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Paul Willging Says...

June 1, 2005
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Marketing Is Key in an Era of Increased Competition

Marketing is key in an era of increased competition Certainly, the theme was catchy, at least for a movie: "If you build it, they will come." Unfortunately, movies are often about make-believe. (This one's title was, after all, Field of Dreams.) And while one might dream about effortless full occupancy, the reality in a competitive market is much different. Filling communities, and keeping them full, takes work-hard work-and lots of it.

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?