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Innovative Strategies Help Residential Security Providers Battle the Economic Slump (19/2/2004)

Fluctuating economic conditions have intensified competition among participants in the U.S. residential end-user security market, resulting in persistent price wars and shrinking profit margins. New analysis from Frost & Sullivan, U.S. Residential End-User Security Market, reveals that this market generated revenues worth $1.72 billion in 2002 and is likely to reach $3.21 billion by 2009.

"Selling residential security systems has become a tough proposition post the 9/11 terrorist attacks," said Frost & Sullivan Research Analyst Deepak Shetty. "Consumers, though highly security-conscious, are equally cautious about their spending and have cutback large-scale capital investments."

Security systems and service providers are coming up with "mass market" programs and aggressive pricing schemes to drive sales. These strategies are denting their profitability despite evoking a favorable market response.

With the decline in profit margins, the competition to win long-term service contracts has increased. Market participants are heavily subsidizing installation costs to win these contracts, which ensure steady revenue flow through monthly monitoring charges while providing an opportunity to seek a second term on contract expiry.

Many participants, in their effort to increase market penetration, have started bundling traditional fire and burglar alarm systems with non-traditional product offerings such as home automation equipment, telecom services, Internet, broadband services, and structured cabling. The widened product portfolio has assisted them in increasing customer base and revenue.

"Residential security providers are buoyed by the huge revenue potential of bundled products and integrated systems, though it has increased competition from companies in related arenas," said Shetty.

The constructive efforts of market participants seem to be paying off as many housing developers are beginning to install security systems during the construction stage itself. This trend is likely to pick up momentum with the resumption of residential construction activity, particularly multi-family homes, following a partial economic recovery.

Additionally, technological advancements in the form of digital recording and surveillance equipment along with the need for security against local crime to terrorist attacks are also accelerating the adoption of residential security systems and services.

The U.S. Residential End-User Security Market is part of the Auto ID and Security Subscription. This research presents an insightful analysis of major factors such as the economy, pricing, and marketing strategies that are playing a critical role in the market growth of various residential security products which include software, hardware, and services.

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