoping to be that hub in the house. It is our job to educate our potential customers and our existing customers that we can be that central hub for you and help you bring all this together.

As you look at 2020 is there a technology in particular that excites you?

Hess: I think voice recognition is going to be the one the biggest things. I know it’s in the marketplace now. Obviously, there’s some that work better than others, but eventually they’ll all get on the same page. I think with that tied into the security system is where we all are probably going to set the bar going forward in the next few years. Especially with smart home technologies as far as integrating your everyday appliances. It goes back to my original statement of security being kind of an a la carte piece. We still know where our bread and butter is, but it’s no longer ‘we’ll come in and install three doors, a motion and a keypad.’ You want your coffee maker to go on? Do you want your refrigerator to call Amazon and have your food delivered? I think we can tie all this in and basically create a mesh network inside a home and security — video surveillance, automation, locks, shades. I think that all can be tied together and help security integrators expand beyond just security.

Shawn Kirk, First Choice Electrical & Security

Shawn, your business model is unique with the builders market. Is there a technology piece that you’re looking forward to adding on top of what you’re offering now?

Kirk: Better integration and better products. A lot of people want cameras. With new construction, I don’t want to sell them a camera that you just plug in and leave on your dresser because the customer is saying, ‘Well, I could do that myself.’ So with the walls open, I want to [run cable] behind the wall. Sometimes we’ll end up splicing the cable to put in a camera that should be sitting on a desk top. I’m looking for something that can solve that problem.

Stephen, how about Homes Electric?

Wheeler: I said earlier we’ve been beta testing a lot of the new products. The new series of panels, the hybrid ProSeries panel, we’re looking forward to seeing if this is going to bring all of the IT automation platforms together so that we can be that hub for the home.

I truly think in the next 12 to 24 months, we’ve got to take over as the central hub of a home. If we are not working toward that the traditional guy is going to work himself out of business. If you are not thinking that way now, you’ve got to change now, in my opinion. You’ve got to think, ‘How can we be all-inclusive with all these various systems in homes?’

Dobson: I’ll echo that. One of the bigger problems with the DIY movement is No. 1, a lot of these companies are selling it as more of a gadget. The marketing is more to sell a thing versus to sell a solution. No. 2, a lot of the gadgets don’t integrate well with other things. You might have a door lock or something but it’s not going to talk to your Total Connect. No. 3, it seems like customers have difficulty or trouble installing them. I can’t tell you how many homes I’ve walked into to see a SimpliSafe sitting on the table in an unopened box, or a customer says, ‘Hey, I bought this video doorbell and I can’t figure out how to use it’ or ‘I bought this smart home device and I can’t figure out how to install it.’

As an industry, we need to have the conversation that we are the professionals here. Instead of selling gadgets and selling just security, we sell the whole home solution. That’s the conversation we need to have with the customers. We are the solution.

Chris, what are you excited technology-wise for next year or next couple years?

Dobson: Yes, we followed the release of the ProSeries panels by Resideo pretty closely. I’m excited that’s close to being released. In particular, we’re excited about the do-it-yourself tower that we’ve been preparing. We’re located as a company in Bloomington, Indiana, which is Indiana University, if anybody’s familiar with Indiana. We have 40,000 to 50,000 college students that live on campus. Really, it’s an untapped market as far as the security space. Their only option, because they only live in these places 12 months if that, is a do-it-yourself no contract option. This tower is going to open up an entirely new market for us locally in Bloomington where we’re going to be able to service a whole campus with a solution.

We’re also really excited about the new takeover modules that we’ve been seeing with the ProSeries, which pretty much will allow us to take over anything that’s out there in the wild today. So as a salesperson selling Internet, since we’re also an ISP, we can say, ‘Hey, we’re going to set up a contract for this Internet. Were you also interested in security?’ If they already have a security solution, odds are 95% of them we can take over.

Then I’m also excited about the new motion viewers that are coming to the ProSeries lineup. Video has been really, really popular. Pretty much every appointment we have, video comes up. Especially in those rural markets, it’s sometimes hard to provide a video solution that’s not very expensive because Internet is obviously a factor. Some people want to put a camera on the barn that’s 100 feet away. You have to worry about WiFi signal strength and all that stuff. From what I’m hearing with the new motion viewers, it’s battery-operated and runs on the SiX [two-way wireless] technology, so you can pretty much strap it to a tree and it’s going to work. We’re excited to be able to offer that offering in more rural communities that we serve.

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