11.21.18 – SSI – Scott Goldfine
Three experts reveal how embracing the latest trends and technology from the front porch to garage can drive more sales and RMR.
The on-demand economy is here to stay. This is creating an on-demand environment for managing people, places and things in the home.
Fortunately, there is an ever-increasing array of devices — such as video doorbells, cameras, smart locks, lighting, integrated garage openers and more — to facilitate control of a home’s exterior, entryways and perimeter, as well as user-friendly interfaces and apps that allow remote, interactive access.
However, jumping in without a smart strategy on product selection, installation and service can degrade the customer experience and impact a dealer’s foundational security services.
Three experts in the field — Xfinity Home Executive Director of Product Management Derrick Dicoi, Preventia Founder Aaron Whitaker and Alarm.com Director of Product Management Abe Kinney — answer five key questions.
Respectively spanning the large provider, small dealer and supplier spectrum, they speak to the overall market, product selection, important features, profit margins and partnering considerations.
With soaring consumer demand for smart home devices like video doorbells and locks, etc., how should dealers view the opportunity? Is it about add-on hardware sales or something bigger?
AARON WHITAKER: It is something bigger. Security was the main driver five to seven years ago that our prospects were interested in, and the main reason for buying. It was an add-on just for more the niche customers that were really interested in smart home devices and the ones that were willing to pay more for that.
Our strategy has evolved that in our base package you have the complete capability to do smart home devices. About a year ago, we made an indoor camera part of the base package as well. We know you kind of want it and we know that once you get it you’ll really enjoy it. So rather than making it a hurdle for you to buy in the beginning, that buying decision, we just put it in to make it standard.
We’ve seen a much higher adoption rate and much higher number of people adding those extra devices on top of the package as well. Without any real hard numbers the driving factor for them to get a system is probably about half and half, whether it’s really security or it’s all the smart home devices.
DERRICK DICOI: There are two sides. One is the upfront sales, whether it’s including the base kit or however you can get something out the door. We’ve seen having the camera base kit or offering the camera upfront you can really move customers up the chain and drive incremental revenue.
The camera seems to be a magic device today. There’s also over time, as customers learn and sort of experience it and they say, “I get it.” They’re willing to buy those other devices over time. I think the trick is finding a way to help customers understand the rich experiences they get. Then figuring out creative ways to offer that, whether it’s financing, something else, to get it in the home.
We’re trying a number of things and continuing to evolve how we talk to the customers, what are the right words, what is the right messaging, what are the right devices. We see about 30% of our new customers want the video doorbell. It’s going to be a bigger and bigger opportunity over time.
ABE KINNEY: With so much of the on-demand economy happening at the front door, there’s a little bit of a race on to figure out who can own that property. So if you are not thinking about that, sooner or later, you can come back to that property and know they got that from another service provider — one that is not so friendly to the security industry.
KINNEY: Certainly, there’s a lot of great features and capabilities out there but I haven’t seen that there’s one killer feature in any one product category. We’re trying to evaluate things across not only their feature capabilities but also installability and supportability. We’re going in with a contract and a professional service, with the mindset of how to make sure the product is going to survive that lifecycle and offer an experience to the customer that’s really great.
DICOI: We think of it in a similar way. What are the key categories that customers want? Where do we see demand? Let’s make sure in each of those categories we satisfy the customer. Maybe it’s one or two devices, but we give some choice. We work to find the right players in each of those spaces.
It’s really about putting one or two or three of these devices together in a way where you can have a conversation with your customer on the phone or online about the rich experience. What are the right devices you can stitch together to deliver what customers seek? You really have to build a bridge to customers and fill in the categories and devices that make sense for you in your portfolio.
WHITAKER: We do primarily Honeywell systems. I can tell Honeywell what I’d like but they’re ultimately going to do what they want. I’m looking at what Honeywell has in their pipeline, which products they’re going to choose. Then we’re at a second level on the decision-making process of whether we’re going to bring that in, train our sales team, train our installers and start offering that.
We want our process, from sales to using the system, for our customers to be as easy as possible. That door lock might be what the manufacturer is pushing and recommending, but if it isn’t as easy to use or has some setbacks compared to this other one then it is not for us.
What other features on the installation, sales or monitoring side do you recommend dealers keep in mind when evaluating these products?
DICOI: We want to give customers choices. We work to build out the portfolio with products we have tested beyond what the vendor has already tested to make sure it meets our standards. Especially with a lot of the smaller manufacturers, we give them feedback and help them iterate on their product before we’ll launch it. We test their IT security, too. A number of our employees put stuff in their houses to test it out as well.
KINNEY: There are compatibility challenges and things you need to educate your salespeople and installers on. One good example is not focusing so much on a specific doorbell offering in the package, but just a camera in general. So you’re going to sell video for the front of the house. Is it going to be on a doorbell camera? Maybe. We’re still bumping into doing some innovative and sometimes challenging and technical things. Dealers can add that expertise for the customer.
WHITAKER: When we’re talking with the customer, we’re not really talking about the brand when it comes to devices like video doorbells, locks, light switches or thermostats. That’s not really the value proposition. It’s about the feature benefits and how they’re going to use it once it’s installed. Don’t create all your marketing materials or train everybody to promote a brand. Ring had the brand recognition for video doorbell, but we have had virtually no trouble using a different video doorbell. We just talk about what different product types can do. Customers just want to know it is going to work.
Which product categories we’ve been talking about have the best margins? Can you give a couple examples of pricing models?
WHITAKER: If you go back about three to four years we had a tiered pricing structure, with a bit more for interactive, a bit more for video, a bit more for automation. We were then having to have two buying decisions … the equipment, because with our company you buy it upfront, and professional installation, and then there’s the monthly cost consideration.
About nine months ago, we shifted to one flat rate to encompass all of it. That’s driven our price point up to $45 a month for our ideal customer. I found they’re very happy to pay for it because of the value. The biggest justification for such an increase was the video. That’s the easiest one to justify why they’re paying more per month on top of the traditional monitoring.
Automation was definitely a piece, but people didn’t quite understand why that would cost more. We even have a bring-your-own-device methodology. If you want to buy your own door lock, go ahead. We just want to be the platform for you to utilize all these products together.
We will sell a standard Yale electronic lock for $249 including installation as an add-on. We tell them, “You can go buy this exact lock online or in a store for somewhere between $175 and $200. If you’re comfortable installing it on your own, we’ll give you all the resources to learn it into the system. We want you to have it. We think it’s a pretty fair price for us to take responsibility for the lock and install it for you for $249.” We find a lot of our customers agree with that.
DICOI: We package security and smart home devices with other offerings, cable TV and so on. But the biggest thing we did a couple of years ago, which really drove a lot of volume, was minimize the number of decisions the customer has to make. We have one SKU. Everything is included. If you want video recording you can bump up to that, but otherwise, everything is there.
So if you want home security, the conversation is over. If you want video, great. And then you can move onto the hardware. It really helps drive the volume and it’s much easier for folks to sell. Simplifying the whole process is important so that you can get to the real conversation of what do you actually need in your home; what do you want to do? And you can have that richer, more consultative discussion with the customer.
On the hardware, I think margins are tight. It’s a matter of what you can get with your providers. And it might swing your choice from using device A to B, etc. And hardware margins are generally lower than service, so that approach changes the economics of your business. That’s the decision you need to make.
KINNEY: If you’re looking to partner, don’t think about the brand. Think about the capabilities. Then look for partners who are dealer focused with an offering. Alarm.com is aligned in your efforts to try to deliver products, keep the customer experience high, and create additional recurring revenue over time.
DICOI: I agree, it’s about solving the problem the customer has. Is it a front-door problem or camera? Do they want to see some video in the house? You can solve the problem in a number of ways. We just see that customers like to have some choice of if it’s a door lock or something like that, I want it to fit the rest of my house. I want it to be this version versus that version. There’s an approach to partner with different folks in different ways that fit your business model and objectives.
WHITAKER: When you’re customer focused, you’re walking a fine line. We have to form partnerships, and I depend on the manufacturers and the choices they’re making. I need to have consistency for my salespeople to understand what we’re selling, consistency for my installers to install it successfully. At the same time, I have to be open-minded.
If that’s not what the customer wants, if it starts to shift, if they’re not satisfying the market demand, then I’ve got to be open to expanding, to making a shift away. That is challenging. But partnerships are important because if you do have an issue you need to know you’ve got a manufacturer you can go to and get answers, and you can get training on how to install it.