Parks Points

2014: Smart Home and Security - Part One

by Tricia Parks | Jan. 1, 2015

Time flies. As we enter 2015, it’s important to assess the changes in the security industry. The purpose: to be sure that we are not like the soldiers who efficiently chopped down many trees in a forest only to hear a commander’s voice in the distance yelling, “Wrong forest.” What is the marketplace status, overall, telling us about what consumers want? What is the status of smart home as an adjacency? Are current and prospective customers changing? If so, how?

While reviewing the overall marketplace for professional security services never exactly matches what any one dealer in a specific region encounters, understanding overall shifts helps plan for and identify prospect and market changes before they overwhelm or take sales personnel by surprise.

In Parks Associates’ Q2 survey of 10,000 broadband households, representing all U.S. broadband households, 25% report having an active, working security system. Another 7% report having a non-working security system. Three-quarters of the nation’s broadband households remain in homes without any working security system. That percentage for households without a security system increases to 80% for all U.S. homes; only about 17% of all U.S households have professional monitoring. More market potential exists: the challenge is finding value propositions that resonate.

Of the 25% of broadband households reporting the presence of a working security system, 80% report paying some monitoring fees, with the bulk paying for professional monitoring. Of the 19%-21% of

broadband households reporting the presence of professional monitoring, the average monthly fee is just over $41. Overall, the percentage of monitored households reflects solid growth for the professional security industry in 2013 and 2014. Sales of security systems dropped during the recession and so did the number of professional monitoring customers. With some recovery have come higher sales and higher adoption of, and slower cancellations for professional monitoring. At this point, the percentage of U.S. homes with professional security is equal to or a bit above where it stood before recession.

The successful security dealer is experiencing growth in the number of 2014 installations, the revenues achieved by installations, or both. Not only have sales of systems increased since 2012, so have average monthly fees. The increases are, in small part, due to slightly higher fees for professional monitoring. However, the bulk of the increased average fee results from fees for new features and services such as smart home devices that accompany classic professional security. A household that has both professional monitoring and smart home features pays, on average, $9-$10 more monthly than a household without such features.

Averages can, of course, be deceiving. There is actually more polarization than averages portray. Professional security providers offering smart home controllers and devices as upgrades to an existing security system or as enhancements for an initial buyer receive more dollars for their professional monitoring itself than providers that do not offer smart home adjacencies. The positive hit is two-fold: a position as a premium professional monitoring provider and dollars for the smart home adjacencies.

Unsurprisingly, then, the majority, 72%, of professional security dealers report offering smart home features with traditional security offerings. In a Q2 2014 Parks Associates/SSI security dealer survey, 50+% of responding security dealers reported that at least one-half of their installations include smart home capability. Sometimes that capability only allows a security system owner to access and control a security system from a smart phone or computer; for other dealers, it includes adding a smart system controller and devices. Dealers offering these capabilities report nearly 25% of their installations include a networked security camera. 12% of these dealers’ installations include smart lighting devices.

The additions serve dealers’ offensive and defensive strategies. Upgrading dealers stay at least even with competitor offerings and serve customers for enhanced as well as basic services. Dealers not adding smart home features, conversely, may choose to be ‘basic professional monitoring providers.’ By keeping their monitoring prices as low as possible, they offer the ‘value version’ of professional monitoring. The value strategy is not inherently wrong; however, it must occur as a strategy rather than an ad hoc decision or just a ‘no decision’ position.




Tricia Parks

Tricia Parks

Founder and CEO

Tricia Parks is the founder, chairman, and CEO of Parks Associates, a market analyst and research company dedicated to providing meaningful information and counsel to companies offering technology-based products aimed at improving people's lives. She presents worldwide on consumer trends, market requirements, and industry structure, with an eye to meshing visionary and progressive ideas to consumer needs and wants.

Parks Associates hosts CONNECTIONS™, an international conference and showcase for the digital home hosted in the U.S., and CONNECTIONS™ Europe, hosted in Europe and focusing on market opportunities for digital products and services in the many nations of Europe. Tricia Parks also developed the Relevancy Theory, a forecasting model for sales across a broad range of digital electronic products and services.

Tricia has served on a variety of industry boards including CEA's Home Networking and Information Technology division, the National Research Council's Committee for a Partnership to Assess Technology for Housing (PATH), the AMD Board of Global Consumer Advocacy, and CABA. Tricia Parks has a BA from Sweet Briar College and graduate studies from the University of Texas.

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