How much would pay for automation, theater, surveillance and IT services offering (hardware, software, lifestyle programming, digital content and support services)
Here are a series a data points and graphs from a survey that I recently distributed on LinkedIn.com to get a rough idea of the markets ability to support a full featured, turn key Home Digital Entertainment and Automation system. Here is what I included in the description of the offering:
The system functionality is pretty much the same for all price points , but the quality, size, finish, services/programming and specs are different for each price category, i.e. like a car it has four wheels and goes from point a to b, but can have different trim, features, options and service levels such as 8 cylinder vs. 4, cloth vs. leather seating and/or free loaner with service. Capacity, size, quality and service are all properties that scale up for the more expense offering. I did not create a matrix of quality to scale (meaning cheaper components for a larger installation, e.g. lower quality components in a higher quantity)
The dollar amount is a onetime cost, the services are bundled into the cost.
Here are the core features:
- Home Automation – Control Lights, HVAC, surveillance cameras, appliances plus programming
- Digital Entertainment – PC based DVR, multi room sound, digital picture frames, multi room video, projector and large screen plus other features
- Surveillance – Multiple cameras, still photo and video, motion detection, remote monitoring and alerts plus more features
- Training, Programming and Help Desk Services – Hosted WWW site, Backup/Restore, Digital archives (all assets, pictures, dvd’s, cd’s, etc..), help desk, training and programming assistance
Here are the survey questions:
Overall results
The distribution here very much supports my plan’s business model and demographic that I am targeting in both my go to market effort and bill of materials (Product blend of hardware, software, programming and content). The 23% “interested but needs more info” is encouraging as it indicates to me that I will get the same distribution for price points if we can convert interest into a sale. The 19% “Not interested” makes perfect sense to me and is also encouraging as it indicates that 81% of the respondents are interested in the offering.
By Job Title
This graph is even more encouraging as the sweet spot, the $15,000 offering with 1 year of service appeals to the small business owner and professional managers – that is the biggest market. But even more encouraging is the distribution amongst C-Level & VP’s, as that is the executive sale and thus a customer that can afford a higher priced combination of goods and services. The most encouraging trend here is that 29% would opt in for the $25,000 systems with 2 years of service and %29 percent expressed interest, thus they could be converted into customers. This result surprised me as that indicates %60 percent of the potential customers in this income bracket would buy the higher priced system with a longer term service contract. My business plan actually projects that we will make MORE money on services year over year than what we made year 1 on margins from the initial sale and implementation of the solution. The spread in “All Other” is an indication of a finding that stands out in the next graph, “By Age”, which indicates that a large percentage of the 24-35 age group know what they want, will buy, but are straddling the fence about the services component of the offering. The correlation I am making here is that the 24-35 group makes up the bulk of the “All other” silo, and thus the reason for the 60% distribution split between “Interested” and “Not Interested”
By Age
Finally this distribution is very interesting as it tells me that in the 25-34 year old age silo, the high number of “not interested” confirms three things for me:
- That the 34% “Not interested” indicates that there is probably a high number of “DIY’s” or “Do it yourselfers” in that category.
- It also tells me that these folks already know what they can do with PC centric Entertainment and Automation systems, or know that they can purchase the goods and piece them together on their own, but are tempted by the offer and want to know more. Content is what will be the tipping point here to close the sale.
- Finally it is clear that the remaining %66 percent are all price sensitive, but will move on the $15,000 system.
If you draw parallels to other big ticket items that are purchased in this group at that price point (ATV’s, Watercraft, Snow mobiles, household appliance upgrades, traditional A/V equipment/ furniture/content/installation), you can also postulate that they would make this purchase on credit, thus financing is an important component of the business model. Lastly, the market strategy to get to these consumers will be very much based on psychology/perception, value and savings, so working the whole “Wow, this a way cool and a must have, get rid of your cable, reduce monthly cash burn on telecom costs, reduce insurance costs, decrease power consumption, etc.. lends itself to making the sale and rolling that “savings” into monthly payment for the $15K solution with recurring content update fees amortized into the payment.
One other thought here is that I now understand why the Life|Ware – Best Buy – Microsoft Entertainment and Automation offering at this price point failed in its first iteration (i say that as if they listen up, dust it off and re package/market tactically it will succeed as the numbers/demand support it). Here’s my litany of the why not and how to :
- Why not (First Iteration)
- They relied on Geek Squad to deliver and that is NOT the right demographic for a Geek Squad branded service given the DIY nature of the 25-34 age group
- That they never rolled out an “Experience Center” to show case the solution and they relied on the existing channel and media vs. “boots on the ground”. Best Buy has PC show rooms and Magnolia, but nothing to target or showcase the synthesis Plus (Plus being the automation, entertainment A/V combination) of the product offering. ITS A BIG GAP THEY DID NOT FILL/SPAN
- That Geek Squad is delivery and NOT sales. And Best Buy Business services do not sell direct to consumers
- That Best Buy, Magnolia sales cannot/do not sell to the 25-34 group as that group knows better to get Big Box deals online and or shop for value
- That they failed to do effective multi-channel marketing in this demographic as they were too focused on the custom installer channel and the 35-54 age bracket, and tried to market and woo their way into a tapped out, dysfunctional channel that is wrestling with change they are not equipped to manage.
- How to (Second Iteration with or without Best Buy
- Dust off the Best Buy RV loaded with Life|Ware, Media Center, Home Server and Xbox and do what Red Bull is doing all over the country – Market/Co Brand at the X-Games, Nascar, Music Concerts, Burning Man, College sporting Events, Winter Resorts. Look at the big ticket items these folks are buying and then go to the events where this items are used. Also, target the events attended by the 25-34 year olds
- Get kiosks at malls (Hp and Dell do this) or better yet create Kiosks within Retail stores and man these kiosks with IDEAS (Innovative Digital Entertainment and Automation Specialist) who are local dealers or advisors, much in the way that a Lancôme Beauty Advisor works a section of a cosmetics counter at Macy’s or Marshal Fields.
- Invest in showrooms or Experience centers in key demographics for the 25-35’s, New York, Boston, Chicago and Atlanta (Hmmm… exactly where Microsoft has MTC… what do you know? And staff then with partners (the “young Turks” revolting against the status quo, the CE industry and Cable monopolies) who do not have the capital to make these investment, but who have the shared vision and the three “P’’s” – Plans, Passion and Persistence to promote this cause/agenda
- Bundle the solutions with content to showcase not just features and form but foresight, meaning content is the king going forward. And each system will be pre-loaded with content and affiliate hooks into a legitimate alternative delivery and supply side (the internet or the “ether” via regional/metropolitan hot spots, like Baltimore and soon Chicago).
Now some of this is neither novel nor untried, but let’s do it again. The numbers that I collected and trends derived beg for a second go at it, but this time with new hope and fueled by hunger. Like me – I AM HUNGRY
As for the 35-54 age bracket – green fields. The 42% piece of the pie, the $15K sale is a no brainer, and the rest is undecided or ready for the up sell. Here however the delivery channel is much more complex as it is the battle ground for existing custom integrator that are trying to make the transition from black box custom to PC centric. I am not even going to comment on that silo for now as it really is a mess. What you will find however, just like with the morphing phenomena going on with generation merge in social networking sites, everyone, regardless of age will flock into the Experience centers. So from that perspective, if the experience centers work for the 25-35, then so to will they work for the 35-54 group, just like an Apple store.
So there ya go. My rant on the topic. email me at ray.casey@arestar.com if you have questions, or if you feel compelled to correct my grammar 
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