New Research Shows What Residential Buyers Want

Consumers are embracing new technologies and services associated with home controls and remote access for everything from energy management, video monitoring, keyless door locks, distributed audio and more. Learn revealing statistics and market insights to help make your stake in the smart-home marketplace.

On the whole, security dealers are bullish about their current sales numbers. More than 65% of respondents to a dealer survey conducted in the second quarter of this year reported that their 2012 sales and revenues were better than the previous year. More than three in four dealers (77%) are expecting an even healthier performance in 2013.

This rosy, industry-wide picture is also borne out by quarterly financial statements from ADT Security, now a publicly traded company. Thus far ADT’s performance presents an upward year for its amount of new subscribers. In addition, the company is reporting a slightly lower rate of attrition than in recent years. As a bell weather for the industry, this bodes well for many security providers.

Let’s take an up-close look at the potential for dealers to grow the home security market through integrated, Internet-enabled packages, plus new research on current security owners and households considering security purchases. It’s all part of the 2013 SECURITY SALES & INTEGRATION Residential Market Report.

Latest Security System, Home Controls Adoption Numbers

Home controls or “smart home” offerings from giants as diverse as ADT (Pulse), AT&T (Digital Life) and Comcast (Xfinity Home Secure) that accompany traditional monitored security may have a hand in the rising residential trend. These competitors most certainly intend to exploit the recovering marketplace going forward with product/service benefits that are varied and, they hope, tip the value equation toward security adoption. That is an advantageous proposition for all dealers.

Amidst the encouraging news of the beginning of market recovery, there remains unrealized potential that falls to the wayside. According to a Parks Associates study conducted earlier this year, between 8%-10% of U.S. householders in broadband-connected homes currently without security reported they considered acquiring a security system in the 12 months prior to the survey, but ultimately elected not to make the purchase (see Figure 1). The percentage of households that considered but did not acquire a security system represents approximately 5 million homes. Moreover, roughly one-half of respondents said they are still open to adoption. Just under 2% of U.S. broadband households (about 1.8 million) actually acquired a security system over the same time period. 

Approximately 80% of those households that did adopt security also acquired professional monitoring at the same time. However, tempering that good news is the attrition factor. Roughly 10%-14% of all professional monitoring contracts were cancelled, taking the net gain from new customers to more numbers than previously served, but just somewhat more. Imagine if attrition was lower!

Parks Associates asked the non-acquiring intenders to briefly report why their household did not purchase a security system. Since this query was open-ended, there were several categories of responses. The most significant number of respondents cited expense as the main reason they did not adopt. Additional reasons included: “just haven’t gotten around to it”; “feel safe in my neighborhood”; and “bought a dog [and/or] gun.”

No doubt householders citing “too expensive” as their reason for not acquiring security are telling the truth as they perceive it. However, people envision their expenses and their costs in context, not in a vacuum. There may be some low- or middle-income respondents who literally cannot afford security with monitoring, and yet many can. After all, householders of middle and upper-middle income pay hundreds of dollars per month for entertainment and communications services. The difference is two-fold: intensity of need and a price/value equation completed in the intender’s mind. In the case of professional monitored security, this is often found lacking. 

A security dealer cannot change the situation for those households that literally cannot afford a professional monitoring fee. But dealers can change the value equation for households that can afford fees with the new smart-home options. This will not alter all perceptions immediately, but it is the path to changed perceptions among many over time. The benefits from smart-home devices are only beginning to emerge, but they will only become better, more robust and more useful.

When recent security adopters were asked why their household decided to adopt security, by and large the responses centered around providing security and safety for their family, as well as peace of mind. Again, it is evident there is one main reason: fear of a break-in. That is a logical, primary reason to adopt. Yet Parks Associates anticipates in the future that phrases such as “managing my home,” “scheduling my electricity usage” and “convenience” will also appear.

Evidence of this change already exists. Figure 2 on page 48 presents the percentage of security system owners with at least one smart-home feature enabled by Internet communication to computers, tablets and smartphones. The percentages illustrated in the chart include security system owners who can access their security systems for status and control of the system itself, as well as receive alerts. Security system householders having some smart-home component beyond simple access via Internet capabilities to their systems are fewer than one in five (about 18%).

Nonetheless, the dramatic differences in having even the capability of access for the security system alone over the time periods show the change in the industry. In short, apps for acquired security systems are rapidly becoming table stakes. Most do not even cost the security system owner/adopter any additional fees.

Snapshot of Preferred Internet-Enabled Devices

Figure 3 below reflects the selected devices that homeowners acquired with their security systems by length of system ownership. From this view, the change in industry offerings as well as uptake is evident. Newer smart-home devices have lower adoption than standard security system components.

A sizable majority (86%) of respondents to Parks Associates 2Q 2013 security dealer survey reported offering some Internet-dependent capability. While Parks Associates dubs this percentage as high, it is not outrageously so. Not all dealers offer smart-home systems, though many do. For starters, the current offerings include IP or network security cameras, smart thermostats and smart lighting devices. This is particularly appealing to younger households (<45 years), the very householders security dealers want to capture.Just under 10% of U.S. homeowners with broadband (about 5 million households) considered purchasing a home security system in the past year but elected not to. Almost one in two (45%) respondents said they have never considered purchasing a security system. Source: Parks Associates

That demographic set is more likely to be comfortable with technology in general, own a smartphone and understand the usefulness and functionality of various apps. As of this year’s first quarter, security system owners are 440% more likely to have an IP camera (not just a baby monitor) in the house than a non-owning security household. Cameras are becoming more versatile, more effective and capable of better image transmissions all the time. In-house cameras of higher quality also have lower or the same prices as previous cameras of lesser quality. The smart-home providers — including cablecoms, telecoms and traditional security providers — are expanding offerings available from their platforms on a regular basis.

It is not surprising that security system owners who made IP camera purchases report they did so, predominantly, to
enhance security or safety. However, these sets and intenders are also more likely to own programmable thermostats, smartphones and tablets. Intenders show nearly the same rates of ownership for these adjacent products. This translates to familiarity with technology.

In addition, smart-home controllers make devices easier to use and program. Programmable thermostats have a notorious history of low usage once initially programmed as owners forget where the manual was stored, forget how to reprogram the device, or find the device’s little screen difficult to navigate. Smart-home controllers with accompanying computer, tablet and smartphone apps change the story. Now a homeowner has a choice of program method and an aggregated interface across adopted smart devices. Instructions are generally user-friendly.

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