The Green Bottom Line
By offering home energy management services, security integrators can capitalize on growing consumer interest in saving money and going green — while also generating new sales and revenue sources for themselves.
As energy costs continue to rise in the slowly recovering economy, some homeowners are looking for ways to save money. At the same time, other homeowners have an interest in reducing their impact on the environment and reduced energy use. Security integrators who offer home automation along with energy consumption monitoring services and products can help these homeowners discover how they can conserve energy and save money while creating a healthy bottom line.
Though saving money is always in style, consumers are becoming increasingly more conscious about saving energy as well. Jay Kenny, vice president of Marketing for Vienna, Va.-based Alarm.com, points to website inquiries as one indicator of increasing consumer demand. He estimates that about 30 percent customers visiting the Alarm.com site are asking for energy management as part of solutions: “Most people care about saving money as a primary reason, secondary is going green.”
CEDIA’s Senior Director of Technology Dave Pedigo says, “Now energy management is not just nice to have, but a need to have. The return on investment is now starting to really come about for the consumer.”
Market research consultant Parks Associates confirms this, recently reporting that more than 60 percent of U.S. households will have energy management technologies by 2022. Although many different types of providers will be entering the market, Tom Kerber, director of research, home controls and energy, for Parks Associates, says that the security integrators are ideally poised to take advantage of this growth: “Security dealers are well-positioned to capture the lion’s share of the growing home monitoring and controls market. High-touch sales channels are ideally suited for educating the uniformed consumers of the benefits of home controls.”
One way to gauge the consumer demand for home energy management is by the entry of and increasing investment by large service providers such as Comcast, Verizon, Alcatel-Lucent, and others, into the market, Pedigo says. “If big Fortune 50 companies are getting into energy management, the consumer is primed to get into it.” He adds, “We’re at the tipping point of putting a lot of energy management products in the home in the next three to five years.”
Despite the opportunity, some integrators might be hesitant to enter the new area of home energy management. However, they may soon find that they do not have a choice if they want to remain competitive in the changing marketplace. Rob Puric, director, Product Management and Marketing, Honeywell Security and Communication, based in Morristown, N.J., cautions, “The biggest threat for the traditional security dealer today: In this area, the local service provider is looking to steal their business. They’re going to have to do this or risk losing business.”
Fortunately, given their existing business model and their frequent status as the most trusted contractor in the home, security integrators are in a good position to transition into home energy management.
“From a sales, revenue, and efficiency perspective, if that security dealer is doing both [security and home energy management], he’s giving the customer what they want and also extracting more money out of the project,” says Jim Arnold, senior vice president of Sales at Salt Lake City, Utah-based Control4.
By adding home automation and control and energy monitoring products and services, security dealers are able to appeal to new customers as a full-service provider and attract homeowners whose primary concern is not security.
For some security dealers, the increased sales through home automation has been so lucrative that it has completely transformed their businesses, as happened with Liberty Bell Alarm and Home Theater Inc., based in Sacramento, Calif.
“We went from builder and security focused, and now our primary business is home automation. We’ve got our security recurring monthly revenue (RMR) and just added to it,” says co-owner Mark Buzzard. The gains are substantial on every sale. Just looking at sales for new homes, Buzzard says his company went from an average of roughly $1,000 to $2,000 for a low-voltage package to now averaging $20,000 a package.
The increasing desire of homeowners to go green and save money is also driving increased RMR’s from home energy management services. “Overall demand for energy management is strong. The market is figuring out what price-value combinations are working,” Kerber says. “Today, home energy management functionality is being sold for anywhere from $0 to $10 a month.”
Adding home automation combined with energy monitoring can result in significant savings for the homeowner, more than justifying the additional monthly cost.
“The money the customer saves on gas and electricity could easily surpass the monthly cost for services,” says Bobby McAfee, marketing director for Gainesville, Fla.-based Crime Prevention Security Systems, LLC.
Durham, N.C.-based, Eragy, Inc.’s Watt’s On Now! app, coupled with an in-home power sensor, can be integrated with Control4 products, or is available in a smaller stand-alone version. “This product allows homeowners to understand energy consumption in real time, as well as expecting what the bill will be. That’s something new,” said Mark Komanecky, vice president of Sales and Marketing for Eragy. He added that having this information benefits both the consumer and integrator: “Pushing that information to them on a regular basis is ongoing value (to the homeowner) while our app is a nice tool for integrators to grow business and increase RMR.”
Customers who are satisfied with the value they are receiving for the cost of their services are more likely to stay. Unlike security systems, which provide peace of mind but are not as tangible, homeowners can see the cost savings achieved with energy management systems and have a more interactive relationship with their systems.
Home energy management can take a variety of forms. Typically it involves some form of home automation, control, and energy monitoring, and these elements can be implemented in a variety ways: provided by service providers, security dealers, and utilities or managed independently by the homeowner. Security integrators can use their existing approach as a foundation for adding home automation and control technologies. “For security installers, this is the perfect adjacency to their business — especially with the interactive service model,” says Rick Matthews, sales director for Lutron Electronics Inc., based in Coopersburg, Pa.
This puts the dealer in position to really stand out in an increasingly crowded energy market, says Kenny at Alarm.com. He adds that security integrators have another advantage: “The security system installer is uniquely positioned to have the most information.” Home automation and control can be configured to work in conjunction with the security system. For example, when security in the home is set for “away” mode, lighting, heating and cooling, and other systems can be set for reduced consumption.
Home automation can help homeowners achieve considerable cost and energy savings in several areas of the home. According to the U.S. Energy Information Administration, 49 percent of residential energy consumption is used for heating and cooling the home (see chart on page 82). Using home automation and control to adjust thermostat settings can reduce energy bills substantially. “Twenty percent of power consumed is wasted. A lot of that is heating a home when no one is home, so HVAC is a good place to start,” Kerber says.
Similarly, dimming the lights immediately reduces electricity consumption and results in longer bulb life. Small appliances have significant electrical draws even when they are not in use. “Even when stereos, DVD players, and Xboxes are off, they are not off. They are in standby, and they are consuming energy,” says Matthews, noting that these devices can account for as much as 7 percent of energy consumption in the home.
An Eye on $avings
Although homeowners are generally interested in saving money and becoming more environmentally friendly in their energy use, most are not aware of how they are consuming or wasting energy. This is where energy monitoring comes in.
Greg Rhoades, associate director of Marketing, at New Orleans, La.-based Home Automation Inc. (HAI), describes the “dashboard effect” energy monitoring can have on homeowners. “If you see how much energy you’re using, you’ll be motivated to reduce that load. That’s a big driving force in this,” Rhoades says.
Indeed, Kerber cites findings that indicate consumers armed with that information save 5 to 15 percent off their electrical bill. “Educating consumers on exactly how much money they waste is the first step in the sales process. An informed consumer will then start to look for ways to reduce waste, and the dealer is in a great position to provide a solution,” he explains.
CEDIA’s Dave Pedigo points out that the trend is shifting from the smart home, one furnished with smart technologies, to the intuitive home, which “understands the preferences of the occupants, what it can do to keep the occupant happy while reducing the amount of energy consumed at the time.
“What the consumer wants is to reduce bill and environmental impact without having to think about it,” he says. “The integrator has to set it up so the consumer can set it and forget it.”
Make It Easy To Be Green
The ideal home energy management system allows homeowners save money and feel good about reducing their impact on the environment without having to think about it. “We figure out how make it an automatic thing, so the homeowner doesn’t recognize a difference in lifestyle, but the homeowner is saving money while he’s out,” Rhoades of HAI explains. “It’s designed to be in the background and silently saving money.”
Integrators can appeal to the homeowner on multiple levels: lifestyle enhancement, saving money, conserving energy, convenience and more. “Traditional marketing doesn’t work anymore. We want to be a resource and give you something to help your lifestyle,” says Liberty Bell’s Mark Buzzard.
The easiest way to sell these products is to get the customer to try them. Since most home energy management products include remote control and monitoring, the sales staff can easily demonstrate the capabilities.
Some dealers have found that providing a showroom or partnering with a builder to install a system in a model smart home is an effective way to drive consumer interest. Crime Preventions Security Systems has partnered with builder G.W. Robinson Homes in Gainesville, Fla. and installed a comprehensive home automation system in the builder’s energy-efficient model home. The hands-on experience wins them over, resulting in easier sales. “It’s half green home and half Jetsons. They want to have fun in their homes and be green,” McAfee says. “The green home is what gets them in there. Once they start interacting with it, the cool factor kicks in.”
Similarly, by offering packages that bundle multiple services — security, energy monitoring, automation of thermostat and lighting, and more — integrators can show homeowners the range of possibilities for their home, and clients may opt for add-ons they had not previously considered. “Those who have grabbed onto this opportunity have been really successful in selling packages as bundles,” Alarm.com’s Kenny says.
Even getting the homeowners to try one additional option can open the door to immediate and future sales. Kenny recommends introducing the customer to the possibilities by setting up a single text alert, “If you just set up a single interface (e.g. front door app), that simple notification drives much deeper engagement,” he explains. “For the customer, just getting that text alert on phone is that ‘Aha!’ moment.”
As energy costs continue to rise, the demand for cost savings and greener lifestyle options will continue to grow. “I’m real bullish on the potential for energy management for the next three to five years and beyond,” CEDIA’s Pedigo predicts. “The number one driver of energy management systems will be economics.”
He also sees new construction playing a role in growing demand, reporting that dealers are starting to see some increase in this market, though growth is expected to be more modest than it was before the recession. New construction growth will likely push home energy management beyond monitoring and automation and into the ability of homes to make energy. “Builders are high on creating net-zero homes,” Pedigo says. Already a few integrators are experimenting with cutting edge green technologies for the home, including solar panels, geothermal heating, and even wind energy.
While it may be some time before those technologies become mainstream, security dealers who move into home energy management today will be primed to take advantage of the new opportunities.
Lutron’s Rich Matthews says that the potential in the residential market is only the beginning. Once the security installer understands these products, they can look to the commercial side.”
Ultimately, home energy management services benefit both the homeowner and integrator. The opportunities for increasing sales and recurrent revenue are only limited by the integrator’s willingness to expand into these markets.
It All Starts with One Element
For traditional security providers who are unfamiliar with home automation and control, the sheer number of options in home energy management can seem overwhelming at first.
Most experts recommend starting with one element of home control. Lighting is often a good first step. “Lighting has easiest integration with security in terms of thought process,” says Control4’s Arnold. Lighting is also a very visible way for customers to see how they can save money, and it’s an appealing lifestyle enhancement. Adding lighting modules is a good way to start. The integrator can expand to other control options as he becomes comfortable with the new technologies. Moving to HVAC control next makes sense, as consumers can realize significant savings in that area.
Manufacturers and distributors are eager to help. Most offer classes, online training, and other support to help their dealers become comfortable with the products. Partnering with a security integrator who has already made the jump to energy management can be very helpful. Some manufacturers provide contacts for other dealers who have experience with the products. “Do your research. Find a partner you are comfortable with and jump in. Otherwise you are leaving money on the table,” Crime Preventions’ McAfee advises.