Marketing Subscription-Based Patrol and Restitution

0:00I'm pushing the limits of the types of papers that are possible to present at the Austrian Scholars Conference by discussing a marketing study. So I want to give a little bit of a context to what I'm doing and talk to you a little bit about the business model that I've been researching and then I'll go into the marketing research that we've done. What I'm doing I might call open source entrepreneurship. I've been studying a business model for several years and as I've been nailing down various elements of it, I've been writing papers and presenting them, several of them here. So these are some of the past papers that we presented. That last one was just recently published. None of those others are published unless you count being on the web as published.

0:55The last one is published in libertarian papers. So the business model that we have in mind is we call it subscription, patrol and restitution and is inspired by the writings of Molinari, Rothbard, the Tannahills and so forth. The idea is to create a full business model for internal security. In the current offering, it's a residential service, subscription-based, about a price point of $35 a month, patrol, monthly newsletter on area crime, first responder, various concierge Care Services while you're out watching, taking care of the pets, so forth, and then covering the crime cycle as I show on the right hand side, which would be if a crime occurs to investigate it, to find the perpetrator, to engage in the mediation or binding arbitration or failing that to make restitution directly to the subscriber.

2:08So right now, one of the things we want to know of course is would people buy this, right? So in 2006, we did a marketing study, a pilot, and some of the things that we learned was that people do indeed want more patrol. This was, this particular marketing research, what we did was we targeted homes that had home monitoring signs in the yard. So we went specifically to people who we already knew were buying additional amounts of security services. In the U.S. about 20% of homeowners subscribe to a home monitoring service.

2:53And of course if you go to higher valuation of home, about $300,000 homes and up, 40% of Americans subscribe to home monitoring services. And we in great detail laid out in this questionnaire pilot what the business model would be and we asked them what do you see in the value of this and they thought the patrol was the main value and that the restitution they also were very interested in. And one of the things that we found was that this business model was perceived by home Home Monitoring Subscribers as being a complement to and not a replacement for their home monitoring services.

3:41Another element is we were trying to probe the question of free riding. In this business model, you know, anyone down the street could subscribe to this model, could subscribe to this business and then if there were two people or three people or for People on a Street. The patrol, of course, would still come down the street in patrol. So the question is, well, as long as my neighbor is subscribing, why should I subscribe? What we tried to do is build into the offering enough internalized benefits so that free writing is not a concern. And with the offering as we gave it, the consumers were reporting marketing that, no, it was not a concern, whether or not their neighbor subscribed did not have a significant impact about whether or not they said that they would subscribe.

4:37This is the perils of marketing research is, you know, you think social science is an art, you know, wait till you get to marketing research, you know, stated intent purchases is very iffy. So this year, to follow up on our marketing research, we went a little deeper. There are some entrepreneurs that would argue that, in particular, Rob Adams comes to mind. He wrote a great book called A Good Hard Kick in the Ass, which is a, he's a venture capitalist out of Austin. He's also an adjunct professor at the University of Texas, teaches a course at UT Austin on New Venture Creation, and in his book and in his courses, he always suggests that the way that an entrepreneur go about his work is to look at a target market and ask them where is your pain, what is your most penetrating problems, and then to sculpt a business plan to solve those problems.

5:47In this case, one of the concerns we had was, well we're coming with a hammer and now we're This was an attempt to probe what we call general pain points, ask open questions to people about security needs. These are some of the questions we had. We did this with Google Docs forms, and I had 14 replies on this. And a couple of the main things we found were that home monitoring dominates what we call the mind-share. That is, if you talk to somebody and you say, tell me about your problems with home security, they immediately think to themselves, oh, you mean my home security system that I have.

6:35And so it requires a learning process or further probing to get at, know we mean all of your security guns dogs lighting locks burglar bars anything behaviors etc another thing that we learned was that people don't know there are no clear or compelling pain points a la Adams but I do want to I do want to I want to mention some other marketing researchers. This is a book by Moskowitz and Goffman, and there are some very interesting marketing research guys. These are the guys that are responsible for chunky tomato sauce, and the reason why is they developed a marketing methodology that bears a little bit of a resemblance to evolution,

8:06in the better product or service. So we said, well, Moskowitz and Goffman give us hope. So the next thing we did was we said, well, let's break it down. We took the SPR business model and we broke it into its eight constituent parts that we could think of and then we turned We put them each into an independent offering, that is, describe a newsletter service, saying okay, here's a service you might get, you get a monthly newsletter on crime, it has a map, here's your house, it shows all of the crimes that occurred in the last month, it lists various things about the crimes, whether someone was caught, what the impact to the victim was, and it will also have articles about security in it and so forth.

9:04Okay, this is the newsletter bundle. This is the vacation integrity check bundle. We took each one of those and we asked people, how much would you expect to pay for something like that? And then the next question is, would you pay for something like that? And some goober went to the mall and rented a table and gave out $2 bills in exchange for completing the survey. And these are the results. What's really nice is generally it looks like this is a marketable service, independently and in combination people are expecting to pay and are willing to pay what I consider to be vast sums of money on security and it was quite interesting to take some of these surveys because a man and a woman would be standing there and a married couple and I'd

10:31Marketing Research, because you learn so much more actually talking to the people instead of handing it off to a service to fill out cold questionnaires for you. So that's, how much time do I have left now? About five minutes, okay good. So that occupies part of the paper. The paper by the way, I've got a whole bunch of them, very athic, you know this is just Flavor and Concepts, right? If you want the meat, it's all right here, and there are several copies out here. You're welcome to take them. So the next question that we have is, when you're trying to build a business model into the mainstream, you have a challenge, and Here's a book that's highly regarded in the high-tech industry called Crossing the Chasm by Jeffrey Moore.

11:37And it's about the fact that there are these different market segments that as you try to enter the mainstream, to start with the high-tech side, you have people who are just tech junkies. They'll buy a VCR when it's $2,000. They'll buy the newest gadget just because they think it's cool. And then there are these kind of visionary people, which are the next segment of consumers, that they kind of get it. You know, once you have a concept that's pretty well defined and you pitch it to them, they say, aha, that's something I can use and they purchase it. But the vast majority of consumers are not like that. Instead, they need extensive amounts of evidence and they also exhibit imitation behavior where they rely a lot on what other people have done or have subscribed to.

12:35They ask their friends, hey, have you done this? Have you tried this product? Is it good? And so he shows that there's this chasm, and I've got a little note here, okay, between the early adopters and the early majority. And this is where most businesses fail. And there's a whole strategy for targeting a market niche within the early majority and going after them and going after them with a vengeance. And then having established that beachhead, and now I'm going to switch analogies, you've got the head pin done and now you have to hit the next pins and the next pins and that's how you get into this, get all the pins down. And so what I've done is I've translated I've translated Jeffrey Moore's concepts into the security environment, and I go into this paper quite a bit, but I explain why I think that the best strategy will be to start with some high-end consumers, to go into a high-crime area next, and then go into a middle-class area, and all of this has to be in one geographic area, which presents some difficulties.

13:43So, I think that's all I'm going to say about the paper, but we can talk about this after the papers are over. Thank you very much.