Red Flag Alert: With Buyers Reluctant To Buy, Operators In Seniors Housing Are At Risk Of Serious Industry Disruption
As independent and assisted living communities wait for the wave of boomers to hit, they can tap into an entire new base of non-customers, dramatically improving revenue and NOI while leveraging existing resources or find a way to get our core customer to willingly buy
DISCOVERING AN OCEAN OF NON-CUSTOMERS
The goal of this study is not to compete for existing customers but to create NEW demand and grow the industry, tapping into those who do not currently look to seniors housing as an option to meet their wants or needs. This is done by unlocking new value for your non-customers who perhaps never thought to look to seniors housing before.
LEARNING FROM OTHER INDUSTRIES DEMONSTRATES WHAT’S POSSIBLE IN SENIORS HOUSING
Think of Square versus Visa, MasterCard and American Express. All three rank among the world’s top 100 brands. Yet despite their global reach, strong brand recognition and deep pockets, all three brands compete head to head, striving to win a greater share of wallets within the same group of customers; established merchants and their customers.
The way the industry saw it, the US credit card market was saturated, with little room for profitable growth, particularly post Great Recession where tighter regulations on interest rates and fees were implemented. THAT’S NOT HOW SQUARE SAW IT. In fact, the co-founders of Square; Jim McKelvey and Jack Dorsey who also co-founded Twitter, saw an ocean of non-customers they could tap into.
AN OCEAN OF NON-CUSTOMERS IS OPENED
75% of all adult Americans have more than one credit card and almost all medium-sized and large merchants accept them. The question Square asked was, “Could Americans use their credit cards to pay the pizza delivery person, the gardener or electrician visiting their home or the piano teacher, babysitter or ice cream truck driver?” The answer was no!
Those individuals who wanted to make a person-to-person payment was a non-customer of the credit card and debit card industry. So were many new businesses and micro-businesses like farmer’s markets, food trucks and pop up shops. In fact, of 27 million small businesses in the US, about 55% don’t accept credit cards at all. Yet research showed that more than 55% of customers wished they did. It showed that when people were given payment options, they were more likely to spend more per purchase which helps small business grow.
THE IDENTIFIED NON-CUSTOMER GAP
- The many small businesses that didn’t offer customers the option of credit or debit card payment due to the expense associated with typical merchant service offerings; but that would benefit handsomely by doing so.
- Person to person transactions, that happen non-stop and that are typically handled by cash or check.
Both presented an OCEAN OF NON-CUSTOMERS TO THE CREDIT AND DEBIT CARD INDUSTRY THAT SQUARE IDENTIFIED NO ONE WAS SERVING. Since 2009 they have been rapidly capturing this new market of customers with its Mobil payment system which allows individuals, small businesses and even large organizations to accept credit or debit card payments on their iPhone, androids or iPad. All they must do is attach a free Square reader that is simple to use. GENIUS!
HOW DO WE BEGIN TO PONDER THE POSSIBILITIES WITHIN SENIORS HOUSING?
Let’s start by looking at who buys independent and assisted living as well as memory care today. It’s safe to say that our primary buyer is an adult daughter, most likely a baby boomer, who is caring for her parent or loved one. Secondary are adult sons, spouses, POA and depending on acuity the senior themselves. Unfortunately, due to the average age of 87 and acuity levels, we see fewer seniors making the decision alone than ever before.
Who are our non-customers? We’ve been exploring this the past few blogs as we’ve taken a deep dive into this executive book study. Perhaps you’re starting to gain insight and ponder new ideas? If not, give it time. Start by learning about the Blue Ocean Shift’s three tiers of non-customers, which is incredibly thought provoking.
THREE TIERS OF NON-CUSTOMERS: TAPPING INTO A WELL OF PROSPECTIVE SENIORS HOUSING NON-CUSTOMERS
The authors describe these first-tier non-customers as the soon-to-be non-customers of your industry. This means, the people who are going to jump ship as soon as there is a better viable option for them. These customers buy not because they want to but because they must. This for sure hits close to home for seniors housing and care as we see it daily.
Independent and assisted living residents today are moving in at the age of 87, ensuring they have a minimal length of stay of just 12-18 months and in many cases, less. THIS IS A MAJOR RED FLAG and should concern our industry leaders.
Typically, first-tier non-customers, once given a superior alternative, will eagerly jump ship. According to the authors, these customers are sitting on the edge of the market. What is so frustrating about seniors housing is that once residents move into a community the experience can be life changing. There simply isn’t enough positive media or consumer awareness to drown out the negative stories we see every day in our social media feeds, on television or in the paper. This means, our entire base of customers is at risk.
Consider cable television. For decades people coveted access to hundreds of channels as they “surfed” for great shows and cable saw massive growth and profits. Then, out of nowhere, Netflix, Hulu and Apple TV took hold, offering much more value at a substantially lower price. Cable customers are leaving in masse and will ultimately devastate this once lucrative industry.
It’s upsetting to think that our first-tier non-customers are the core of our base, our target market but until I read this book I hadn’t realized how at risk for disruption seniors housing really was.
Refusing non-customers consider an industry and then consciously choose against it.
For independent living, assisted living and memory care, these are people who have considered seniors housing as a care option. Maybe they inquired through your website, by telephone or walked into the community. These individuals may have even toured three to four locations; ultimately rejecting it all together either because of a better offering such as home health care, moving in with a family member or simply waiting it out.
Blue Ocean Shift challenges us to consider how often our organizations have been a second-tier non-customer.
The way I understand this is it’s all those who looked but didn’t buy. That means if your inquiry to move in conversion ratio is just 10%, a whopping 90% of the time you have been a second-tier non-customer!
The simple fact that these prospective buyers contemplated your communities, weighing the pros and cons tells you that you were closer to capturing them more than you may realize; yet they ultimately decided to reject the idea.
Now that we know a significant majority of our prospects are second-tier non-customers, we need to look at WHY AFTER CONSIDERING YOUR OFFERING DID THEY DISMISS IT? If you are not currently doing post-tour surveys or even post-inquiry surveys as I suggested in the last blog, it is vital you begin to do so right away so you can answer this very important question.
These are unexplored non-customers that are currently in seemingly distant markets. These are the furthest away from our current seniors housing existing customer. Commonly these unexplored non-customers have never been thought of as potential customers, nor targeted by any of the industry’s players because their needs have always been assumed to belong to other industries. Immediate considerations that come to my mind are:
- End of life services such as hospice
- Adult daycare services
- Transitional Care
- Cancer recovery
- Adult caregivers
Before Square, the industry assumed that a merchant was half of the transaction equation. All the transactions that occur between individuals were left off the table as it was assumed they belonged to another industry- cash and checks. Besides, who would install a point of sale credit/debit card system at home?
Now, rather than running to an ATM or failing to purchase because we don’t have cash on hand, we can use our credit or debit card thanks to Square. These are the third-tier non-customers that Square set out to unlock through its simple, easy to use, easy to carry, pay only when you use it Square reader (which I love as I have two here at my office for back of the room book sales when keynoting!).
STOP AND MAKE A LIST OF POSSIBLE THIRD-TIER NON-CUSTOMERS
This can be for our industry or you as an operator, the largest catchment of non-customers to be unlocked.
In my last blog, I wrote about Salesforce who successfully identified CRM non-customers and created an entirely new market. Starbucks did the same thing for coffee drinking; the lists goes on and on.
THE GOAL OF THIS EXERCISE IS TO MOVE THE DISCUSSION OF THE THREE-TIERS FROM THEORY TO CONCEPT TO A POSSIBLE REALITY
WHO COULD BUY TOMORROW, WHO IS A PROSPECTIVE CUSTOMER?
- Who sits on the edge of our industry and uses its offerings reluctantly and or minimally?
- Who considers our industry and then rejects it, satisfying their needs through another means or not at all?
- Who could strongly benefit from what our industry offers, but doesn’t consider it because of the way it’s currently delivered, thus making the industry seem irrelevant or out of their reach financially?
While this is going to take some time, it is going to happen. Someone is going to disrupt seniors housing and open an entire base of new, non-customers. As an executive it is critical you continue to grow, learn, think and consider the possibility the future holds for you and the seniors housing industry. Please, share your thoughts and ideas with me, I love to hear them. Email email@example.com or text me at 813.390.3349.
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Bild & Co partners with seniors housing operators, investors and developers to improve sales and operational business performance. With sales, marketing, research and talent divisions all working in combination to serve our client organizations we can scale quickly and move fast to support your strategic plans. To learn more text Traci at 813.390.3349 or email TBild@BildandCo.com
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