A Competitive Climate Companies that sell, lease, install, service and monitor security systems generated total 2015 estimated industry revenues of $75.0 billion, a 4.6% increase from $71.7 billion for 2014. Revenues are forecast to increase another 6.4% for 2016, to $79.8 billion. New and increased competition is likely the biggest reason the security industry didn’t reach its 2014 forecast of 2015 revenues totaling $84.4 billion. According to Security Sales & Integration’s 2016 Gold Book, technician shortage was the #1 business concern. The average number of installations may have decreased for 2015; however, security systems prices increased and project costs and monthly monitoring fees in both the residential and commercial sectors increased, maintaining average gross profit margins.

Tops in Security Based on the latest data available from The 25th Annual SDM 100, the 100 largest security companies reported a 3.3% increase in 2014 recurring monthly revenues (RMR) totaling $670 million. The smaller dealers in the top 100 list experienced more competition and cost reductions in the residential market, resulting in a poor-performing year; however, others cited an increase in commercial markets offset the stagnant to declining residential segment. The top 5 companies were the same as 2013, except Vivint, Inc. advanced to #4, which pushed Monitronics International to #5. ADT’s RMR, at $262.7 million, was many times that of #2 Tyco Integrated Security, at $62.5 million, but its gross revenues were larger.

Big Revenue Gains According to Security Sales & Integration’s 2016 Gold Book, the average gross revenue per installing company was forecast to increase an enormous 25.3% for 2015, or $10.3 million compared to 2014’s $8.3 million. Average monthly installations were expected to decline from 91 to 78, but average monthly monitored accounts were projected to increase from 307 for 2014 to 346 for 2015, leading to more revenues per installation and better customer retention. Residential customers represented 50% of all security installations during 2015, adding another point after a 14-point increase from 2013 to 2014. Commercial accounted for 39% and large industrial 11% of the remaining installations.

A Ripe Residential Market With single-family starts to increase 20% and a moderate increase in existing home sales for 2016, security system dealers could realize very good residential sales since 65% to 70% of security adoption occurs when a household moves. Alarm systems, for intrusion or fire detection, generated the most 2015 sales for installing security contractors, at 33%; followed by fire/life safety, 16%; video surveillance, 12%; and access control, 6%. Security Sales & Integration reports that a household move is the primary cause of residential account attrition, at 40%. Others in the top 5 include competitive takeover, 18%; economic hardship, 16%; non-payment, 15%; and unsatisfied, 2%.

Room to Grow in the Smart Home Sector According to Coldwell Banker Real Estate’s Smart Home Marketplace Survey of 4,000 US adults during October 2015, 45% said their homes either have smart home technology or they would be adding it during 2016. Another recent study found that the early adopters of smart home technology were men, 25–35 years of age and with high incomes – and TV advertising was their most influential media channel. Although Millennial males may be the early adopters of smart home systems, the Coldwell Banker Real Estate study found that 40% of adults older than 65 already had smart temperature technology compared to just 25% of Millennials.

Advertising Strategies Promote an incentive to households in which they receive free monitoring services for all annual holidays and days they are on vacation (even at home) for a qualifying contract. TV should be a primary advertising channel for security companies that want to maximize their share of the home automation market, appealing to young male early adopters and selling add-ons to seniors who already have smart temperature technology in their homes. With home sales increasing and the household move the primary cause of residential attrition, security companies can offer a free equipment re-install at a new home or a rebate for a free re-install by another company in the market where the household is moving.

New Media Strategies Consumers are certainly looking for a local security expert to trust. A blog, therefore, is critical for local security companies. Posts should include fire and burglary statistics as well as customer stories/case studies that emphasize the importance of home security. Create and post videos that show the equipment and installation techniques used to secure a home, case studies of challenging security jobs and customer videos of specific instances when their security systems proved their value. Security companies can generate considerable community goodwill by using their Websites and social media pages to promote local fire and police departments: showcase a different fire station each month, fire/police safety videos and sponsoring an appreciation day.