Last week we examined the 3rd quarter financial results for Service Corporation International. When we did that we noticed, and told our readers, about the success that their preneed funeral services seemed to be having. We actually told readers to compare what they are doing in their own businesses to SCI to make sure that your own business was staying on track.
What we didn’t know when we reported those results was the existence of Service Corporation’s proprietary technology that they refer to as “Beacon” that they believe gives them a leg up on their competition. We did learn the next day of Beacon when we read the transcription of the earnings call between SCI’s leaders and the financial advising media. You can read the transcript from Seeking Alpha here.
From what you can read here, it is evident that SCI management believes the advent of Beacon may be a game-changer in the preneed world.
If you don’t want to read the entire transcript here are some excerpts of what SCI CEO Thomas Ryan said about Beacon in the earnings call:
Quote #1 from CEO Thomas Ryan –In addition, we continue to make investments in marketing and sales lead development both of which are helping to drive growth in our preneed funeral sales production. Speaking of preneed funeral sales production, I’m extremely pleased with our sales team’s performance for this quarter. We grew production an impressive $27 million over the prior year quarter or almost 14%.
Both our core funeral home channel and our non-funeral home channel delivered double digit percentage growth. We continue to see a noticeable increase in production in markets where we have Beacon, our new customer-facing technology rolled out. We believe Beacon is responsible for approximately half of the growth that we’re experiencing in the third quarter.
Our sales teams are utilizing this great tool alongside valuable leads generated from our website redesign, digital marketing campaigns, and search engine optimization results, delivering exceptional preneed funeral sales production growth for our company that we believe will drive enhanced market share in future periods.
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Quote #2 from CEO Thomas Ryan – I wanted to take a moment to take a deeper dive into a current initiative that is having an impact on our business and our financial result, our customer-facing technology for our sales team Beacon.
Beacon was capital put to its best use that both leverages our scale and grows revenues, truly a drive factor. It’s a tablet based pre-arrangements tool that guides the consumer through the entire operating sales process.
Beacon is the seamless digitized presentation tool that really brings our product and service offerings to life. The tool enable the customer to make informed decisions with various payment options while automatically generating the insurance application and purchase contract and then accepts credit card payments onsite.
This significantly enhances the productivity of our sales team allowing them to focus more of their time with our client families versus administrative tasks. So why are we so excited about Beacon. Number one, the tool showcases to our customers our entire suite of products and service offerings. Additionally, it’s dynamic enough to allow our products and marketing team to add new products and services quicker than what we’ve been able to do in the past.
Second, Beacon provides our sales leadership with greater insight into the productivity of our sales associates. For example, we can see counselors are spending time with the consumer and better determine where we should focus more of our selling activities and training.
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Finally, CEO Thomas Ryan in response to a question –
The next question comes from Scott Schneeberger from Oppenheimer.
Thanks, very much. Good morning. So to start out asking on funeral preneed sales growth that was a significant second quarter in a row, very large and accelerating, could you discuss kind of compare and contrast how much of that is Beacon versus how much of maybe some of your other initiatives? And then the previous expectation for the year was low-to-mid single-digit growth rate, you clearly have surpassed that. How should we think about that growth rate going forward? Thanks.
Hey, Scott, this is Tom. Thanks for the question. I think and again it’s always hard to measure, but based upon the markets where we’re rolled out, it’s our belief that about half – we have 40% growth in the quarter, about half of that was driven off Beacon markets, which we’re going to attribute them to Beacon’s impact, which is pretty huge, particularly since we’re only at 60% of the markets with the target to be at 95% by year end, so that is a big driver and a lot of that I think is – what it does in front of the customer, it also really increases the efficiency of our sales force. They’re allowed to spend more time in front of families and less time with administrative tasks and burdens, and I think you’re seeing a real shift of emphasis if you will to the pre-arranged product because it’s easier to do. I can meet my quotas and objectives as it relates to funeral side of the business quite possibly to the detriment of cemetery, I mean in certain markets. So we’re excited about that.
As you think about next year and again we haven’t put out any formal guidance and I don’t want to put any pressure with Gerry, sitting in the room, but I do think we should particularly in the first half of the year have a really nice comparable, which then should in my opinion settle into that kind of mid single digit growth. So next year again could be mid to high with an emphasis on, I think real execution of the percept for the year as you think about rollout of Beacon. The most exciting point Scott for me is we’re going to roll it out to cemetery next year and it could begin at some point to impact our result as you think about sales production growth on the cemetery side of equation which is exciting and particularly exciting to earnings because again when we sell preneed cemetery property, we’re generally going to be able to recognize those earnings. We don’t get that benefit on the funeral side today. Having said that what’s important to us is our families, what’s important to us is the long-term future of SCI and having Beacon in our funeral production tool kit is a huge advantage and we see it continue to benefit into 2019.