**************************

comment on whether DIY will hurt or help industry from Nov 22, 2013 article

**************************

Ken,

    In regards to DIY…I don’t think it will hurt the installing alarm industry.  

    Here we are in 2013 and statistics show that we are still only 20% penetrated into American residences with security systems.  So, we have 80% of American households who for whatever reason, have decided not to buy an alarm system from an installing alarm company.  It’s obviously not because they have never been advertised to (think Brinks, ADT TV ads) or that nobody has knocked on their doors (think Vivent, Pinnacle, etc.).  

    A good deal of this 80%recognizes that they have a need for security but they want to do it themselves and possibly monitor it themselves.  These folks are not currently prospects for installing alarm companies.  So, it’s hard to see how the installing industry will be hurt by DIY companies marketing to these people.  It just delivers services to an underserved segment of the market.  I will say however, that some percentage of the DIY customers will realize that they got in over their heads and this will create opportunities for installing alarm companies to come and clean up their messes.  

    In the long run, the need for security will be heightened all across America and this is good for the entire industry. In today’s security industry the most important tool an alarm company possesses is an open mind. 

Mark Matlock, SVP

UCC

www.teamucc.com

************************

Hi Ken,

    After 40 years in this industry, I can share that there have always been the Service or Value added contractor market and a direct to end user retail market.  We had ‘Alarm Stores’ back in the early 70’s. Many distributors sold retail and wholesale.  Even some Alarm dealers would rent retail space, display their products, and sell direct to people that wanted to Do it themselves. It provided a showroom, and an additional revenue stream. It turned into service work because often, when the customers realized what was involved, they would get a quote to have the dealer install the system for them.  Usually when something didn’t work, they would pay the dealer to service it.     Retail never represented more than 20% of the total sales, and generally it led to paid to dealer, value added services and support.  Of course if the system needed to be monitored, there would be recurring as well.

    Today, little has changed.  There are more people in the world, and more demand for products.  There will always be a do it yourself market, but there will always be more who like others to do it for them.  It is clear, that in the land of the free, some people are willing to do things themselves, most prefer to have others do it.  I suspect that the actual percentage of those willing to do it themselves has remained the same over the last 40 years. Even DIY’ers often end up someone else to fix it when it breaks.  I don’t believe it has hurt anything, and it provides those who can’t afford an installed system, to at least have something. I know a lot of people in this industry, and most that have been doing this for a while would agree that if you service your accounts, provide them with quality products, and good value, they tend to stick around, and bring their recurring revenue with them.  For every person that is willing to do it himself, there are 10 times as many that have no interest in doing so.  We are happy to help them.  We have installed video systems for people that bought their equipment at Costco, or Sams. We charge them for materials, labor, and help them get set up for remote viewing on their phones, iPads, and Tablets.  When the equipment breaks, we charge them to remove and replace it if needed.  It is all business, and our labor rate is higher than what we charge our monitored accounts, and adds to our bottom line. 

    In our humble opinion, we are not in retail, we are in a service industry. As such we need to make a profit on everything we do. Recurring revenue is a bonus and adds to the bottom line, and of course represents equity, but only if you plan on selling your business.  There is plenty of service business for companies that do a good job, and take care of their customers.  Existing customer growth, and referrals are still the number one source of new business.  We haven’t been in the yellow pages for over 15 years, and do no form of advertising, other than our yard signs.  Our experience is that the more people that are advertising, marketing, selling and creating interest in security/safety products, the more people that are shopping. We will get our share of the business so long as we know our products, provide quality services, and take care of each customer as if they were our only one.

    As a matter of principal and Corporate policy, we do not purchase equipment from vendors or manufacturers that end up in retail stores.  We purchase our products almost exclusively from manufacturers who support a distribution/dealer channel, but this is America, and everyone has the right to sell whatever they want .. through whatever marketing method they choose.

    Whining about competitors is wasted energy that could be spent taking care of customers.  This is a GREAT industry with TONS of opportunities in every direction. Like any industry, there are certainly individuals and companies that are not improving industry image, lying about their competition, beating each other up for the same customers, and selling price versus service.  With enough capital, this works for a while, but eventually, investors want to be paid back, see a return on their investment, and realize some profit. Eventually, these companies, when left to their own devices, find that money, investors, and time run out, resulting in an acquisition by one of their patient competitors. There is no real impact, the rest of the Long term industry keeps plugging away, swooping up the left overs, focusing on long term relationships, and service based profits rather than chasing low end sales.

    DIY will always be part of this industry, and if positioned right, our experience suggests it can help you grow your business and profits.  Embrace it .. know the products and look for the opportunities.  It makes business sense to not buy products from companies that sell in retail stores. Support manufacturers that support your market, there are plenty of good products out there.  Let free enterprise do the work. There is enough for everyone .. God Bless America!

Michael Smith

SCN

www.scnsecurity.com

***********************

Hi Ken,

    Again, your response is right on.  I’m referring (this time) to the DIY market.  Why is everybody so up in arms about this.  We all like to be able to do things around the house. The margins are so slim as it is with the residential market.   Why go after something that isn’t wanted. There is enough business out there that truly want our services.  When someone brings up they can get this or get that, I tell them to go right ahead if that is what you want.  When they ask if I’ll install and service it I refuse.  But then I tell them my why. I don’t put that equipment down at all, I just point out what my installation will provide and ask them which they prefer.  By selling thru education, you will eventually turn the DIY to a contracted client.  In my book that’s exactly what I want, a client that appreciates the difference and wants what we can offer.  They won’t get that with the DIY kits.  I’m also fortunate to have created my business model to be 85% commercial so I don’t have a great call for that. 

Craig Wohl, ET

www.cwsecurityservice.com

*********************

Ken - 

    Years ago, the largest company in Arizona at the time, Metrol Security, sold alarms through Costco. It did not last very long. Being a vendor of Costco is a double edged sword. Costco is not going to risk their reputation for the small amount of revenues it receives from an alarm company. We all have had the alarm consumer whose demands and expectations have reached far beyond what is reasonable. Costco is judge and jury of who can place products in their store and they do not need to hear an alarm vendors side of the story. Also, Costco is not a discount place for the vendor to place products. Once the bulk of those who visit and try DIY have made their purchases, the trickle in purchases no longer support the product being on Costco's shelves. 

Roger D. Score, President

Arizona Alarm Dealers Association, Inc.

arizonaalarmdealers.org

**************************

TO SUBMIT QUESTIONS OR COMMENTS REPLY TO THIS EMAIL OR EMAIL Ken@Kirschenbaumesq.com.  Most comments and questions get circulated.