WEBVTT NOTE Marketing Subscription-Based Patrol and Restitution 1 00:00:00.000 --> 00:00:05.120 I'm pushing the limits of the types of papers that are possible to present at the Austrian 2 00:00:05.120 --> 00:00:11.240 Scholars Conference by discussing a marketing study. 3 00:00:11.240 --> 00:00:18.960 So I want to give a little bit of a context to what I'm doing and talk to you a little 4 00:00:18.960 --> 00:00:22.880 bit about the business model that I've been researching and then I'll go into the marketing 5 00:00:22.880 --> 00:00:26.920 research that we've done. 6 00:00:26.920 --> 00:00:32.620 What I'm doing I might call open source entrepreneurship. I've been studying a business model for several 7 00:00:32.620 --> 00:00:38.520 years and as I've been nailing down various elements of it, I've been writing papers and 8 00:00:38.520 --> 00:00:45.360 presenting them, several of them here. So these are some of the past papers that we 9 00:00:45.360 --> 00:00:53.000 presented. That last one was just recently published. None of those others are published 10 00:00:53.000 --> 00:00:55.540 unless you count being on the web as published. 11 00:00:55.540 --> 00:01:00.320 The last one is published in libertarian papers. 12 00:01:00.320 --> 00:01:08.140 So the business model that we have in mind is we call it subscription, patrol and restitution 13 00:01:08.140 --> 00:01:18.880 and is inspired by the writings of Molinari, Rothbard, the Tannahills and so forth. 14 00:01:18.880 --> 00:01:28.080 The idea is to create a full business model for internal security. 15 00:01:28.080 --> 00:01:35.380 In the current offering, it's a residential service, subscription-based, about a price 16 00:01:35.380 --> 00:01:43.680 point of $35 a month, patrol, monthly newsletter on area crime, first responder, various concierge 17 00:01:43.680 --> 00:01:50.280 Care Services while you're out watching, taking care of the pets, so forth, and then covering 18 00:01:50.280 --> 00:01:54.920 the crime cycle as I show on the right hand side, which would be if a crime occurs to 19 00:01:54.920 --> 00:02:01.240 investigate it, to find the perpetrator, to engage in the mediation or binding arbitration 20 00:02:01.240 --> 00:02:08.760 or failing that to make restitution directly to the subscriber. 21 00:02:08.760 --> 00:02:16.000 So right now, one of the things we want to know of course is would people buy this, right? 22 00:02:16.000 --> 00:02:25.560 So in 2006, we did a marketing study, a pilot, and some of the things that we learned was 23 00:02:25.560 --> 00:02:29.640 that people do indeed want more patrol. 24 00:02:29.640 --> 00:02:36.040 This was, this particular marketing research, what we did was we targeted homes that had 25 00:02:36.040 --> 00:02:38.460 home monitoring signs in the yard. 26 00:02:38.460 --> 00:02:46.660 So we went specifically to people who we already knew were buying additional amounts of security 27 00:02:46.660 --> 00:02:48.040 services. 28 00:02:48.040 --> 00:02:53.900 In the U.S. about 20% of homeowners subscribe to a home monitoring service. 29 00:02:53.900 --> 00:03:01.220 And of course if you go to higher valuation of home, about $300,000 homes and up, 40% 30 00:03:01.220 --> 00:03:08.060 of Americans subscribe to home monitoring services. 31 00:03:08.060 --> 00:03:16.340 And we in great detail laid out in this questionnaire pilot what the business model would be and 32 00:03:16.340 --> 00:03:20.540 we asked them what do you see in the value of this and they thought the patrol was the 33 00:03:20.540 --> 00:03:25.840 main value and that the restitution they also were very interested in. 34 00:03:25.840 --> 00:03:32.700 And one of the things that we found was that this business model was perceived by home 35 00:03:32.700 --> 00:03:39.620 Home Monitoring Subscribers as being a complement to and not a replacement for their home monitoring 36 00:03:39.620 --> 00:03:41.980 services. 37 00:03:41.980 --> 00:03:49.240 Another element is we were trying to probe the question of free riding. 38 00:03:49.240 --> 00:03:53.980 In this business model, you know, anyone down the street could subscribe to this model, 39 00:03:53.980 --> 00:04:00.620 could subscribe to this business and then if there were two people or three people or 40 00:04:00.620 --> 00:04:05.180 for People on a Street. The patrol, of course, would still come down the street in patrol. 41 00:04:05.180 --> 00:04:11.180 So the question is, well, as long as my neighbor is subscribing, why should I subscribe? What 42 00:04:11.180 --> 00:04:15.600 we tried to do is build into the offering enough internalized benefits so that free 43 00:04:15.600 --> 00:04:26.420 writing is not a concern. And with the offering as we gave it, the consumers were reporting 44 00:04:26.420 --> 00:04:31.140 marketing that, no, it was not a concern, whether or not their neighbor subscribed did 45 00:04:31.140 --> 00:04:37.620 not have a significant impact about whether or not they said that they would subscribe. 46 00:04:37.620 --> 00:04:44.680 This is the perils of marketing research is, you know, you think social science is an art, 47 00:04:44.680 --> 00:04:51.460 you know, wait till you get to marketing research, you know, stated intent purchases is very 48 00:04:51.460 --> 00:04:53.020 iffy. 49 00:04:53.020 --> 00:04:59.060 So this year, to follow up on our marketing research, we went a little deeper. 50 00:04:59.060 --> 00:05:08.580 There are some entrepreneurs that would argue that, in particular, Rob Adams comes to mind. 51 00:05:08.580 --> 00:05:14.980 He wrote a great book called A Good Hard Kick in the Ass, which is a, he's a venture capitalist 52 00:05:14.980 --> 00:05:15.980 out of Austin. 53 00:05:15.980 --> 00:05:22.420 He's also an adjunct professor at the University of Texas, teaches a course at UT Austin on 54 00:05:22.420 --> 00:05:29.140 New Venture Creation, and in his book and in his courses, he always suggests that the 55 00:05:29.140 --> 00:05:36.620 way that an entrepreneur go about his work is to look at a target market and ask them 56 00:05:36.620 --> 00:05:44.820 where is your pain, what is your most penetrating problems, and then to sculpt a business plan 57 00:05:44.820 --> 00:05:47.020 to solve those problems. 58 00:05:47.020 --> 00:05:51.660 In this case, one of the concerns we had was, well we're coming with a hammer and now we're 59 00:05:51.660 --> 00:06:05.660 This was an attempt to probe what we call general pain points, ask open questions to people about security needs. 60 00:06:05.660 --> 00:06:08.660 These are some of the questions we had. 61 00:06:08.660 --> 00:06:16.660 We did this with Google Docs forms, and I had 14 replies on this. 62 00:06:16.660 --> 00:06:25.660 And a couple of the main things we found were that home monitoring dominates what we call the mind-share. 63 00:06:25.660 --> 00:06:30.660 That is, if you talk to somebody and you say, tell me about your problems with home security, 64 00:06:30.660 --> 00:06:35.660 they immediately think to themselves, oh, you mean my home security system that I have. 65 00:06:35.660 --> 00:06:42.660 And so it requires a learning process or further probing to get at, 66 00:06:42.660 --> 00:06:49.980 know we mean all of your security guns dogs lighting locks burglar bars anything 67 00:06:49.980 --> 00:06:56.460 behaviors etc another thing that we learned was that people don't know there 68 00:06:56.460 --> 00:07:06.620 are no clear or compelling pain points a la Adams but I do want to I do want to 69 00:07:06.620 --> 00:07:36.620 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, 70 00:08:06.620 --> 00:08:23.460 in the better product or service. So we said, well, Moskowitz and Goffman give us hope. 71 00:08:23.460 --> 00:08:28.260 So the next thing we did was we said, well, let's break it down. We took the SPR business 72 00:08:28.260 --> 00:08:34.620 model and we broke it into its eight constituent parts that we could think of and then we turned 73 00:08:34.620 --> 00:09:04.620 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. 74 00:09:04.620 --> 00:09:09.620 Okay, this is the newsletter bundle. This is the vacation integrity check bundle. 75 00:09:09.620 --> 00:09:15.620 We took each one of those and we asked people, how much would you expect to pay for something like that? 76 00:09:15.620 --> 00:09:20.620 And then the next question is, would you pay for something like that? 77 00:09:20.620 --> 00:09:29.620 And some goober went to the mall and rented a table and gave out $2 bills in exchange for completing the survey. 78 00:09:29.620 --> 00:09:32.620 And these are the results. 79 00:09:32.620 --> 00:09:42.100 What's really nice is generally it looks like this is a marketable service, independently 80 00:09:42.100 --> 00:09:50.020 and in combination people are expecting to pay and are willing to pay what I consider 81 00:09:50.020 --> 00:09:55.260 to be vast sums of money on security and it was quite interesting to take some of these 82 00:09:55.260 --> 00:10:01.260 surveys because a man and a woman would be standing there and a married couple and I'd 83 00:10:31.260 --> 00:10:36.180 Marketing Research, because you learn so much more actually talking to the people instead 84 00:10:36.180 --> 00:10:43.860 of handing it off to a service to fill out cold questionnaires for you. 85 00:10:43.860 --> 00:10:47.900 So that's, how much time do I have left now? 86 00:10:47.900 --> 00:10:49.740 About five minutes, okay good. 87 00:10:49.740 --> 00:10:52.460 So that occupies part of the paper. 88 00:10:52.460 --> 00:10:59.060 The paper by the way, I've got a whole bunch of them, very athic, you know this is just 89 00:10:59.060 --> 00:11:05.600 Flavor and Concepts, right? If you want the meat, it's all right here, and there are several 90 00:11:05.600 --> 00:11:11.260 copies out here. You're welcome to take them. So the next question that we have is, when 91 00:11:11.260 --> 00:11:27.300 you're trying to build a business model into the mainstream, you have a challenge, and 92 00:11:27.300 --> 00:11:35.180 Here's a book that's highly regarded in the high-tech industry called Crossing the Chasm 93 00:11:35.180 --> 00:11:37.780 by Jeffrey Moore. 94 00:11:37.780 --> 00:11:42.100 And it's about the fact that there are these different market segments that as you try 95 00:11:42.100 --> 00:11:48.940 to enter the mainstream, to start with the high-tech side, you have people who are just 96 00:11:48.940 --> 00:11:49.940 tech junkies. 97 00:11:49.940 --> 00:11:52.940 They'll buy a VCR when it's $2,000. 98 00:11:52.940 --> 00:11:58.460 They'll buy the newest gadget just because they think it's cool. 99 00:11:58.460 --> 00:12:03.920 And then there are these kind of visionary people, which are the next segment of consumers, 100 00:12:03.920 --> 00:12:06.380 that they kind of get it. 101 00:12:06.380 --> 00:12:13.340 You know, once you have a concept that's pretty well defined and you pitch it to them, they 102 00:12:13.340 --> 00:12:17.220 say, aha, that's something I can use and they purchase it. 103 00:12:17.220 --> 00:12:21.740 But the vast majority of consumers are not like that. 104 00:12:21.740 --> 00:12:28.620 Instead, they need extensive amounts of evidence and they also exhibit imitation behavior where 105 00:12:28.620 --> 00:12:35.100 they rely a lot on what other people have done or have subscribed to. 106 00:12:35.100 --> 00:12:37.940 They ask their friends, hey, have you done this? 107 00:12:37.940 --> 00:12:38.940 Have you tried this product? 108 00:12:38.940 --> 00:12:41.180 Is it good? 109 00:12:41.180 --> 00:12:47.580 And so he shows that there's this chasm, and I've got a little note here, okay, between 110 00:12:47.580 --> 00:12:50.180 the early adopters and the early majority. 111 00:12:50.180 --> 00:12:55.720 And this is where most businesses fail. And there's a whole strategy for targeting a market 112 00:12:55.720 --> 00:13:02.720 niche within the early majority and going after them and going after them with a vengeance. 113 00:13:02.720 --> 00:13:06.780 And then having established that beachhead, and now I'm going to switch analogies, you've 114 00:13:06.780 --> 00:13:10.940 got the head pin done and now you have to hit the next pins and the next pins and that's 115 00:13:10.940 --> 00:13:17.940 how you get into this, get all the pins down. And so what I've done is I've translated 116 00:13:17.940 --> 00:13:43.940 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. 117 00:13:43.940 --> 00:13:52.940 So, I think that's all I'm going to say about the paper, but we can talk about this after the papers are over. 118 00:13:52.940 --> 00:13:54.940 Thank you very much.