Capturing Middle-Income Buyers: The New Sweet Spot for Smart Home Sales
The middle-income market niche is expected to grow 27% per year and there is a growing awareness of home automation among this group.
Capturing Middle-Income Buyers: The New Sweet Spot for Smart Home Sales

No interior designer, no architect and no lighting designer mean more control and money for integrators in this burgeoning middle-income market niche, which is expected to grow 27 percent per year.

Every integrator wants the mega-six-figure projects… right? You know, the ones that drag on for two years with picky homeowners that create cash flow problems for your small custom installation business. Sound familiar?

Well, for one integrator, Eagle Sentry in Las Vegas, those large projects are great, but the company would rather have lots and lots of ongoing very profitable projects in the $10,000 to $20,000 range. Greg Simmons, vice president at CE Pro 100 Eagle Sentry, believes these lower-priced jobs are the future for his company and for the entire custom electronics industry due to several factors, including the advent of smartphone control, influx of alarm-based competition, and growing awareness of home automation among middle-incomes Americans.

“What has happened is the technology that we normally reserved for high end custom homes we have now been able to bring those products down to the next level below which for us is the middle market demographic and it is working really, really well,” says Simmons, who participated in a recent CE Pro webinar that also included David Weinstein, vice president of residential sales for Lutron Electronics and Fred Napolitano II, senior vice president of Napolitano Homes in Virginia Beach, Va., a top production/semi-custom homebuilder that also targets middle-income buyers.

For Simmons, that means the company is finding success working with senior housing, MDUs, Millennials, first-time homebuyers and move-up buyers. This niche is also attractive because there are fewer trades involved fighting for a piece of the pie. That means a freer schedule for the integrator and no architect, lighting designer, and interior designer eating away profits.

Free CE Pro Webinar On Demand: How New Home Automation Technology Is Helping Integrators Connect with Mid-market Customers

As a builder, Napolitano Homes focuses on this niche, building entry-level multi-family, single-family and empty-nester cluster communities ranging from the mid-$100,000s for multifamily to $450,000 for single family.

“We do all ranges of homes, but we recently expanded our technology offerings as part of the base price of the home,” says Napolitano. “For instance, we install as part of the standard features the alarm system, structured smart wiring, smart door bells and touchscreen thermostats. And the buyer has the ability to integrate all of this on his smartphone.

“What we have found, rather successfully across all our demographics, is that people five years ago were still learning how to use their smartphones. Now they are into their second and third generations of smartphones… it has almost become an appendage to our consumers… and they want that connectivity to be able to tie into their home from wherever they are.”

Data from Parks Associates supports his assertion. By 2017, smartphones will be a means of control in close to 80 percent of all smart homes. Today, it is used a control device in about 40 percent of homes.

Related: 3 Reasons to Use Security to Capture Middle-Income Smart Home Buyers

Weinstein points out that the mid-level income market is vast.

“We see the middle market as approximately 64 million homes between $250,000 and $500,000 in value where we can now provide simple, reliable and affordable environmental control solutions for lights, shades and temperature for this vast market segment that up until now could not afford, understand or commit to these types of amenities. Because of the advent of smartphone-based control and all the advertising we are seeing, the awareness is growing at a tremendous rate,” he says.

Isn’t the Middle Market All DIY?

Skeptical integrators believe the mid-level market for home automation is all going to go DIY, with homeowners opting for apps that that give them silos of home control but not real integrated home automation.

But according to data from Parks Associates, money spent on home automation services, that is installation, monitoring and maintenance, is expected to nearly triple from 2012 to 2017. In all the data reveals that an estimated $30.5 billion (that’s billion with a “b”) will be spent on home automation services in 2017 compared to $8.1 billion spent in 2012.

To be exact, that is a 276 percent growth rate. At the same time, the amount spent on hardware is expected to grow from $13.7 billion to $41.3 billion. Overall, the combined home automation hardware and services revenues are expected to have a compounded annual growth rate (CAGR) of 27 percent per year.

So much for just DIY only.


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