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Dealers Explore Success in the ‘New Normal’

“It takes a lot of courage to say ‘we’re going to cannibalize our business,” Tim Costello said in describing the concept of creative destruction to dealers attending the Power of Four Summer Tour stop in Teaneck, NJ, on July 26. It is precisely this concept that sponsors SpeakerCraft , D-Tools, Monster , and Lutr

“It takes a lot of courage to say ‘we’re going to cannibalize our business,” Tim Costello said in describing the concept of creative destruction to dealers attending the Power of Four Summer Tour stop in Teaneck, NJ, on July 26. It is precisely this concept that sponsors SpeakerCraft, D-Tools,Monster, and Lutron hoped to impart on conference attendees to incentivize them to embrace the “new normal” economy and think beyond their usual selling strategy in the custom integration channel.

The Power of Four conference discussion about “creative destruction” was part of guest speaker Tim Costello’s introduction, which provided background on what custom integrators need to add to their arsenal to adapt to the changing business climate.

The discussion of creative destruction was part of Costello’s introduction, which provided background on what custom integrators need to add to their arsenal to adapt to the changing business climate. Doing so, Costello said, involves being aware of the current social and physical environment and being willing to make changes even if it sacrifices a current business strategy. He joked that the latter is practically part of Apple’s business model, noting that Steve Jobs and his team has had no problem making their own products obsolete.

Costello also made the point that because of the basic product technology in this industry and the way it has historically been in a state of constant evolution, he believes CEDIA dealers are well equipped to adapt to the changing tides. He used this optimist outlook to launch into an admittedly “gloom and doom” presentation of current housing market and demographic statistics.

The presentation should be familiar to anyone that caught the chairman and CEO of Builder Homesite Inc. speak at CEDIA Management Conference earlier in the year at CEDIA EXPO this month in Indianapolis, but what was missing from his previous appearance in San Diego was an in-depth exploration of the new market opportunities that exist in this “new normal.” Such was the goal the Power of Four sponsors had in taking Costello across the nation to meet regionally with custom integrators and brainstorm new business models.

Costello explained that one example of a strategy that homebuilders are using to adapt is to create houses like nothing else on the market. Some of this is through more European-inspired designs, as well as green homes that consume as much as 70 percent less energy than those built just a few years back. “Custom installers that can work with these kinds of features in the homes have an edge,” Costello said.

The second half of the day was spent identifying and discussing how to attract the small pockets of great wealth that still exists in this country despite the dismal housing, employment, and stock market outlook. The focus of the conference was on 10 such opportunities for the new normal: gracefully aging baby boomers; green buildings; Gen Y consumers; the minority majority; mobilized and networked homes and apartments; security; religious facilities; the rental market; going where the money is; and operational excellence through eliminating waste.

The key to tapping into most of these markets is figuring out exactly where the consumers are. Coming from a housing background, Costello continually stressed the importance of knowing local homebuilders association members and their specific projects.

Graceful Agers
With the graceful agers category, oftentimes a sales pitch is made to adult children or homecare facilities managers that are making decisions about remote health monitoring systems. Other opportunities exist here for software and control system programming, because the needs of aging baby boomers are so specific. Many have downgraded from large family homes, but they still desire the same amenities they’ve been used to, just with more convenience and less maintenance. There’s also a security element that is not just focused on keeping out intruders, but also on the ability to act swiftly if someone has an accident and needs immediate help.

Gary Yacoubian, vice president of strategic development for Monster, noted that there is a desire for this demographic to video-chat with children and grandchildren simply and from any screen in their homes. This involves turning their home theater installation into a Skype device, and there are different home teleconferencing products from which to choose. One attendee noted that Panasonic introduced an HD video conferencing capability as part of its HD Visual Communications (HDVC) system at CEDIA EXPO last year.

Pictured (l-r) are SpeakerCraft’s Jeremy Burkhardt, D-Tool’s Tim Bigoness, Lutron’s Jeff Zemanek, and Monster’s Gary Yacoubian.

Green Building
The green building market offers both new and retrofit prospects with the inherent move toward fully automated homes. Costello noted that there is not an obvious trade group out there taking the lead in green building automation, specifically, so there is an opportunity for CEDIA integrators in this capacity. Beyond energy monitoring tools, integrating smart meters and monitoring air quality are other elements that dealers can roll into software programming.

Many of the integrators present were eager to share their experiences with specific clientele demands. The importance of knowing the intricacies of those customers’ demands is vital. Curtis Cole, vice president of Systems Design Company does home integration in the famously wealthy Hamptons area of Long Island. In discussing how to pitch to the green building market, he said, “Energy dollars and cents don’t translate to our clients.” In other words, the literal quantity of water consumption speaks more volume to them than the relatively minimal cost savings they might incur by conserving water.

Gen Y Consumers
The Gen Y consumers were perhaps the most complex of all the categories. The 95-million strong in their mid-20s to 30s are well educated while more diverse than baby boomers, but they save less, and their wages are stagnant. This demographic is more inclined to rent instead of own, form single-person households, and single women are more dominant. Most importantly, Gen Y consumes information, music, and entertainment enthusiastically and in new, often very individual, ways.

With the stagnant housing market combined with lower wages and tremendous student loan debt, many Gen Yers are staying in the rental market longer. As a result, new rental buildings increasingly feature community-style media rooms and kitchens. Dealers should look to work with builders and developers of these types of rental units, Costello said.

Many young adults also continue to rely on their parents. Sometimes they do so by living in the comfort of mom and dad’s house, rent free, which gives dealers the opportunity to sell various types of systems to the same client. However, it’s important to keep in mind that the household dynamics are not the same as selling to traditional families with teenage children.

Alan Poltrack, president of Video Installations Plus in Hartsdale, NY said one of his clients sent him to Philadelphia to do a basic install in their son’s college apartment.

Even though this demographic isn’t financially equipped for a large home install, it’s important to keep in mind that five or 10 years from now, they probably will be. So part of selling to Gen Y is doing small jobs and building a trusted business relationship that may prove more lucrative in the long run.

Custom Channel Dynamics
Beyond all the specific market opportunities, the ultimate take-home point of the day was about embracing the unique changes the CEDIA channel faces today.

Tim Bigoness, vice president of sales and marketing for D-Tools, noted that “there is limited selling to early adopters.” Once the foundation for this industry, “even early adopters are different people than before,” agreed Monster’s Yacoubian. “You’ve got to figure out how to ride that wave,” he said.

The feedback from attendees was generally positive throughout the day. Joe Camarata, from Mid-Atlantic Representatives, said that as a manufacturers’ rep, “I need to educate [dealers],” because “they don’t remember all these pitches.”

Poltrack of Video Installations Plus was drawn to the event because he knows the four sponsors as highly reputable manufacturers. He was pleasantly surprised to learn that New York has the lowest number of underwater homes in the United States. “In today’s environment, I try to leave doors open to learn new things,” he said.