Brand-Centric Business Model Boosts Integrator’s Profits by 50%
Houston integrator Digital Delight leaves traditional business model based on equipment margin for a high-volume operation using Logitech for control.
After 18 years as a traditional custom installation company, JJ Canon and Peter Friesen of Digital Delight in Houston knew something had to change. Since 1999, Digital Delight had operated pretty much like many other CE pro businesses, installing a small number of high-ticket systems for affluent clientele while earning most of their profit from equipment margin. But that changed about one year ago.
“We basically sat down and realized we personally could not afford to buy the $50K+ custom systems we were installing. So, we challenged the business model and decided to focus on smart home systems that a median income family could afford,” recalls Friesen.
That decision led Digital Delight to analyze various IoT solutions on the market, but the “missing link was control,” says Canon. “We had these cool, new-to-market IoT solutions that were affordable, but couldn’t find the right solution for control.” That’s when Canon got a call from a previous client who asked for assistance for her son-in-law who needed help programming a new Logitech Harmony remote.
“I downloaded the new software and I was worried it would take me a long time to figure out how to program this thing, then learn how to teach the client how to operate it; or perhaps sit online for hours with tech support trying to figure out how to integrate all these devices into a new control system that I wasn't familiar with. But once I downloaded the software, which was really easy, programmed the system, and gave the client the customer education, I found it only took me 30 minutes for the entire process. My eyes were opened to what Logitech could provide our company. It filled the void of a control system for our clients. That's how we got hooked on Logitech as our controller,” says Canon.
Soon, Digital Delight was pairing Logitech control with other recognizable brands, including Nest, Roku, Sonos and Lutron, into its new “silo’ed” business model the company has dubbed “DIFY (Do It For You) Tech.”
“They all play together in this nice unified ecosystem and at a full system price point that allows JJ and I to offer a smart home solution to far more clients,” adds Friesen.
Complete Business Transformation
The transformation has been lucrative. Digital Delight previously installed about 30 systems per year ranging from $50,000 to $200,000, and earning about a 20 percent net profit per project, mostly from equipment markup. Today, the company performs 30 installations per month averaging about $5,000 per project. Meanwhile, company profits are up 50 percent with about 20 percent of profit coming from equipment margin, and the rest coming from labor.
“When we got Logitech, it transformed the business,” notes Friesen. “We had a certain way of doing things with matrix switchers, large eight-zone amplifiers, equipment racks and all that stuff. Today, everything we integrate into a smart house is the size of the hub. We don't build racks anymore. Everything is small, centrally located in every room for the client but it’s just as powerful and can do the same or much more than some traditional systems on the market today.”
Canon calls the process “siloing” meaning that everything is isolated in a particular zone. “And if there is an issue with that particular zone, it's easy to have those products in stock to make a repair the same day,” he adds. It’s not unusual for a Digital Delight installation to have between six and nine Logitech Harmony remotes… one for each room.
Streamlined Back-end Processes
The new business model not only streamlined the installation process, but the back-end as well. Digital Delight was able to transition a high cost custom programmer role to regular installers, further reducing costs and boosting productivity. The company can onboard new technicians much more quickly because learning the systems is not as complex.
“The Logitech and SONOS setup wizards have lifted a financial burden on our company because the learning curve is a lot faster than past CI solutions,” says Friesen.
Meanwhile, Return Authorizations (RA) for these newer products are much easier than classic CI brands because they typically involve a simple swap of a single amplifier versus a complex process of replacing an eight-zone amplifier, during which a client’s entire system is down while the integrator waits weeks to months for the repaired component. Instead, the structure of brands like SONOS and Logitech allow the integrator to have a few units on the truck if something goes wrong.
Rory Dooley, head of Smart Home at Logitech, says Logitech is committed to supporting integrators in the field. "Integrators are the frontline of this industry, and we take pride in the level of support we are able to offer them. It starts with one of the deepest programming databases in the industry. Not just a set of codes, we take the time to test TVs, AVRs and other equipment to make sure power on and input delays are accurate and don’t require the integrator to spend additional time in the field fixing broken macros. Paired with our dedicated dealer support line which is open 7 days a week, and a two-year warranty on all Harmony Pro product, it’s that commitment to the integrator that makes us so popular with our dealers," he says.
Also, from a service standpoint, Digital Delight can remotely access each client’s system by logging in via the Logitech Harmony Pro portal and forcing syncs. The company is no longer dealing with complex home networks, VPNs with backdoors and other remote access methods. If a truck needs to be rolled, technicians are no longer crawling through attics since all the products are typically isolated in individual rooms.
“I don't need to have a technician start tracing wires to see where things are plugged in. They can just go straight to that one room where the problem exists,” says Friesen.
“So in totality, Logitech has transformed the business… I mean it's night and day from where we sat 12 months ago to where we sit today.”
Digital Delight routinely couples Logitech Harmony with a Sony display, DISH Network Joey 4K satellite system, Sonos soundbar, Nest thermostat, garage door control, and even Amazon Alexa voice control.
Lastly, Canon says the simplification of their business is less stressful.
“Doing those larger systems is stressful,” he says. “I mean, just knowing that you have a mountain of programming ahead of you. And the financials that are on the line for those larger systems are very, very stressful. For a two-year-long project, you might have $200,000 tied up. My stress today is greatly reduced. It's fantastic. I get to spend time with my family now and don’t worry about my installers in the field.”
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Jason Knott is Chief Content Officer for Emerald Expositions Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at firstname.lastname@example.org
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