Smart Home Key to Higher Margins, Recurring Fees, Say Panelists

The transition to the LTE network occurring in the home security space gives dealers a chance to upgrade customers to smart home products, said Jeremy McLerran, Johnson Controls global marketing director. With faster, more reliable networks, dealers are able to give customers more capabilities, including touch-screen interfaces that enable control of connected lights, locks, video doorbells and thermostats. As the offerings expand, “there’s a real draw to having everything all in one experience, all in one app and having everything controlled in one space,” McLerran said.

“The play is to get into the home,” said Logan Dunn, head of growth for do-it-yourself security company Wyze, noting a rise in bundles that professional monitoring companies offer to combine TV service and other technologies. The benefit that smart home technologies can bring to the DIY home security market is “daily use,” said Dunn. A challenge has been to get customers to interact regularly with their security system, he said. Customers have had negative associations with a security system, often by accidentally setting it off when inputting the wrong code, and that leads to irregular interaction. Webcams helped increase daily usage because “people want to self-monitor,” he said. But the smart home market has growing pains, said Dunn: “There’s still too many devices that require long-term support across multiple manufacturers that make it very difficult to do the whole smart home concept.”

That complexity helps dealers, even if they don’t make the initial sale, because consumers look for professional help when they have difficulty with self-installation, said Spencer Moore, Rapid Response Monitoring vice president-sales and marketing. He called the DIY market a “gateway” that introduces customers to the idea of security. Many DIY customers ultimately realize that monitoring their home themselves is more difficult than they envisioned, he said. “There’s a reason why there are services that professionally provide that service 24/7 and get you the help you need no matter where you are.”

Dealers help with sensor and camera placement and teach customers how to use a security system to get the most out of it, Moore said. They also answer questions and provide recommendations for other products a customer can add. What starts out as a panel and sensor sale can lead to a larger smart home system buy that expands a dealer’s “wallet share” with a consumer, he said.

Nearly 40% of security system customers buy their systems from dealers, said Parks. The DIY segment broke down the cost barriers to monitored security and the smart home, noted Min Kang, Brinks Home chief product and strategy officer, but it’s also creating more business for dealers. People are realizing there's a benefit to having cameras at their front door, she said. Some customers prefer to self-install and others think they want to, she said: “When they bought and tried to install, they realized they actually needed some help.” Companies like Brinks have financing programs to help with the cost difference of DIY and professionally installed systems, she said.

McLerran said today’s smart space is all about choice for the consumer. That can include method of installation, product selection and how they want to interact with a system, including app and voice. Consumers’ preferences vary widely, so companies and dealers have to be flexible. Andreas Rudyk, co-founder of Smartfrog & Canary, said the security and smart home market is at an inflection point, saying studies show security system penetration will grow significantly over the next decade, but high price and privacy concerns are causing a “chasm as this industry enters the mainstream market.” He touted the need for an affordable, easy-to-use and safe solution -- installable in five minutes -- enabled by a software-as-a-service subscription.

On the role of the tech giants in the smart home, Rspndr CEO Mark Zimmerman said having Apple, Amazon and Google paying more attention to the security industry is a positive. “If it’s going to be a big enough opportunity and strategic enough to move the needle for companies whose market cap is measured in the trillions, it means we’re going to have explosive growth in this space.” Tech companies' marketing spending will drive consumer interest and user experiences, he said.

Smaller players will have to up their games, said Zimmerman. “Copycat products won’t cut it anymore; nor will the status quo from a customer experience point of view.” For dealers who have pitched their business in the past on being local and caring, “I don’t think that will be enough to differentiate them,” he said. Rspndr bills itself as a quick response company that consumers can monitor by app in the same way they can see where an Uber driver is before pickup. Zimmerman contrasted that with not knowing if the police are on their way to an emergency call, or if they will come at all. The company's service brings “transparency and speed” to the emergency response segment, he said.

A quarter of home security purchases don’t include professional monitoring, according to Parks data, but consumers are willing to spend beyond the basic price for installations and warranties, said Dunn. “What are value-adds to security that we can do because professional monitoring is being commoditized?” Smart home is one, but installation is a challenge, noted Parks, saying the CEDIA channel does that for the luxury customer but would have a hard time scaling to the mainstream. Dealers have margins to maintain on products, installation and services, she said.

Johnson Controls’ McLerran said consumer education and interest in smart home has to start with manufacturers. “How do we make it easier,” more accessible and give consumers more choice, he said, saying manufacturers should be able to create platforms to do that. The COVID-19 pandemic forced that when installers couldn’t go into customers’ homes; some did initial setup and then guided homeowners the rest of the way, he said: “They take it in the home, they plug in the panel; they do a couple things with an on-screen wizard, and voila! They now have a security system.”