Marketing Eating Up More Money
There has been an exciting, sometimes overwhelming influx of new technology and products into the electronic security industry during the past few years. All these bells and whistles are great, but at the end of the day it takes business management acumen to sustain any commercial enterprise. Security installation companies are no different. To excel, they must be at least as adept in sales and marketing concepts as they are in devising technological solutions.
So then, what are the most popular and cost-effective techniques to gain more customers? And how does one know what strategies to deploy or gauge those already in place? The best way to discover the answers to these questions is by analyzing actual marketplace data. That was the impetus behind Security Sales & Integration launching its Sales and Marketing Survey, which has now been conducted five times since 1992.
Based on the responses of the nearly 250 security contractors who participated in the 2006 survey, more money is being doled out for sales and marketing, and only one in 20 companies planned to spend less this year than they did in 2005. In addition, the percentage of companies devoting greater than 5 percent of their total operating budgets to marketing rose 17 percentage points the past two years to 52 percent in 2005.
“As the number of alarm companies grow, we have to fight harder for our share of the market,” says Michael Duffy, chairman and CEO of Per Mar Security Services of Davenport, Iowa. “To reach a greater market and to increase name recognition, there is a trend to invest more in marketing. Smaller companies cannot compete with the giants of the industry so they feel they need an edge that marketing might provide.”
Meanwhile, the average amount spent on marketing per account has swelled from $46.70 in 2003 to $55.11, or 18 percent. However, the good news is that the annualized increase has dropped from 25 percent between 1992-2003 to 9 percent the past two years. This would seem to indicate security contractors are becoming more skilled at managing their return on investment (ROI) when reconciling sales and marketing costs against actual signed customer agreements.
So what else continues to drive escalating sales and marketing costs? The driving factors have not changed all that much the past few years. They include intensifying competition from a variety of sources; greater end-user sophistication; the urgency to explore vertical markets and applications; the proliferation of new marketing mediums; and rising costs and inflation.
“There is an overall upward pressure on the costs of advertising. Inflationary pressures, especially those related to fuel costs, are higher than in previous years,” says David Gilbert, president of Springdale, Ariz.-based Guard Tronic. “Even if a company is going to run the same yellow-page, radio or television ads as the year before, it is going to be hard pressed not to spend more on the same amount of advertising.”
SSI’s 2006 Sales and Marketing Survey uncovered many other fascinating new wrinkles in the fabric of security system selling and marketing. Sales incentives, promotional items and free monitoring have grown in popularity, while insurance discounts have faded. Companies are networking more closely with police, government and other security installers. And marketing electronically via the Internet as well as the old-fashioned way with printed collateral materials are both surging.
The following study results, along with insightful comments from several survey participants (see sidebar), shed light on the changing nature of sales and marketing on the installation side of the electronic security industry. Referrals and positive word-of-mouth is fine, but it can only advance a business so far. Maximizing potential growth happens when that proven track record merges head-on with effective sales and marketing techniques.
For the complete version of this story, see the June issue of Security Sales & Integration magazine.
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