Security Business

MAY 2019

Find news and information for the executive corporate security director, CSO, facility manager and assets protection manager on issues of policy, products, incidents, risk management, threat assessments and preparedness.

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May 2019 / / Security Business 39 or years down the road, but according to some very astute members of our industry, we are facing a remarkably similar issue that the mobile phone industry faced a handful of years ago. Remember the beginning of the smartphone era? Consumers had two options – they could buy a phone for upwards of $700 dollars….or, they could simply sign a two-year contract with a carrier, get a free version of the same phone, and build that equipment cost – and then some – into 24 monthly payments. Sure, it reduced sticker shock, but it also gave the carriers license to continually charge for equipment long after it was paid off…and consumers had few viable options to end the two-year contract. When the contract was up, they signed on for another two years and (sometimes) upgraded their phones. Sound familiar? If you are a residential security integrator, it should, as this closely mirrors the home security/alarm financial model that has dominated the industry for decades. Consumers were promised a “free” system, and they paid a fixed amount for what alarm dealers hoped was years and years to come. Chris Johnson remembers those days; in fact, as the co-founder and President of LiveWatch for nearly 10 years before being acquired by Monitronics, he led a team that transformed the way home security is delivered. Now, as Chief Strategy Officer for Brinks Home Security (formerly Monitronics), Johnson sees another transformation coming: Changing the way consumers finance and pay for residential security and smart home systems. And while change is often difficult to embrace or even envision in the security industry, changing the financing model may be just the weapon that residential integrators are looking for in their battle against DIY, customer attrition and more. Evolved Consumer Expectations As the smartphone penetration rate in the U.S. has skyrocketed to more than 70 percent, AT&T, Verizon, Sprint and T-Mobile – the big four – have all moved away from “free” phones; and because of this, consumers have been conditioned by the wireless companies to expect to have to pay at least something for their equipment. “It is necessary for us to change with the customer expectations,” Johnson says. “We are going to lose market share as an industry if we don’t adopt a different model. Traditionally in the industry, we have essentially lumped in the financing of the equipment into the monthly rate. If we think about this as an industry, we can adjust the monthly rate vs. the upfront cost…What we can’t do is ask the customer to pay for everything up front and get the same monthly rates that we have been used to.” Thanks to the cell companies, consumers are becoming more educated about the tried-and-true method of building the costs of free equipment into a monthly payment; thus, security customers are starting to realize that if they are paying for monitoring and equipment because they got a system on the front-end for free, then at some point they will have paid for that equipment and that cost should drop off their bill. If the cost never goes down, then they expect some upgrades or more free equipment. In turn, consumers are now accustomed to expecting to pay at least some amount for new, updated equipment. “As we know, the cost of the equipment has grown, as has the feature set and the consumer expectation for the hardware,” Johnson says. “Consumers are now conditioned so dealers are able to say to customers: ‘I would like to give you a fair deal with transparent pricing, and you will make monthly payments just like you do on your wireless phone, with no interest.’ “That’s really important – customers expect no interest. In our industry, we have been tempted to find the extra buck here and the extra angle there…we just need to be really transparent.” The Role of Financing As Johnson alluded to, today’s residential security industry is dominated by innovative and interesting technology advances. A decade ago, a typical residential customer put a panel on the wall and a few motion sensors in the home. Today, those customers still exist, but they are atypical. “The majority of the folks want to have a more powerful system that includes intrusion and some level of "Once customers have paid for (their security system), they will want to continue to utilize that investment ...It is not easy to throw away something that you paid $1,000 for, whether it was over time or up front." – Chris Johnson, Chief Strategy Officer, Brinks Home Security

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