January 22, 2011
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Dear Anon;
I would like to further embellish on Ken's comments about what happened to the alarm business that you so ably questioned. In fact, this question, and thanks to Ken's forum we have an opportunity to discuss it, is one of the biggest dilemmas we face. As always, the art of framing the right question leads to the best answers and solutions.
Nothing happened to the alarm business. Something happened to the consumer. It's the way the buyer has been entrained to spend their money. No longer do they look at their savings account or wallet to decide what they can afford, they look at the total of their monthly payments, to see if they can add more. (or if someone is nuts enough to offer them something more) It is a sick manner of living to be constantly in debt. But it gets the maximum milk from the cow so to speak.
There will always be customers who want your 'old' model of doing business if it is available. How many of you would throw away your cell phone right now, that sorry cell phone that doesn't work half the time, and doesn't operated like you really want it to operate? IF you had a choice?
The cell phone business is an example of where the Lords of Business have been shoving the alarm industry for decades now. An unregulated utility they say. Where only a few players 'compete' and you can't 'buy' a better cell phone because there are few choices, and the monthly amounts are all nearly the same. But because they've locked you up with an iron-clad legal contract and are big enough to enforce it to the ends of the earth, they can rely on the total amount of money in the contract as if it were cash.
Whether it swings around before it ruins the industry by driving off our police or even fire response may be up to the power and sincerity of your local industry organizations.
I (at 37 years in the industry) say that human nature doesn't always fit a bean-counting number-cruncher's formula. Even when it's backed by deep-pocketed advertising, masses of sales people on the street, and steel-trap collection service. It will fail if there is competition. And all those that advocate it know that.
But there is much more at stake here than just getting rich and cornering the market. The 'old way' you described is better for humans, it is time tested and true. Everything about it lifts up society, civility, and culture while the 'new way' is almost entirely the opposite. Think about what you said; The old way (for 47 years) = trust New way = sign an arm-length contract There's more, but I know you can fill in the other examples yourself.
This example is a good illustration of what part capitalism has played in the dilemma that American is facing right now. America, like some consumers, has got more monthly payments than it can now afford. Wooops!
Ken,
I've given up on cable TV and get most of my news from the internet. I look for your emails each morning as part of my regimen! I particularly respect that you do not throw less-than-superlative letters in the crapper or edit them yourself as I've seen others do.
Getting along in years (at least in the industry) I'm grown sensitive to new business approaches that do not seem right. Not because I don't participate or understand them, but because they seem wrong in some significant manner. And in this case, because they seem to be becoming more accepted.
This subject was begun by a well-written anonymous letter you posted January 13th. A veteran of 47 years in our industry lamented the way we have fallen into conducting business. Ken, you so accurately and astutely pointed out that there is a difference between 'the alarm business' and 'the recurring revenue business'.
This is a huge point. But let me define it a little differently. Let me define it as a separation between old and new, between big and small, and between success and failure. Even between building relationships and surviving or not.
Here are the facts as an overview, one can embellish it as they wish and the conclusion is the same:
We have seen all types of large entities; publicly traded companies, the telephone, cable, and even finance industries enter and leave. Even the ones remaining have a disappointing percentage of the overall business. Over 70 percent of the business is not theirs. They covet more and you are the obstacle, you are the competition.
They see the alarm industry as an unregulated utility with no government price controls. They have tried many ways to reach a critical mass and corner the market; coming in the back door through dealerships, manufacturing, distributing. Their greatest power is their pocket-book and they want you to play their game.
Since if they can't get more than 20% or so of the pie, make the pie bigger. If 20% of Americans had an alarm system, that meant there was 80% that didn't. So they went after that 80% as a means to grow. An old rule of thumb back-in-the-day when no alarm company ever advertised was; "any advertising helps everyone". And that is true now, if you re-educate when you get the opportunity and do not let them make the rules for the game.
The entire 'recurring revenue' conflict comes from the fight over selling systems to that 80% of the homeowners that previously had none; often for a good reason.
So why are we, the small businessman, still around with the big piece of the pie? Why is it that they are the least-feared competitor for most of us? Why have we seen so many come in with a bang and leave with a whimper?
Because the alarm industry is about service. And every good, quality, potential sale knows this (or you should be teaching them).
The point to this long story is simple. Big companies have tried to change the game because they cannot reach their goals any other way. The question is: Can the big companies, (indeed can capitalism in general) succeed with their seemingly bottomless advertising budgets to change the mind of the consumer from quality and service to drive-through system installations and financing?
And will this ruin the business for everyone in the recurring revenue business when no police response is the result?
Teach as you grow your company. There are plenty of folks that still buy quality. And if you pay attention to each sale, there are still enough 'good folks' that are good credit risks to do as Ken has suggested; diversify your portfolio. Just like the old days, sell on an installment plan. Those good credit risks always turn into successful people and that one credit sale will multiply later.
You need Ken's rock-solid contracts to defend against litigation and to legally define your customers obligations. But if you buy into the idea that this has indeed become only or even mainly 'a recurring revenue' business modeled by some bean-counter (that theory has never worked yet for any length of time because the cost of customer loyalty is not quantifiable and the equation is no good without it) you will also need an iron-clamp for a collection agency.
It will be like a bunch of boys playing at the local swimming pool; jumping in to see how long they can hold their breath. Yet the big companies have an air tank or a snorkel. Look at the cell phone industry; where price and contracts are everything and there is no customer loyalty or service. Is that the model for our industry that you want? That will insure your business lasts over time? It's what the proponents of a 'recurring revenue business' want and where it will go, mindlessly and relentlessly, if we do not build customer loyalty through quality and service.
Zeke Lay
Comtec
Oklahoma
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Comments on New York's proposed monitoring license
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To: Whom It May Concern:
From: Robert Keefe, All American Monitoring
RE: Article 6E New York State
I have recently read of the New York State article 6E proposal regarding the separate licensing of Central Monitoring Stations and do not profess to know its content.
I also read Russ MacDonnell’s (of Rapid Response Monitoring) comments and do not detract from them.
I have been in this business as both a Monitoring and Installation Company for almost 38 years. I have seen Licensing and Alarm Ordinances come from nowhere to the bureaucratic and financial situation it is today for all of us. Over the years, questions have been raised as to its purpose from quality of service to money to restraint of competition.
Fortunately, on the latter, while I have heard those voices over the years, always in the end wiser minds prevailed and restraint never materialized for the good of all.
We also are a Wholesale Central Station Monitoring Company for 1450 Alarm Dealers across the United States. I agree with MacDonnell, that Dealers are very concerned regarding the monitoring of their accounts to the point we receive their visits from all parts of the country as far away as Alaska on a regular basis. We welcome their visits and these Dealers go back home feeling they and their customers are in good hands.
Both they and us would have it no other way.
On the Licensing side, let me tell you a little bit about us. We have been a Central Monitoring Station since 1973 and UL Certified since 1981. We monitor in all of the United States and are licensed in all states where required with many, many municipal licenses as well. Yes, it is very time consuming and expensive, yet every state and municipality feel their purpose is beyond reproach so on it goes. I’m not sure it stops as it seems to be the system in place and these jurisdictions want to police their area.
I am in continuous continuing education as you might imagine.
Regarding our Central Station Operation, we have two SIA trained Instructor Operators and all Operators are Level 1 or 2, CSAA certified. They are all fingerprinted and checked for criminal history by the Florida Dept. of Law Enforcement. They are well paid and our well qualified trained staff are second to none.
Our technology is the latest and greatest . We meet all the qualifications of a CSAA Five Diamond Central Station. With all that we would seem to be qualified to monitor anywhere which is true except one location, that is NYC Fire Monitoring which seems to be a very closed group, and extremely difficult to become part of, which is where the tone of my letter is going. New York State will do as New York State will do and as so many others have done including my state of Florida, so I’m not sure I’m in a place to tell them what to do. On the restraint side, I get even more concerned and I hope there is no consideration there.
As I said, you would think with our qualifications we would be qualified to monitor Fire Alarms in NYC, but it seems very difficult to accomplish, so we are unable to do that while NYC Monitoring Companies with a Florida License are permitted to monitor Fire Alarms in all areas of Florida as far as I am aware. If there is to be free and open fair trade, the American way, then I guess New York State will not be much different than most which brings me to my final question, regarding New York City. If New York State implements Central Station Monitoring Licensing and its intent is not to be restrictive as we would all expect, would that then mean we would be qualified for Fire Monitoring in NYC?
While we all understand that AHJ is the final authority, I would hope NYC Fire Monitoring would be an easier task to accomplish then it currently is for well qualified Central Station’s such as we are. I would appreciate being advised by someone in the know.
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Regarding the licensing of alarm monitoring firms.
Point #1 Those who work in NY and hold the Article 6D license (Business of Installing, Maintaining and Servicing Security and Fire Alarm Systems) are required to be fingerprinted and to fingerprint our employees, resulting in a background check of the employees. Hopefully, we all comply with that requirement. We then obtain sensitive information from our subscribers (pass codes, open and closing times, vacation schedules, etc,) and give that information to a monitoring station who may or may not (ask them, and trust but verify) fingerprint their employees. Seems that there is a glaring vulnerability that needs to be closed.
Point #2 It wont be long before some enterprising member of our industry decides to open a monitoring station in, say Mumbai or some other third world call center area. How secure would you feel exporting your client's information to an offshore monitoring station? And what about those alarm companies who monitor critical infrastructure (consider sewer plants, water pumping, electrical substation, I could go on)? Would you feel secure in having someone in a time zone 7 hours or so away monitoring those accounts? Or having access to the account information?
Point#3 There are some in our industry who have been very vocal in their opposition to the proposed Article 6E monitoring law. Those of you who have, just be man enough to take the responsibility for opposing this law (and not proposing an alternative or improvement) when an event happens that gives a black eye to your industry. An event will happen, it's not a case of if, but when. And then, take responsibility for the law that gets rammed down out throats by the "we need to protect the people" political types. It will be worse than anything we,as an industry create. Coming from a law enforcement background, I know it is always better to police yourself than to have "outsider" police you organization.
Point#4 The NYBFAA is holding an open meeting on Feb 10, 2011 in Albany to hear comments from the industry. Your thoughts? Oh, before you comment, I suggest reading the proposed bill. On our website. Thanks
Joseph Hayes, CPP, PSP, CET
President, NY Burglar & Fire Alarm Association (NYBFAA)
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Let me figure out the increased cost of the proposed licensing requirement in New York that will be passed on to the Rapid Response Dealers based on the cost of a license in my state, which is $310's every two years. 1200 dealers divided by $310.00 equals $3.87 per dealer every two years or $1.94 a year. Hopefully they already have their insurance coverage handled. That shouldn't change whether you are licensed or not. If you are already following good sound business practices, I doubt the law will have you change anything so your cost shouldn't go up to meet the requirements. If your are using good business practices in the security industry, than you are probably overcharging the dealers anyways. I will pay that $1.94 increase in a heart beat to know that I am dealing with a company that is regulated and following the law. Stop whining. Get licensed. You are already doing it other states, so what is the big deal.
Portland Paul
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To Portland Paul: It is a big deal! It isn't about the fee. It is about government control, extortion, fines and punishment of working people and businesses. When you allow the government to create unreasonable laws, or laws not clearly black&white on LOCAL LEVEL, then every County, every Town will have different laws. You won't be able to know, or follow the laws, you may not even be allowed to work in a ZIP code other than your own, and if you do, you may face fines and imprisonment. You may get busted by cops, locked up, your truck impounded or broken in - because you failed to recognize some local law which was never published and you couldn't even know existed. That's what LOCAL government control will do.
Dusan