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ServiceMaster Idea Proposal (SERV)

ServiceMaster Idea Proposal (SERV)
 

Will ServiceMaster’s American Home Shield maintain its service quality as it adds contractors and introduces new technology?

 

Report Available: September 29, 2016

 

Blueshift’s initial research showed SERV’s AHS becoming a more important part of SERV, seeing increased revenue, growth in home warranties, and consistent retention, while adding a mobile app as a customer service convenience. But as AHS grows and adds more contractors, it is likely to face challenges in delivering the same quality of service as well as getting enough contractors to adopt the new technology, potentially placing its service, retention, and reputation at risk.

 

Observations

  1. SERV’s AHS provides home warranties for household systems and appliances. It made up 37.8% of company revenue in Q2 2016. Year to year revenue growth was 8%, a quarter of which is attributed to higher pricing. Growth in home warranties was 7% compared to a year ago, and customer retention rate was 75%, the same as in 2015. SERV revenue grew 4% year to year, driven in part by AHS’ increase in direct-to-consumer and real estate customers. The company also acquired OneGuard Home Warranties, expanding its presence in Texas, Arizona and Nevada. AHS is expected to achieve 10% organic growth in the second half of the year and upwards of 12% growth with the inclusion of OneGuard.
  2. AHS is the 1 Consumers Advocate-rated home warranty company, celebrated for its speed in assigning pre-screened contractors within 15 minutes 90% of the time, and for its strong reputation across the industry. It received highest marks for customer experience and contractor network. With any service business, dissatisfied customers will complain loudly. The Better Business Bureau resolved nearly 7,000 complaints in the last three years, with 71% of those complaints centered on problems with the product/service and 14% on guarantee/warranty issues.
  3. Service delivery is crucial to AHS’ success and customer retention, placing a premium on the contractors the company uses for service calls. As the company expands and adds new contractors, training and quality execution of service will be vital to keeping the same level of service. AHS has used a small network of preferred contractors for the majority of its claims, something which may have to be adjusted as the company grows and adds contractors.
  4. AHS has introduced ServSmart, a mobile app used to file a claim, schedule a time for service call, alert when a technician is on their way, and allow customer to rate their experience. If adoption is high among AHS customers, it remains to be seen how contractors will take to this new technology and whether they will adhere to the process required to make this development a successful customer service and retention tool. Also, as home warranty competition grows, the battle for top level contractors will increase, potentially requiring AHS to step up to keep their top performers.

 

Are contractors seeing a change in the level of service from AHS? Are contractors using ServSmart? Do contractors see a difference in the speed of the process with ServSmart? Will AHS contractors switch to competitors if they are paid more elsewhere? Will contractors get big enough that they don’t need AHS to get customers?  Why are competitors not devoting more resources to compete with AHS in direct to consumer? To answer these and other questions, Blueshift will gather data and issue a market research report from AHS contractors, Competitors’ contractors, Real estate brokerages, Home warranty competitors, AHS customers, and Industry specialists.

 

Companies: ServiceMaster (SERV)

 

Research Begins: September 12, 2016