As some of you may know, I am writing a business plan for a patrol and restitution company in my hometown, The Woodlands, Texas, about 30 miles north of Houston. Clients will pay a subscription for patrol of their residences, including call response, and will be indemnified against criminal activity on their property. If a crime occurs, we will investigate at our expense (variable cap) and then attempt to engage the perpetrator in mediation or binding arbitration to obtain restitution to the victim and for our expenses in apprehension.
A nagging problem is that no service like this exists, as far as I have found. This makes my marketing section somewhat weak. The closest service (which is well documented by Security magazine) is the home alarm market: ADT, Brinks, and all the others. Market penetration for those is really low (around 6% of homeowners), which would not be very exciting for my business. I estimate that 30% market penetration would be a comfortable level for efficient use of patrol resources.
There are two related demand-curve issues. First, there is the obvious question of what market penetration will be had at base subscription rates of $10/mo to $50/mo. Current calculations show that $10/mo. is hard to make, since insurance claims alone could eat up all the profit and apprehension rates would be low, since knowledge of the neighborhood would be less. A solution, if $10/mo is near the sweet spot, is to not offer indemnification for the big stuff like murder, rape, and assault. I'd hate to do that, though, since I see that as a key differentiator.
Not only would I like to find the sweet spot on the demand curve, but there is a network effect to consider. If the subscription rate in the area is very low, patrols will be spread out geographically, with lots of down time between patrolling the property of subscribers; plus, the community policing model on which they will patrol will be less cost-effective. As a result, I am considering adopting a pricing scheme that will reward network behavior. For instance, a subscriber might get 10% off his subscription if a property within 1000 feet is also subscribed. Or, we could adopt a more complex sliding-scale scheme; but I'd like to keep the deal to the consumer as simple as possible. We might also offer one-time referral bonuses.
So far, the market research techniques about which I have read focus on existing markets. How does one do market research in an undeveloped market such as this? Are surveys and focus group results truly indicative of actual demand schedules? I am skeptical of their worth (especially when I look at the price I will be paying for such). Unfortunately, I can't "test market" the service. Does anyone have suggestions for estimating the demand for such services?
Any other comments or suggestions would also be helpful.
Thanks,
Gil Guillory, P.E.
Process Design and Project Engineering
KBR, KT-3131B
email [EMAIL PROTECTED]
phone 713-753-2724(w) or 281-362-8061(h) or 281-620-6995(m)
fax 713-753-3508 or 713-753-5353
