American Home Shield 2015 Annual Report Download - page 26

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Direct-to-consumer through our company-owned branches;
Indirectly through partnerships with high-quality contractors in our home warranty business; and
Through trusted service providers who are franchisees.
To accelerate new customer growth, we make strategic investments in sales, marketing and advertising to drive new business
leads, brand awareness and market penetration. In addition, we are executing multiple initiatives to improve customer satisfaction and
service delivery, which we believe will lead to improved retention and growth in our customer base across our business segments.
Develop and Expand New Service Offerings. We intend to continue to leverage our existing sales channels and local
coverage to deliver additional value-added services to our customers. Our product development teams draw upon the experience of
our technicians in the field, combined with in-house scientific expertise, to create innovative customer solutions for both our existing
customer base and identified service/category adjacencies. We have a strong history of new product introductions, such as Terminix’s
crawlspace encapsulation, mosquito control and wildlife exclusion services, that we believe will appeal to new potential customers as
well as our existing customer base. As of December 31, 2015, mosquito, wildlife exclusion and crawl space encapsulation are being
offered in substantially all U.S. geographic markets where we believe substantial market opportunity exists. We are now focusing our
efforts on increasing our market share in these product lines.
Expand Our Geographic Markets. Through detailed assessments of local economic conditions and demographics, we have
identified target markets for expansion, both in existing markets, where we have capacity to increase our local market position, and in
new markets, where we see opportunities. In addition to geographic expansion opportunities within the United States, we may also
grow our international presence through strategic franchise expansions and additional licensing agreements.
Grow Our Commercial Business. Our revenue from commercial customers comprised approximately 13 percent of our 2015
revenue. We believe we are well positioned to leverage our national coverage, brand strength and broad service offerings to target
large multi-regional accounts. We believe these capabilities provide us with a meaningful competitive advantage, especially compared
to smaller local and regional competitors. We recognize that many of these large accounts seek to outsource or reduce the number of
vendors used for certain services, and, accordingly, we have reenergized our marketing approach in this channel. At Terminix, for
example, we have hired a dedicated sales team to focus on the development of commercial sales. Our commercial expansion strategy
targets industries with a demonstrated need for our services, including healthcare, manufacturing, warehouses, hotels and commercial
real estate.
Enhance Our Profitability. We have and will continue to invest in initiatives designed to improve our margins and drive
profitable growth. We have been able to increase productivity across our segments through actions such as continuous process
improvement, targeted systems investments, sales force initiatives and technician mobility tools. We are also focusing on strategically
leveraging the $1.4 billion that we have spent annually with our vendors to capitalize on purchasing power and achieve more
favorable pricing and terms. In addition, we have rolled out tools and processes to centralize and systematize pricing decisions. These
tools and processes enable us to optimize pricing at the geographic market and product level while creating a flexible and scalable
pricing architecture that can grow with the business. We intend to leverage these investments as well as identify further opportunities
to enhance profitability across our businesses.
Pursue Selective Acquisitions. From 2011 through 2015, we have completed over 125 acquisitions. We anticipate that the
highly fragmented nature of our markets will continue to create opportunities for further consolidation. As we have in the past, we will
continue to take advantage of tuck-in as well as strategic acquisition opportunities, particularly in underserved markets where we can
enhance and expand our service capabilities. We seek to use acquisitions to cost-effectively grow our customer count and enter
high-growth geographies. We may also pursue acquisitions as vehicles for strategic international expansion.
Our Reportable Segments
Our operations are organized into three reportable segments: Terminix, American Home Shield and the Franchise Services
Group (which includes ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec).
Terminix
Terminix is the leading provider of termite and pest control services in the United States, with an estimated 21 percent market
share for 2015, as measured by customer-level revenue. In addition, Terminix is the most recognized brand in the industry with
approximately 1.5x the unaided brand awareness of our next-largest competitor, based on a study by Decision Analyst, Inc.
periodically commissioned by us as part of our ongoing marketing efforts. Terminix specializes in protection against termite damage,
rodents, insects and other pests, including cockroaches, spiders, wood-destroying ants, ticks, fleas and bed bugs. Our services include
termite remediation, annual termite inspection and prevention treatments with damage claim guarantees, periodic pest control services,
insulation services, mosquito control, crawlspace encapsulation and wildlife exclusion.
For the year ended December 31, 2015, 56 percent of Terminix revenue was generated from pest control services, which
includes mosquito control, and 39 percent was generated from termite and other services, which includes crawlspace encapsulation,
wildlife exclusion and insulation services, with the remaining five percent primarily from the distribution of pest control products. For
the year ended December 31, 2015, 69 percent and 31 percent of pest control revenue was related to residential services and
24 2015 Annual Report