SW24 getting positive response to 'no long-term contracts'

New ad in metro New York generates spike in Internet traffic and calls, company says
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Wednesday, January 23, 2013

NEW YORK—SecureWatch 24’s promotion of residential monitoring with no long-term contracts has raised eyebrows in the alarm industry, but consumer response has exceeded the company’s expectations since an ad launch on Jan. 2, according to Executive Vice President Jay Stuck.

A 1-minute television ad has been airing on ABC, CBS, NBC and about 40 cable channels in the metro New York area, said Stuck, who is also chief marketing officer for SW24. He said the positive response backs research conducted by the company, which specializes in property surveillance and facilities management.

“We’ve seen our Internet traffic spike to a huge degree, as well as the call-ins to the 800 number,” Stuck told Security Systems News. “I think it just underscores that there is pent-up demand for a new [business] model. I think there is a tipping point, and I think people are getting tired of the traditional model where they’re locked into long-term contracts.”

Stuck declined to provide statistics detailing the response to the ad campaign, saying the information was proprietary. But he said the ads have generated “a very good call-to-lead ratio and a great lead-to-appointment ratio.”

With SW24’s new initiative, customers own their security equipment and also pay upfront to cover installation costs. Monitoring is provided on a month-to-month basis instead of using the 36- or 60-month contracts that have defined the industry, Stuck said.

SW24 is offering residential packages for $699, $999 and $1,299 that include Interlogix Simon XT and XTi panels, with Alarm.com communications and interactive services, according to a company statement. The monitoring fees are “highly competitive,” Stuck said, and leasing is available for customers who prefer not to own the equipment.

“We’re finding most of our customers are opting for the upfront payment and the convenience of no long-term contract,” he said. “Frankly, we thought the take rate on the lease was going to be a lot higher than it actually is.”

Stuck said the alarm industry is taking a wait-and-see approach on the new sales initiative, adding that there is “great interest as to whether or not it succeeds.”

“I talked to a number of colleagues in the industry prior to [the ad] going on the air, and to a person they said, ‘We kind of get it, but we don’t. We don’t quite understand what you’re trying to do here. Don’t you understand that you’re destroying the traditional value of a residential contract that generally lasts three to five years?’ I said, ‘We don’t see this as destroying the value at all. As a matter of fact, we think we’re rewriting the model,’” he said.

Henry Edmonds, president of The Edmonds Group, a St. Louis-based specialty investment bank that focuses on recurring-revenue businesses, said the number of customers willing to make the initial investment likely would represent a small part of the market.

“Residential alarm monitoring is a big market, so there are undoubtedly some people who would be interested in the trade-off of paying more money upfront and not having any kind of long-term commitment,” he said. “But I think that model is less attractive for the majority of customers.”

Edmonds said the initial cost of the residential packages provides SW24 with “a good credit screen” that could pay dividends when it comes to attrition.

“For those customers willing to pay that amount upfront, if [the company] has a monthly monitoring fee that is very competitive, then I would expect their attrition level would be at or better than the industry average,” he said.

Stuck said SW24’s research showed that customers want freedom and flexibility when it comes to home security, and eliminating the need for a long-term monitoring contract provides that. He also said the company believes it can retain customers for 36 months and beyond without having to lock them in.

“There is a lot more stickiness to that kind of customer, because if they’re willing to make the kind of investment that we’re asking them to make upfront, it means there is a commitment to having a monitored system and also an interest in the technology,” he said.

Stuck said the ad was expected to run through the end of January. Given the positive response, he said it might be repeated and expanded to other areas outside metro New York.