Paul Willging Says…

Marketing is key in an era of increased competition

Many businesses fail, either because they don’t have a product that can profitably meet a real customer need (a failure of market research) or they don’t promote the product properly (a failure of marketing). We know that, generically at least, seniors housing and care does meet a customer need. The customer might not, in many cases, wish to recognize that need, but it is there, nonetheless.

No, the issue is marketing, an issue even more applicable to seniors housing and care, since the consensus among analysts following the field is that it has less experience in the marketing arena than most other service industries. That may result, to some extent, from the fact that for all intents and purposes nursing homes and assisted living facilities have traditionally operated in noncompetitive environments. Protected by certificates of need, nursing homes didn’t see the need to market. Focusing on the inappropriate placement of low-acuity residents in nursing homes, assisted living, early in its history, was able to pick the low-hanging fruit from nursing homes. But times have changed. Marketing is now key to success in both sectors of seniors housing and care. And in neither sector have managers shown a real appreciation of the marketing imperative.

In this article, I focus on two issues. The first is the issue of market research. Effective marketing is based, after all, on the premise of a product essential to meeting customer need. Marketing has a number of prerequisites, all of them related to the product being sold. Absent a viable product, even the most experienced marketing personnel will be challenged beyond their capacity to produce. The other underlying principle has to do with resources. Because of its critical importance to the success of any business or organization, marketing must have the necessary resources behind it. Marketing is an investment yet, in periods of financial difficulty, it is often the first area cut. A radical rethinking and transformation must occur in most companies, especially in seniors housing and care companies, if marketing is to fulfill its goals.

Marketing is much more than advertising and selling. These are important parts of marketing, to be sure. But a better definition of marketing might be activities that seek to accomplish a company’s objectives by anticipating customer wants and needs, producing goods and services that satisfy these wants and needs at a profit that exceeds the cost of capital to the company, and making the market aware of those goods and services.

We’re talking here about much more than just advertising and selling. While important, they constitute just one of the four “Ps” of marketing: place, price, product, and promotion. Three of the four must be attended to before the fourth, promotion, can be effective. If you have a lousy location, noncompetitive pricing, and a reputation for inattentive care, great advertising and sales can do little for you. It is the initial decisions made with respect to place, price, and product that will determine the degree to which promotion can be accomplished effectively and efficiently. This is where market research comes into play.

Since marketing must start from the premise of anticipating and meeting customer needs or wants, it must start with effective research that truly uncovers those needs or wants. The lack of any research (or the lack of effective research) is one of the most critical mistakes made in seniors housing and care. Unfortunately, it is made quite often, resulting in multimillion-dollar mistakes.

We know from the National Investment Center for the Seniors Housing & Care Industries’ National Survey of Assisted Living Residents: Who Is the Customer? (1998) that the location of a property directly affects how many leads will be generated for that property. This is an important ingredient in the science of marketing.

Place can create a sustainable competitive advantage (assuming it otherwise meets customer needs) if a company secures the best location within a desirable geographic area. This is especially true if no competitors can build because of barriers such as scarcity of land, restrictive zoning, or the reluctance of local officials to further open the marketplace to competition.

In effect, a property can be truly unique. However, this is rare in seniors housing and care. In approximately 85% of cases, a property will have at least one competitor. But still, having the best location in a primary market area should be a key strategic goal.

Overall, the challenge of price is to provide the same quality service at a lower cost to the customer than that available from competitors. Possible approaches include operating more efficiently and lowering the cost of providing the service, or accepting a lower margin and making up the difference through volume.

In dealing with the issue of price, the company needs to evaluate its own costs: Are the company’s various functions working together effectively? How do your costs compare with those of your competitors? How can your company’s costs be reduced?

An alternative approach is providing a higher quality or a specialized service, even though it results in a greater cost to the customer. This approach gets to the concept of value. It is perceived “value” that will propel customer decision making. And value is an amalgam of perceived quality and price. This approach, however, is even more dependent on careful market research to confirm sufficient demand for the service being offered.

Finally, but of greatest importance, is the product itself. You will never be able to effectively market your services if you have a reputation for providing poor care. It is service we are selling and service the customer is looking for. In the National Survey of Assisted Living Residents, 32% of the residents mentioned “services offered” as the most important reason for selecting the assisted living residence they chose. Only 12% said they selected the residence because of its “appearance.”

Likewise, in the Assisted Living Federation of America’s National Assisted Living Resident Satisfaction Study (1999), the most important elements of resident satisfaction in freestanding assisted living properties were reported to be the food service, administration, and security. Amenities and environment were a distant fifth and sixth place. The service element was even more striking for family member satisfaction. “Assisted living service” was the most important contribution to family member satisfaction by a large margin. Amenities ranked next to last out of ten variables in this area.

Certainly, family members want a desirable building that is well designed, decorated, and maintained. But this is almost a given that just allows you to be “in the game.” The limited inducement of the building’s appearance, room size, etc., quickly wears off, especially for family members, once someone moves in.

And how do residents and their families judge the quality of the services provided? In a nutshell, it is personal relationships-how the person is treated and valued as an individual-that dictate how your property will be evaluated and how satisfied and loyal your residents will be.

Service providers tend to think that customers are buying their expertise. In most cases, however, the client has no way of knowing whether the provider is truly “expert.”

Assisted living and nursing residents do know whether their meals are appetizing, whether the atmosphere is pleasant, whether the staff is responsive to their needs. Long-term care facilities are not selling expertise as much as they are selling the relationship between the staff and resident. Makes sense, doesn’t it? Yes, facilities do wish to be judged on service outcomes. And customers probably wouldn’t disagree. But it is the customer who determines what constitutes a critical outcome, not management. And how staff relates to the customer, be it the resident or members of the family, is what stands out in the customer’s mind. So for better or for worse, every member of the staff is engaged in marketing. Every impression made will determine whether the customer is happy or unhappy. Every impression made will determine, by word of mouth, whether the facility’s reputation is correspondingly enhanced or diminished.

To excel, management must understand this issue, and select and train employees so that they realize this is their mission, the essence of their job. It is not accounting, or maintenance, or food service, but selling to and serving customers and potential customers.

Greeting customers and potential customers and being knowledgeable about the complete property are important parts of everyone’s job. Early and lasting impressions about the property are formed based on a customer’s impression of security guards, maintenance and grounds personnel, and receptionists. Some of the most successful communities have instituted the so-called “ten-foot rule.” Any staff member within ten feet of a customer or potential customer is required to make eye contact, engage in conversation, and ask if he or she can be of assistance. Anything can be overdone, of course. But if implemented appropriately, the ten-foot rule is a powerful recognition of staff as critical members of the marketing team.

It is a rare but excellent company that selects and trains all of its employees to be marketers, and recognizes that they are the service that is being purchased. As you might expect, companies that see their employees as part of the marketing team are more profitable than those that don’t.

And now to the issue of resources. Compounding the lack of emphasis on marketing caused by a misunderstanding of its role is the reality that marketing is a complex and time-consuming process, which requires far more resources from a company than are usually provided. Many companies do not believe they are large enough to justify the number and talent of employees necessary to perform the tasks critical to marketing.

To understand the essence and strategy of this industry, marketing must be recognized as an investment, not a cost. It is, in fact, an investment ultimately as important as the investment in a well-designed, strategically located building and properly selected and trained caregivers. Because of its complex and time-consuming nature, marketing success over time is contingent on a written plan with specific objectives backed up by a detailed budget. This plan must be used and adapted as circumstances and results change. It cannot be shortchanged when times get tough. Indeed, it should be enhanced.

A marketing plan must include a system (preferably one that is automated) to track and measure results. Because of the large dollar-sale nature of this industry, it is extremely difficult to be successful without an effective lead management and marketing management system.

The reality is that most businesses do not consistently operate on a written marketing plan. Those that do implement written plans seldom devote adequate resources to marketing activities. Yes, marketing costs money, but it is the best investment you can make in a project.

Finally, marketing seniors housing and care properties is about both education and persuasion. These twin goals must be at the heart of every marketing plan.

Somewhere between 25 and 40% of seniors and adult children are still completely unaware of the types of and distinctions among seniors housing and care communities. And of the 60 to 75% that claim to be aware, only about 15% of these people believe themselves to be very knowledgeable about any of the property types.

Marketing results can be significantly improved (and in some cases dramatically improved) by making awareness and education a central part of your marketing plan. For example, a direct-mail campaign of oversize postcards to all the households in your key zip codes explaining the property and its key benefits in a short, hard-hitting style, done on a quarterly basis, can have significant results. Ongoing direct mail to your lead base explaining the benefits and the happiness of the residents living there also can produce excellent results.

But remember: We’re selling our people as much as our product. The goal of marketing must, ultimately, be a visit and an interview. Desirability goes up upon a visit, and desirability is directly related to one’s willingness to move. The more people that visit, the greater your move-in results will be, especially if you prove to people the value you offer.

The interview (as opposed to a tour) is critical in developing that personal connection. And it is the personal relationship that will determine the potential customer’s perception as to the quality of the product. Again, marketing is a combination of all four “Ps.” And the forth, promotion, will be successful only to the extent the other three, product primary among them, can stand on their own.