SW24’s ‘game-changer’: No long-term monitoring contracts

Company will handle residential intrusion with monthly agreements
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Wednesday, September 12, 2012

NEW YORK—SecureWatch 24 is entering the residential intrusion market with what it calls a “blast from the past” for the security industry: no long-term monitoring contracts, with customers owning their equipment and paying up front to cover installation costs.

SW24, based here, specializes in property surveillance and facilities management. Its main business is video monitoring, with more than 22,000 cameras installed at more than 2,000 buildings in the New York City area. The company signaled its intention to get into intrusion monitoring by developing the Fusion Centre, a 25,000-square-foot central station in Moonachie, N.J. It is scheduled to open in early 2013.

For the past 25 years, residential security companies have been willing to lose money initially to gain customers and then break even months later via monitoring contracts, said Jay Stuck, vice president of sales and chief marketing officer for SW24. That economic model is no longer sustainable, he said.

“It’s kind of ironic. We’re really looking at moving back to the days when you were profitable right out of the box,” Stuck told Security Systems News. “Based on what we’re seeing in the marketplace, we think that the time is right for a brand-new paradigm.”

Stuck said 36-month contracts have become standard and that some companies are locking in customers for five years. He said proprietary research has shown that many customers resent the long-term obligation, which led SW24 to offer monthly monitoring for residential and small-business clients.

“It is giving the customer what the customer wants, and that is freedom and flexibility,” Stuck said. “By going on a month-to-month agreement, which can be canceled within 30 days, we’re very confident that our customers are going to be satisfied with the level of service they’re getting from SW24 and there’s not going to be a need for a long-term [contract].”

SW24’s research has also shown that customers won’t have a problem paying more up front as long as they understand the value of the service. They will own the wireless equipment outright and can move it when they want to, Stuck said, and all of the company’s intrusion packages include Alarm.com interactive features.

The new marketing initiative will be launched in the New York metro area in October and then be taken nationwide. To bridge the gap between now and when the Fusion Centre opens, the company has added intrusion-monitoring capability at its 1 Penn Plaza headquarters.

Stuck called the new approach “a game-changer” and said the industry would be watching closely to see if it succeeds.

“I think that everyone is complaining about how they’re not making money until 36 months into a contract,” he said. “And I think now is the time for us as an industry to redouble our efforts at customer satisfaction and giving them what they want, and this move is all about that.”

Comments

Here in Atlanta security is an everyday utility for customers who have hundreds of different security firms to choose from.  Several companies offer low cost monitoring with no contracts, but than charge the customer a thousand plus dollars for the equipment and install.  From a company standpoint this is great profit right upfront, but for customers it doesn't always equate into their budget and financial needs which is why the 36 month agreement for free equipment will always be an attractive offer.

http://www.cfasecurity.com

I was an ADT dealer for 11 years until 3 years ago when I decided not to renew my contract with them and change my business strategy. I started advertising a low monitoring rate with no long term contract to do takeovers for free or an install of what everyone else calls a "Standard System" for only $299. This offer is very well received and we have no problem increasing our customer base daily. We are very successful selling against  "So Called" Free systems, 3 year + contracts, and skyrocketing monitoring rates.

As I have come to realize, if you are selling 3 year deals to some dealer program you’re not really in the security business, you’re just working for the people who are.

I have always charged an up front installation charge.  Basically, to cover equipment and installation costs.  That way if the subscriber fails to live up to the contract, which is a month to month contract, I don't lose much more than the installation time and paperwork.  I feel that if a customer is a good customer they will see this as and added value.  If they just want "FREE INSTALLATION", I know they will most likely say, "WHAT the heck, I didn't pay for it why should I keep paying".  The added costs of lawyers and legal fees to go after them just isn't worth the time and trouble.  ADT - Protect America and Broadview overcharge the monthly and can pay lawyers to fight their fights.  I have a business to run and hate fighting with people.