More than one-third of U.S. homeowners and 14 percent of renters have a functioning security system, research by Dallas-based Parks Associates shows. Owning a home is a leading indicator for having a security system — homeowners are nearly 2.5 times more likely than renters to have a working security system — but many of the new security device players hope to crack the untapped rental market by offering lower-cost security or peace-of-mind solutions, such as self-installable portable security systems. These solutions are not solely for the rental market though; among U.S. security owners who know who installed their systems, more than 25 percent have a self-installed system.
As more self-installable security products and systems enter the market, security dealers must adapt to the changing competitive landscape. Emerging smart devices, ranging from networked security cameras (IP cameras) to all-in-one devices, are positioning themselves as substitutes for traditional security systems, with lower or no monitoring fees.
A key counterstrategy for security dealers and companies is to exploit their current, powerful role as the prime channel for smart home devices. Between 50 percent and 60 percent of smart safety and security devices were acquired as part of the householder’s security system. For example, many security system providers offer IP cameras as optional enhancements for their systems, and as of fourth quarter 2015, nearly 60 percent of IP camera owners reported that they acquired their cameras as part of their security system.
Researchers at Parks Associates believe this trend will continue, especially over the next two years, with security providers and manufacturers successfully extending their smart home product strategies. Given that in the second quarter of 2016, only 15 percent of U.S. broadband households were familiar with smart home solutions, the security industry has the opportunity to maintain its leadership position in the smart home beyond two to three years by rebranding — positioning itself as a smart home solutions provider, rather than a security provider.
But there is change in the air. Purchase intenders of these same smart home devices (U.S. broadband households that plan to buy a smart home device in the next 12 months) report a significantly lower likelihood of purchasing desired devices as part of a security system. Most of these intenders are interested in purchasing the desired device as part of a smart home control system instead. Also, as awareness increases and industry interoperability initiatives take root, consumer comfort with acquiring smart home solutions independent of a system will increase as well.
One catalyst for sales could be the Amazon Echo, with its early success, broad visibility, and product partners. Potentially strengthening the Echo’s case is the fact that a sizeable group of security system owners appears neither satisfied nor dissatisfied with their current service provider. This group represents 34 percent of professional monitoring subscribers, creating a significant opportunity for smart home controllers and other hero products like the Echo. These customers represent a vulnerability to current security providers — these users could switch providers, try out a new ad hoc monitoring service, or cancel altogether.
This is an area in which data analytics is providing key insights. Customer retention can be dramatically impacted by basic steps to assure that the customer experience is positive. Implementing best practices, such as making sure consumers download the app and that they understand how to add a device or make basic changes to the system, will move customers from confused and disengaged to confident and satisfied.
To move beyond the current 21 percent or 22 percent penetration of security among broadband households, providers could exploit safety and security benefits of smart home products to upsell security. As noted, the majority of IP camera owners acquired the device via a security system, but the remainder of cameras — in households without security systems — are used for multiple applications but with primary use cases for security and peace of mind. Cross-marketing and integration with leading networked camera vendors are approaches to expand the security market that should be considered.
The addition of interactive services and home control solutions are the major factors driving growth in the security market, and there is considerable experimentation from different companies seeking to more rapidly expand the customer base. Parks Associates has tested the numerous new business models and security alternatives with consumers; but among those without a home security system or professional monitoring service subscription, no single feature had high levels of appeal. A service without a long-term contract was the most appealing to this group. Half of those without systems just aren’t interested — today or under any offered conditions. The other half represents a significant opportunity for the industry.
Given these consumer research findings, security dealers will need to consider alternative strategies that can compete with smart home products offering self-monitoring with low-cost monitoring options. For example, more than 75 percent of smart smoke detector owners indicated interest in having their smoke detectors monitored, and 60 percent of these owners would pay $10 per month for that service.
Parks Associates research shows these customers largely value cost savings. When security households that terminated service in the past year were asked why, 36 percent said they didn’t feel the service was worth what they were paying for, which makes options such as a smart home kit with self-monitoring very appealing, especially to non-traditional security customers. Customers are increasingly interested in home controls. Adapting strategies to compete in this rapidly changing market is key.
