ADT’s changing tides

Company refocuses while industry watches
Thursday, July 1, 2004

BOCA RATON, Fla. - In 2001, security industry insiders were not sure where ADT was headed. Under Tyco management, the company changed its business plan - becoming focused on acquisitions in the security market and quick revenue strategies.

Fast forward to today. Gone are the deals and high attrition rates. Gone are the exasperated dealers, frustrated with changing contracts and a lack of compensation.

Controversial ADT Security Services has been replaced by a company striving to take its business, and its reputation, to a higher level by moving away from its previous mass marketing strategy.

“All of these changes that have been put into place are aimed at accomplishing our goals while encouraging future, sustainable growth,” said Bill Barnes, vice president of dealer development at ADT.

The company’s transition has been propelled by changes made to its dealer program in the fall of 2003. Since that time, the company has been cautiously adding to its authorized dealer program and it plans on continuing with the additions - between 75 and 100 in the next 12 months, according to Barnes, after a substantial downsizing in 2001.

More notably, ADT has thrown its free systems approach out the window. Instead, customers now pay an upfront fee of $99.

Michael Barnes, president of Barnes Associates, said that ADT’s previous cutbacks and alterations were necessary to weed out the program’s unproductive sectors so that the company could focus on its long-term goals.

“They needed a smaller, more focused group with which to make necessary adjustments, both in the structure of the arrangements and the pricing,” Barnes said. “That appears to have been accomplished.”

The changes to the program affect an already established network of dealers, many who already survived cutbacks. Dealers were required to deal with ADT’s raised customer credit requirements and price. With the new approach, Jimmy McClellan, an ADT dealer based in Mississippi, saw his customer and installation numbers drop.

“It made a difference because I lost customers,” McClellan said. His company, Security Services, which has two locations in the state, went from installing 80 systems a month to 60 systems per month after ADT’s implementation of the upfront fee.

But the higher costs associated with the systems for the consumer resulted in higher revenues.

“It cut our numbers, but raised our profit levels,” he said.

McClellan said his company has adapted to the change. To assist dealers, ADT offered training classes to educate them on acquiring new clients at this new price level.

“I look at it as I am part of ADT and what is good for them is good for me,” he said.

Other members of the industry also see the move to charge more for systems as a positive change for the entire industry.

“It’s a hopeful trend,” said Jean Levenson, president of Sentry Alarms in New York. “When you give systems away for free, people will treat it as free.”