Residential Market Report: Dealing with DIY

Walk the floor at the CES show; browse the shelves at your local Costco, Home Depot, Best Buy or Walmart; flip through your junk email folder — the chances are pretty good that you will run across quite a few do-it-yourself home security systems. From self-installed, to self-monitored, to even un-monitored, your current and potential customers are seeing literally hundreds of ways and options to replace the traditional residential security service provider every day.    

Even traditional security vendors and service providers are dipping their toes into the DIY arena —launching product lines and services designed to attract this growing market.

“The DIY market is here to stay,” says current Electronic Security Association (ESA) president Marshall Marinace. “I was reading some predictions, and I couldn’t believe it when it said that DIY will be a billion-dollar market soon. I think the traditional alarm dealers must certainly keep an eye on what’s going on and be flexible and nimble because when it comes into their territory, they better figure out how they are going to compete against it,”

Exactly how does a “traditional alarm dealer” compete with DIY solutions? Believe it or not, there are several ways to not only compete, but to also leverage it to draw new customers into your fold and expand your reach. So, the next time you see an “all-in-one kit that provides dwellers with a simple alarm system solution with no monthly fees or long-term contacts” (true marketing promises from an unnamed DIY security vendor) — you can feel secure knowing that these aren’t lost-forever customer acquisition opportunities.

A Look at the Threat

Make no mistake, the do-it-yourself security market is growing fast. When a major player like Google steps into a particular market — with its acquisition of Nest Labs and Dropcam — it is assuredly a hot one. In fact, the smart home, mobile and the cloud are coming together to form a perfect storm for the DIY security market, which NextMarket Insights recently predicted would hit $1.5 billion over the next five years.

"The traditional home security market in the US has plateaued at 25-percent market penetration," NextMarket Insights chief analyst Michael Wolf said in a statement. "The reason is that while most consumers want to feel safe, only a segment of the market is willing to pay a $40-$50 recurring monthly fee and commit to a three-year contract."

That recurring fee — the lifeblood of many a residential security services company — has spurred the creation of myriad pay-as-you-go and monitor-it-yourself options in the market. Many of those services are seeing major capital investment. Aside from Google’s acquisitions, venture capitalists have poured millions into direct-to-consumer security vendors such as Simplisafe and Canary.

It is only natural to assume that some of the reason for the cap on market penetration is from a price elasticity standpoint, explains Lew Brown, president of MiOS, whose subsidiary, Vera Control, introduced no-contract central monitoring and camera management services at CES this year.

“If you can offer something half that cost with comparable functionality and feature set, that you open up to a new market,” Brown says. “You will do two things: You will shift some market share from that 45-55 dollar-per-month user, and you will also grow the market to an additional user set that is not able to afford or not interested in the service at that price point, but would be interested at a lower cost.”

Combating the Threat

If you see DIY as a threat to your residential security services business, you are not alone; however, the key — as with many disruptive technologies — is to lean hard on what our industry does best, and to chip away at the inherent vulnerabilities of that disruptive technology. And DIY home security products are fraught with them. Here are three that you can cite right away when selling or competing against a DIY solution:      

1. Too Much Responsibility: Some DIY systems — particularly self-monitored offerings — enable users to have they system send a message to a smartphone for instance. It is then up to the user to take action on that, which might mean calling the police, or the fire department, or even self-verifying the safety of the premises.

“I’ve heard the scenario that you are out to dinner or at the beach one day and the fire alarm goes off in your home. Your cell phone is ringing and nobody is picking it up and the call or the emergency is basically dead-ended at that point,” says Marinace, who in addition to being ESA President, is owner of Yorktown Heights, N.Y.-based Marshall Alarm Systems. “That’s a scary thing.” Fortunately, that’s an easy selling point for a centrally monitored system from a traditional residential dealer.

2. False Alarms: False alarm rates are another weakness to potentially leverage when competing against a DIY solution. While there is no definitive proof yet (it is surely coming), it is possible that these DIY systems generate increased nuisance or false alarms. “Of course, false alarm rates are something that has plagued our industry for years, so that’s something we will have to keep a careful eye on,” Marinace says. “If these DIY systems are generating most of the false alarms, then someone is going to have to enact legislation or standards or codes to correct that.”

3. Insurance Premiums and Bonuses: How does a homeowner prove they have a security system? Simple — they have a certificate from their security service provider that says so. The homeowner then sends that certificate to their home insurance provider to collect on a discount. How can this possibly work with a DIY solution? Marinace says that insurance companies are still evaluating DIY systems vs. professionally installed ones. “If down the road after they evaluate the systems, if the DIY systems perhaps do not perform on the same level as a professionally installed system, consumers may not get the insurance discounts,” he says. “Right now, you have to have the certificate to get the discount.”

Marinace adds that with high-end homes, many insurance companies specifically require a professionally monitored system with a certain level of protection. “They want all the doors, the first-floor windows, 25-percent volumetric detection with motion detectors, and other things like that,” he says. “A DIY system is just not going to fit those criteria.”

Leveraging the Threat

Now that you understand the threat and have ways to sell against and combat the threat, there are also a few ways to capitalize on the threat, turn it to your advantage, and harness DIY to help pave your path to greater profits. Here are a few of the ways:

1. Give your customers more options. One way is to use DIY equipment — particularly those targeted at the smart home and other lifestyle products — to enable your base customers to customize their systems. Many security vendors are making this not only possible, but pretty easy.

Telguard is one example. At ISC West this year, the company unveiled HomeControl Flex, which allows homeowners to integrate more than 170 smart home products and web services into their security system. The product harnesses “If This Then That (IFTTT)” with Internet of Things (IoT) services to control many IoT devices through its HomeControl security platform. In the end, security dealers can still offer a curated home automation ecosystem, but they can now choose to focus on delivering professionally monitored security while allowing the end-user to self-integrate and self-support consumer products via free IoT services. “Dealers will have an option in interactive services that avoids the costs of training and supporting complex offerings without forsaking the end-user’s demand for integrated products,” Telguard VP of Marketing Shawn Welsh explains.

2. Expand your territory. Even more compelling for security dealers is the potential leveraging of DIY products to expand their service areas. Marinace explains: “There are some very large players in the conventional marketplace that have reached out and are selling DIY products. And although they are installed by the end-user, they will be monitored by the national company.

The thought process here is that the DIY products are opening up markets by enabling users to self-install systems in areas where the company doesn’t have coverage, such as in remote areas. “Thus, they are capturing market share in areas they really don’t service,” Marinace says. “The bottom line is our industry is RMR, and the companies going into this area are going to see significant growth thanks to the DIY market.”

3. Monitoring on Demand. While this is not a service that many traditional residential security providers employ, there is definitely potential to generate profit in a part-time monitoring role. Take, for example, a potential customer who is comfortable and savvy enough to self-install and self-monitor. When that person leaves town on vacation or on business, however, their ability to self-monitor is severely hampered. “It would be viable (for that customer) to just make a phone call and put that account online (for central monitoring services) just for the time they are gone and get it monitored for a small fee,” Marinace says. “This is something that’s fairly new, and we will have to see how this segment of the market grows — but it is certainly going to be interesting as an alternative for customers that only use a system for a couple months a year, or for weekends and things like that.”

In the end, just because the customer didn’t buy their equipment through a particular security dealer doesn’t mean they can’t have it centrally monitored for some or all of the time.

The Evolution Continues

DIY is obviously a market that is still growing and evolving; thus it is critical for residential security service providers to stay on top of the trends, products and overall growth of this burgeoning segment. “There are so many questions,” Marinace admits. “We still don’t know where this is going to end up. DIY is here, and it is here to stay, but it will be interesting to see where this is in another several years. I think it will have significant growth, but I’m watching it closely.”

No matter where it ends up, DIY security users are still potentially vulnerable — which is where the professional security providers can swoop in. “It’s one thing to have a DIY security system and have a ‘comfort level’ with security,” Marinace concludes. “My biggest concern is the person that goes out and buys one smoke detector online, puts it in a large home, and then they feel comfortable that they have full fire protection. Imagine if the worst happens.”

Paul Rothman is Editor-in-Chief of Security Dealer & Integrator (SD&I) magazine: www.secdealer.com.