ServiceMaster CEO Hank Mullany: "We’ve decided to focus on our traditional inquiry, digital and direct marketing channels since these channels have proven to have better retention rates."
The busy spring lawn and garden season was especially eventful for one of the Green Industry's largest companies this year. TruGreen decided to sell its maintenance division (LandCare) in April. Then its president, Stephen Donly, announced his resignation in May. By August the CEO of TruGreen's parent company, ServiceMaster, said the TruGreen business was underperforming and needed to adjust its sales strategy.
TruGreen actually grew its sales through June by roughly 3% as compared to the same timeframe one year ago. However, growth in full-program accounts dropped by 5.2%. The company's customer retention rate went from 70.9% to 67.2%.
To reverse negative trends such as these, the company says it must focus on reducing customer cancellations, improving service delivery and consistency, reducing lawn specialist turnover, and improving communication with customers. TruGreen must also focus on more profitable sales—placing considerably less emphasis on "neighborhood selling" as a means to acquire new customers.
The following is an exclusive interview with ServiceMaster CEO Hank Mullany, who discusses TruGreen's shift in strategy.
Q: Many contractors say that "neighborhood selling" is how they've built up their businesses over the years. Why does TruGreen believe that this is no longer a viable approach?
We’re re-evaluating all of our existing sales channels and our marketing spend to ensure that we’re making the most of our resources. For example, we’re taking a long, hard look at the TruGreen neighborhood sales program. You may recall in 2009 that we expanded neighborhood sales as a way of growing customer counts; we had our field staff knocking on more doors in more neighborhoods which they already served to sign up new customers.
But we’ve found that neighborhood selling isn’t as effective as it was in the past. Our neighborhood sales program was an expensive channel through which to sell. Our customer retention rates were lower than in our other sales channels.
As a result, we’re going to rebalance our sales and marketing efforts and focus on more profitable sales. We've decided to focus on our traditional inquiry, digital and direct marketing channels since these channels have proven to have better retention rates.
Although this may impact TruGreen revenues in the short term, in the long term we believe this will improve our profitability, increase the average and lifetime value of a sale, and drive higher customer retention.
Q: What are we talking about when we say "more profitable sales"?
We’re looking at increasing customer retention through improved customer experience and continuously adjusting our marketing mix to optimize sales and brand awareness. That would include investment in digital marketing: search engines, websites, mobile and social.
Q: You've referenced the need for improvement in the area of customer communication. Can you elaborate on this: What has been the problem and how will you correct it?
To improve the customer experience in TruGreen, we’ve launched a set of seven standards of service excellence so we can drive toward a common set of service delivery standards and a superior experience for all of our customers. This isn’t complicated stuff we’re talking about here. This is knocking on people’s doors before we service their lawn to let them know we’re there. It’s following up with a phone call to new customers after their first application. These are basic steps we can take to improve the customer experience.
As you know, one of the challenges in TruGreen is the variation in agronomic conditions from region to region. But customers everywhere still expect a healthy, green weed-free lawn. When that doesn’t happen, it’s not surprising that we get dissatisfied customers. So, we’re reviewing all of our agronomic programs to ensure that we’re providing the most appropriate lawn care treatment for every lawn.
Furthermore, when a customer’s lawn isn’t meeting expectations, we’re rolling out a new lawn recovery process to proactively address problem lawns before the customer decides to cancel their service.
Q: It sounds like some technological tools being deployed by the Terminix business unit of ServiceMaster can be applied to TruGreen. Can you provide an overview of what they are and how they will enhance customer service?
To deliver the kind of service our customers expect from us, we need to be better at executional excellence. Some of the improvements we’re looking for will come from investments in technology, such as better call management, similar to what’s being used today in Terminix.
We’re actively working in all of our businesses to implement specific actions to transform customers’ experiences, drive higher customer satisfaction and, as a result, improve retention rates and increase customer counts. As I said, improving the customer experience is at the core of our growth strategy, particularly in TruGreen.
While TruGreen delivered relatively flat revenues in a difficult economy, its performance is not meeting our expectations. Revenues only grew slightly more than 1% in the most recent reported quarter, and operating performance was below last year for the same period. We need to do better.
We are seeing some positive signs emerging—improved retention and customer save rates. Our TruGreen team is making good progress, and I am very optimistic that they will deliver on our commitment to transform the customer.