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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40 Security Business / www.SecurityInfoWatch.com / May 2019 Cover Story smart home functionality and cameras,” Steve Trundle, President and CEO of Alarm.com, said during the company’s Q3 2018 earnings conference call. “There’s just a higher up-front cost that has to be borne by someone – the service provider, the customer or potentially the customer through a financing mechanism.” Instead of this being an obstacle, many experts agree that it is an opportunity. In lieu of free systems, residential security integrators can get, for example, $400 up front and go to a zero-interest subsidized model. That’s where consumer financing partners – of which there are several – will be a new tool in the integrator’s chest. “If I were to spend $5,000 on a system in my own home, I could choose to finance that,” Trundle explained. “Dealers are increasingly making that financing easier to obtain for the consumer. The financing element makes it more attainable and more possible for our service providers to sell a complete system to a customer without sort of wrecking the balance sheet by giving away a much bigger system today for free than what they may have needed to do 5 or 10 years ago.” “Financing is the way to go,” agrees Joe Nuccio, President of Dealer Partnerships for ADT and a 30-plus-year veteran of the industry. “It is good for both parties – the dealer, because they are getting their cash up front, so it is better for cash flow within the business structure; and it is good for the consumer because they are able to buy more and get more of what they need.” By getting money for equipment up front, it dramatically changes the economics in a positive way for a security business. But there’s more – the consumer financing model may be a way to enable integrators to offer upgrades more often, as well as have a positive impact on attrition rates. Impact on Attrition and Business Valuation For a residential security integrator, a good customer is a sticky customer; a good customer is someone who uses their system often. The consumer financing model helps facilitate this by enabling customers to add as many bells and whistles as they would like to their security and smart home system, which, in turn, enables them to interact with the system more often. “Our service providers have told us for a long time that if a customer invests in their system up front, those are typically better customers than customers who received the system for free and now are basically repaying for the up-front capitalization cost in the form of a monthly service bill,” Trundle said. “We like to see customers that are invested up front.” Adds Nuccio: “The more components that consumers can touch and feel – garage door opener, lights, locks, etc. – the more they have, the more they use them. That they own the equipment means they have more skin in the game…the consumer financing model opens that up.” The fast acceleration of smart home and security technology innovation – like smartphones – makes the ability to refresh the equipment more frequently attractive to both consumers and providers. “It would have a positive impact on attrition,” Nuccio adds. “It probably won’t have a gigantic one, but when the consumer has skin in the game, I think it would have naturally have an impact (on attrition).” The customer will stay sticky initially while they are paying for the equipment on a monthly basis, as it has been in the industry; however, “once they have paid for it, they will "There are so many good products out there today that are affordable, and (consumer financing) helps to fit it into the operating expenses within a household." — Joe Nuccio, President of Dealer Partnerships, ADT Hardware Payment Preference Pay for it all upfront 39% Finance it and pay monthly 61% "Q7585. How would you prefer to pay for the hardware?" | Asked of a Subgroup of 4,998 U.S. BB HHs Source: American Broadband Households and Their Technologies Q2 2018 | N = 10,024,±0.98% © 2018 Parks Associates

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