What's the deal?

ADT has established a solid base reporting over a thousand new dealership installations a month, representing a dealership of 110. The company's figures in the USA are still growing and ADT has emerged as the clear front runner in the UK.

But, just as in the States, other organisations have joined the party.

At the New York ISC EXPO security show in September '99 a dozen companies were offering variants of the monitored alarm "little or nothing deposit and 25$ a month for three years"-type schemes … including panel manufacturers.

US security trade press reported an average life of around eleven years for contracts. The contracts themselves are easily re-saleable and can be converted into cash when selling out.

Independent minded installers
However, UK manufacturer Pyronix's research here indicated strongly that, while ongoing revenue was an attractive prospect, many installers were not thinking about selling out.

The company has launched its own dealer programme, Secure Protection Ltd, with a different sort of appeal to installers.

"Neither Pyronix nor Secure Protection have gone into the installation business" explained Sebastian Herrera, Pyronix Deputy MD. "Secure Protection is not remotely interested in getting involved in ongoing service contracts. It's not our business, we don't have installation engineers and we most definitely are not going to compete with our thousands of loyal customers".

He said the programme was a result of installers asking for an "edge against their competitors".

Pyronix found a finance company that could provide quick acceptances of clients and negotiated a 'no clawbacks' deal in case the client cancelled. It was working with an independent alarm receiving centre with 15 years experience.

"The finance company is necessary because they fund the process and pay the installer a cash lump sum for the installation. In effect the finance company 'owns' the contract, but only for the three year term. After that the contract reverts to the alarm installer. So the installer benefits from the long term income themselves.

"After the installation we need the dealer to service and maintain the system for the three year period before it reverts back to them anyway. We need to know that the client is looked after because SPL has to guarantee the system to the finance company. We believe that an engineer is likely to take better care of a system if it really belongs to him.

"The dealer gets all referrals and upgrades and, of course, strengthens his customer relationship throughout the first three years."

Manufacturers' customer base shrinking
Why is a manufacturing company getting involved? The underlying reason is not hard to find. As the national installers continue their programme of buying the independent (mainly NACOSS) installers, independent manufacturers see their customer base shrinking through no fault of their own.In an already quiet market this is a logical defensive step.

General manager of Secure Protection, Colin Brown, is convinced that the dealer route is the future … like it or not.

If an installer had decided to continue selling systems and grow his own company, the scheme gave the option of keeping some contracts and selling others for instant cash.

The cash value for each contract is lower than for other programmes but when a dealer signs a contract SPL refund the kit price in full. A £99 connection fee is charged to the end user initially and dealers can raise it to £199 maximum and keep the difference to subsidise the cost of installing.

The kit includes smoke detectors as standard.

Why are manufacturers launching dealer partnerships? As the nationals continue to buy the independent installers, manufacturers see their customer base shrinking … This is a logical defensive step.

The installer sells the system as a "family protection system" emphasising that saving lives is more important than belongings. If the client wants another PIR or contact it is added to the total or he pays the installer directly for extras.

To ease the installer burden on paperwork, the company says that documentation has been streamlined. Installers will only be taken on if they are approved by either NACOSS or the recently-merged SSAIB, AISC and Integrity 2000.

What about the annual subscription fee of £250. Doesn't that deter some installers? Not so, according to Carl Nixon, MD of Ilford based Locktec, an SSAIB company, who has been installing for eleven years.

"It's nothing. It's irrelevant. It's one job", he said. "It's the right time. It's the way the industry's going. £99 down and the rest on the never never. It's better (for the installer) in the long run but you can't afford the cash flow if you are putting in five a week. We have been losing out more and more to the ADT's and the BG's (British Gas) that weren't there a few years ago so we needed to do something. The real attraction is that at the end of three years the job reverts to me so it improves the salability of my business in the long term".

As for having to use Pyronix manufactured kit, Nixon was philosophical. "Life is full of compromises and this kit is OK. It's not really about the kit itself, is it? You sell yourself and the company really. This gets the customer police response."

Aggro over specifications
Locktec used to install for one of the large dealer programmes and Nixon was satisfied with it – both the speed of payment and the work volume. "We were very busy but it didn't pay enough for the amount of 'aggro' you got from clients over specifications we didn't design ourselves".

Another dealer, Anthony King of King's Security Systems Ltd, has built up a ten branch NACOSS operation from his Bradford base. He echoed Nixon's comments about current trends: "It's obviously the way the market is going.

"The American influence has shown the way the domestic marketplace has to be sold. The ADT's and the Protection One's have stimulated that particular marketplace and they have provided the finance for it too.

"The struggle for installers is to find the right finance package. You also need the right sales techniques that the big boys have, to put you on the same level." King's was putting together a direct sales team starting with four in Bradford and Leeds and, eventually, twenty up and down the country.

The BSIA's recent consumer research (previewed exclusively in Security Installer, October 2000) brought the unwelcome news that end users were expecting to pay only £200 for monitored systems. Since security systems are commonly perceived to be grudge purchases lower upfront charges would appear to be the key.

Mark Horsley, another SSAIB registered installer of twelve years standing and based in Birmingham made this point too. "I've lost a lot of work in the past where people couldn't afford the £500 or so cash outlay up front. This enables even those on low incomes or on the dole to still have a system, and I get a lot of work – including referrals – from this sector. " A dealership was the "last piece in the jigsaw. I didn't have a consumer credit licence and did not want to get into all that. I don't have the manpower in the office. My core skills are installation. I can sell but I'm am not a salesman as such. " He used the Pyronix sales video rather than explaining the system.

But will it work? Old habits die hard. Some installers are opposed to any form of direct selling and automatically class any programmes as expensive and reject them out of hand. Some say monthly payments are hard to sell. Whilst that may be true, the mood is changing and while the marketplace continues to be depressed, installers with spare capacity are going to be faced with awkward choices.

Meanwhile ADT are setting the pace and proving that sales are achievable despite traditional views to the contrary. ADT's Gilbert Thompson, Director of the UK dealer programme, quoted Tyco CEO Dennis Kowalski: "We are the largest global electronics security company yet we still have dramatic opportunities for growth".

The company had sold 425,000 dealer programme systems last year in the USA.

"In the UK we've growth rates of 50 per cent every quarter, have an expanding network of 110 dealers and a brand that's universally recognised".

In my opinion, under the Pyronix programme, installers have flexibility and, ultimately, should see a better long term return. Strengthening the installers will, in turn, shore up a struggling distribution sector where payment is notoriously slow and margins near suicidal. Sales techniques have often been a problem for engineers who love installing but hate selling and resist sales training.