Making New Connections In the Home Integration Market

The housing crisis, in many ways, tarnished the gilded age of home integration. Prince, among other home integrators, had to find a way to diversify. The middle-class housing market is where they're turning. "When the market went down the builders became very cost-conscious," he said. "So some of the standard features—liberal pre-wires and such—started to go away." Prince decided his company needed to get aggressive and figure out how to tackle new markets. "If you want to grow, you've got to have a decent mix and the reason is what we're going through right now in the market," he explained.

With the cost of equipment, from plasma televisions to surround sound speakers to wireless network routers, reaching more affordable levels, middle-class homeowners are finding an integrated home is a fiscal possibility. For many homeowners, though, a fully integrated home is still well outside an affordable price range.

"Integration is starting to appeal more broadly, but a big difference that remains is scale," said Scott Evans, Microsoft's group manager for entertainment and devices in the Redmond, Wash.-based company's eHome divison. "While a mainstream homeowner is increasingly interested in integrating the TV in the home with the PC, a five-plus zone dedicated entertainment system remains in the realm of the high-end residential market."

Tyler Dikman, CEO of Tampa, Fla.-based systems integrator CoolTronics, is pragmatic about growth in that space. "The middle income is not there completely yet," he said. "We start off helping them with current technology needs and helping them explore other options."

Dikman found that pitching small and building on those relationships is important. "Most people don't really know what's out there," he said. "For those guys, we usually start small, rather than diving in and having a customer drop $20,000 to $30,000 on something."

That strategy, in turn, provides home integrators an opportunity to earn repeat business and develop a long-standing relationship with the customer. "I truly believe in the model where if you can sell them really well on one product or service they'll come back to you asking for more," Dikman said.

Mike Seamons, vice president of marketing at Westerville, Ohio-based home integrator Exceptional Innovations, says that the entwinement of home entertainment with home integration gives the middle-income market a boost. "I've tried for years to get somebody excited about controlling three lights from a touch pad," he said. "But if you give them a TV, the lights and the thermostat, it gets a whole lot cooler. And you've planted a seed you can attach a bunch more value to."

Microsoft's Evans says there are a multitude of factors contributing to the rise of the middle-class home integration market. "Home networking—both pulling CAT5e and configuring wireless networks—remains challenging for many consumers," he said. "The home integrator has a huge advantage in the ability to offer a much richer level of capability than these mainstream-focused companies offer." The challenge, he explained, is to create that initial relationship with the middle-tier consumer.

Prince's company has taken advantage of the trend toward broader adoption of home theater systems as a way to do exactly that. "Just look at the number of $300 to $600,000 homes compared to the number of $1 million homes out there," he said. "The buyers of those $300,000 homes are very interested in this technology."

Although many of these homeowners have a do-it-yourself mentality, Evans, Seamons and others agreed integrators can convince the middle-income market of their value. "If someone really wants to make this seamless, they can't do it by themselves—even for the above-average consumer," Seamons said.

Competition from mass-market retailers means home integrators must focus on attracting and retaining customers who are looking to build an integrated home that provides them with more than just a collection of whiz-bang technology. "We're selling an experience, not a commodity," Prince said.