Smart-Home Devices Fuel Rising Residential Tide

Find out why no service providers are better positioned and more qualified to deliver desirable smart-home offerings to homeowners than security companies.

The successful security dealer is experiencing growth in the number of 2014 installations, the revenues achieved by installations, or both. Not only have sales of systems increased since 2012, so have average monthly fees. The increases are, in small part, due to slightly higher fees for professional monitoring. However, the bulk of the increased average fee results from fees for new features and services such as smart-home devices that accompany classic professional security. A household that has both professional monitoring and smart-home features pays on average $9-$10 more monthly than a household without such features.

Averages can, of course, be deceiving. Professional security providers offering smart-home controllers and devices as upgrades to an existing security system (or as enhancements for an initial buyer) receive more dollars for professional monitoring than providers that do not offer smart-home adjacencies. The positive hit is twofold: a position as a premium professional monitoring provider and dollars for the smart-home adjacencies.

Unsurprisingly, 72% of professional security dealers report offering smart-home features with traditional security offerings. In a Q2 2014 Parks Associates/SSI security dealer survey, more than 50% of respondents reported at least one-half of their installations include smart-home capability. Sometimes that capability only allows a security system owner to control a security system from a smartphone or computer; for other dealers, it includes adding a smart system controller and devices. Dealers offering these capabilities report nearly 25% of their installations include a networked security camera. Further, 12% of these dealers’ installations include smart lighting devices (see Figure 2).

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The additions serve dealers’ offensive and defensive strategies. Upgrading dealers stay at least even with competitor offerings and serve customers for enhanced as well as basic services. Dealers not adding smart-home features, conversely, may choose to be basic professional monitoring providers. By keeping their monitoring prices as low as possible, they offer the “value version” of professional monitoring. The value strategy is not inherently wrong; however, it must occur as a strategy rather than an ad hoc decision or just a “no decision” position.

Growth Rate of Smart-Home Controllers on the Rise

In 2014, sales of security system controllers, either as replacements or as part of an initial security system sale, will hit about four million units. (Note: The number of monitoring contracts does not mirror the sale of security system controllers because some acquirers do not opt for professional monitoring and some subscribers cancel or do not re new existing monitoring contracts. Oftentimes they still have working systems and arm them for local alerts only.)

This represents growth from 2013, reflecting both better numbers for new housing starts and homeowners who are again moving more often than during the recession. The increase also derives from non-moving households acquiring a security system or upgrading their current system due to its age, a switch in providers or a desire to upgrade to a system with smart-home features.

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