Honeywell aims at doubling residential penetration

HOLLYWOOD, Fla.—Honeywell Security Products President Scott Harkins said last week that he believes the industry's residential security penetration rate could double to 40 percent, and that Honeywell aims to become “the Apple of the industrial world,” combating the growing do-it-yourself security system trend by creating products that are easy to install, sell and use.

“I saw that ADT … suggested that they thought market penetration could be 40 percent,” Harkins told Honeywell First Alert Professional dealers attending the group's annual conference, held here Nov. 1-4. “We at Honeywell actually share that expectation. The market share could be much larger than it is today and it could break out of the traditional 20 percent penetration.”

The ADT Corp. CEO Naren Gursahaney recently said he believes the rate of security penetration could be increased, in light of the penetration rates of broadband, wireless and cable, which are at 70 percent or greater.

Harkins, in his talk to dealers, said that this year marks the 23^rd anniversary of First Alert Professional (FAP), which Honeywell described as the “longest-running dealer program in the industry.” As many as 165 dealers were expected at the conference but some were unable to attend because of Hurricane Sandy, which pummeled the East Coast, particularly New Jersey, where Honeywell is based.

At the conference, Harkins also introduced the new leader of First Alert, Marek Robinson.

Robinson, who has been with Honeywell since 1995, recently was promoted to president of authorized dealer groups. Most recently Western region director of sales for Honeywell Systems, Robinson will focus on the First Alert and Commercial Security Systems dealer programs. FAP has not had a dedicated president for more than a year.

Harkins pointed to new players entering the security space, such as the telecoms and cablecos, as one factor in expanding residential penetration.

“We have to ask ourselves why [they're entering the space],” he said. “And I think it leads back to technology trends [including broadband and smartphones]. They see an opportunity to earn additional RMR in a much broader space than we have traditionally played in.”

Harkins added, “I think that's a great opportunity for us.”

For one thing, he said, “I think their advertising is probably somewhat effective in making the size of the market bigger.”

Also, Harkins said, “I believe that generally a lot of these new players don't truly understand the marketplace. They don't truly understand what it takes to install security systems and make the products work in a life safety environment. They're coming at it more from a lifestyle perspective than a life safety perspective.”

But he urged dealers to think beyond life safety. “Challenge yourselves to think about [the market] a little differently,” he said.

“The key here is that it can't always be just about the security system or just about the RMR, as critical as that is to our industry,” Harkins said. “We have to be able to compete in the interactive services space and the remote video space against these new competitors in the market.”

He said Honeywell's products enable dealers to do that.

“We've seen the uptake of interactive services with Total Connect really increase dramatically,” he said. “About 25 percent of all our LYNX Touches and Ready Guards being sold today are pulling through some type of remote service, and you see that pretty consistently month after month after month. We think that's a pretty good sign.”

Harkins also warned dealers about the growing trend for DIY security systems, such as the Iris system that home-improvement retail giant Lowe's launched this summer. He said statistics “suggest there are about 7 million DIY [systems] installed today where the homeowner bought it somewhere and installed it themselves,” and that the number could climb to 14 million within five years.

“[There is] a big trend toward DIY, which is a threat to the industry, but it's also another opportunity,” Harkins said.

He said market research that the company recently did showed that “many of the customers are completely intimidated by their alarm system … [they think] it's too complex or they're going to cause a false alarm.”

So he told dealers that to compete against DIY, “it means you have to make things so simple to install for your installation crews and for consumers to use, that the DIY piece of consumers trying to buy it and install it themselves just doesn't make sense.”

He said the onus is on Honeywell to make that happen. “We as a manufacturer have to make products that are so easy, so intuitive that we remove any barrier to their use or deployment,” he said. “We're spending an awful lot of money to go in that direction right now.”

Also, he said, to attract more customers, particularly younger ones, the products must have “sizzle.”

“We have to make sure if we're going to go from 20 percent penetration to 40 percent penetration that you're getting the absolute best sales … with very cool, high-sizzle feature sets that are very easy to sell,” he said. “If it's easy to sell and easy to demonstrate, it will be easy to use.”

He added that if Dave Cote, the chairman and CEO of Honeywell, the diversified parent of Honeywell Security Products, were at the First Alert conference, “he would say his No. 1 goal for our organization, Honeywell corporate, is to make it the Apple of the industrial world,” making products so easy to use, install and sell that it's “almost intuitive.”

“That is our goal,” Harkins continued. “It's Honeywell's corporate goal across all of our products, even jet engines … to develop features sets and high technology that [is] very, very easy to use.”