By Sara Montalto, Senior Vice President, Strategic Services, Love & Company
In today’s highly competitive senior living field, with operating margins continually being driven down by a combination of inflation, increasing payroll costs, declining reimbursements and more, it is critical that organizations step back and take a strategic look at the options they should be considering to improve and stabilize margins well into the future.
Whether a community starts the strategic planning process from a position of financial and market strength, or a position of declining occupancy and aging infrastructure, the first step in determining what paths the organization should consider taking is the same: Fact finding to understand market dynamics. What is the potential for growth? Are there underserved geographic or demographic niches? What price point can the market support? What are competitors doing? This information provides the foundation on which a successful strategic or master plan is developed.
Join Us on March 28 for More Insights on How to Develop Longer Term Strategies to Increase Operational Margins
Join Sara Montalto, Love & Company’s SVP of Strategic Services, Rob Love, Love & Company’s President/CEO, Toby Shea, Partner, OnePoint Partners, and Mike Kivov, Partner, OnePoint Partners, as we explore strategic steps communities should take to look at their longer-term potential to increase not just revenue but margins, ensuring you will have a strong organization well into the future. Our upcoming webinar, “Overcoming Inflationary Pressures, Part II: Longer Term Strategies to Increase Organizational Margins,” will be held on Tuesday, March 28, from noon to 1:30 Eastern.
The Key Questions
The questions you should seek to understand from market analyses are:
- How saturated is your market for senior living? Is there room for growth, and if so, what could that growth look like?
- Is your community priced appropriately relative to key competitors based on its current market position, and is there an opportunity to enhance margins from existing service lines?
- How does your current market position align with your desired position in the market?
These questions are key to understanding the opportunities that may be available for your organization.
To answer the first question, conduct a detailed market demand analysis. The focus is to understand supply and demand within your community’s market area and whether any new inventory is supportable. This includes a detailed analysis of market demographics and competitive inventory, along with the current product offering of the community. The result is a comprehensive review of the market and identification of opportunities for growth.
To answer the second and third questions, conduct a more nuanced evaluation of your community’s pricing and positioning relative to your key competitors. This should go beyond the broad look at competition from the market demand analysis and provide a deeper analysis of your top three to five competitors. The result is a much deeper understanding of both the product and price positioning of your community. It will tell you whether your community is priced appropriately based on its current product offering, and if there is an opportunity to improve revenues from existing residences. This is an important step in master planning, particularly for an organization that wants to improve its market position and/or add a higher-priced product to its campus.
These two sets of analyses can be taken together to inform the master planning process, including how the community can grow and/or evolve. For some communities, this could be a multi-phased process, replacing older buildings on its campus. For others, master planning may include upgraded amenities and adding new residences, or even the desire to grow off campus at a satellite community. It truly depends on the current campus, how it compares to what is offered in the market, and the long-term strategy for the organization.
From here, the organization can conduct its master planning process to determine how the community should evolve.
Remember The Consumer!
When you think about senior living market intelligence, it’s easy to get lost in the data, demographics, charts and maps. It’s always important to remember that, when it’s time to presell the project, we will be dealing with real individuals with real needs and concerns. As such, marketing is often the representative—and protector—of the consumer throughout the strategic and master planning processes, as the consumer will ultimately be paying for the project. At Love & Company, we consider a key part of our role in any planning process to be the protector of both the consumer and the revenue.
Once a preliminary plan has been developed, the final phase of market intelligence is consumer research to ensure that the planned project does indeed align with consumer wants and needs.
Consumer research can be accomplished in various forms. It could be a digital survey to a wait list and/or lead base, a larger-scale mailed survey combined with focus groups, or even large-scale in-person research events. The approach is driven by the information needed to inform the decision-making process. A community may choose to employ different types of consumer research at different phases in the master planning process, depending on the need at the time.
The overall goal of market intelligence is to provide information to leadership and the board to aid in the master planning process, as the organization will be making serious investments in its future. An investment in solid, detailed market data can ensure that strategic initiatives are best positioned for success.
If your organization is getting ready to develop a strategic plan or master plan, please reach out to Tim Bracken at 410-207-0013 to explore how to get started with market intelligence.