New security Business sees prospects in orphan market

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Friday, October 1, 2004

DAYTON, Ohio - Branching out from his role as chief operating officer at Onika Security, a residential and commercial security provider, Paul Dohse has started his own company - Altec Alarm Systems.

Dohse, who is planning to leave Onika by the end of the year due to business philosophy differences with his partners, plans on building business at Altec, which opened for business on Aug. 1, by re-establishing orphan accounts and working as a partner with other companies to service existing accounts.

Dohse said he sees the market for orphaned security systems - systems that are installed but are not being monitored by any company - as wide open and estimates that this sector has opportunities.

“You’ve got all of these dealership programs putting in thousands of systems per month and other people are moving into these homes with systems already installed,” he said. “I will come in and reprogram , and hook them up with an independent monitoring firm.”

Dohse estimates the price for this service to the consumer will run from $35 for the reprogramming and a monthly monitoring charge beginning at $15.95.

The company also will focus on working as a non-competitive, third-party service provider for existing security accounts.

“There is a huge market for servicing these accounts,” he said. “I anticipate these dealership programs create so much need for service attention.”

As for the company’s chance in the orphan market, Michael Barnes, president of Barnes Associates, said that alarm companies broadly lose an average of 5 percent of its customers each year due to moving activity. But he also said most attempt to retain the account by either providing incentives to the exiting homeowner to coordinate an account transfer with the new homeowner, or by directly soliciting the new owner.

“Good alarm companies try very hard to recapture the business by soliciting the new homeowner,” Barnes said. “Our data suggests that about half of all moves are resigned by the existing alarm company.”

Barnes also said that roughly one quarter of moves are resigned with a different company. All the numbers taken into account make it seem as though the market might be attractive, but Barnes said he “would worry about this as a target market.”

“It smacks of having ‘adverse selection’ characteristics,” Barnes said. “That is, inherently defining a potential customer set that is either not appreciative of alarm protection, economically not willing to take on the payment responsibility, a very tough sale or all three.”