Market Analysis Design: Key Factors to Consider

by | Mar 16, 2022

In a recent Sunday mass that I attended, the priest began by saying that “Beginnings are very important. They set the stage for everything that comes after.” It struck me how true this is in the world of project planning, whether for new development, for an expansion or repositioning a community. And project planning should always start with a detailed look at your market.

Some aspects of market analyses may appear to have become commodities: demographics and competition in, market potential out. But an analysis is rarely that simple. Decisions regarding the study design and the data upon which analysis is based set the stage for everything that follows. It is worth taking the time to understand how your study will be constructed as you begin the process, because differences exist.

Here are just a few of the key components to consider as you prepare to undertake an evaluation of your market.

The Market Area

Every analysis is based on a geographic study or market area; consider it carefully. If the study is for an expansion, repositioning or a nearby new development, we use the community’s historic draw as one key measure to establish the study area. It is worth noting that over the past few years many markets appear to be dissipating geographically. That is, residents are being drawn from a more dispersed area.

Although the primary market area (or PMA) has traditionally been defined as the geography from which 60% to 70% of residents originated, we are seeing many communities now only pulling 50%, and sometimes less, from the PMA. The density of draw has been diminishing with more residents coming from more ZIP code areas, but not necessarily in heavy concentrations from any specific location, making it difficult to define many ZIPs as part of the primary market.  This can result in a significantly larger market area, or an area that represents fewer residents. It is worth asking if this is occurring in your market, and if so, can reasons be identified.

The Data That Are Included

When considering a study methodology, it is worth understanding what data will be used and the sources. All data should be actionable (not just data for data’s sake), and they should allow for the greatest possible segmentation of the markets.

Quantifying households that fall into pre-selected age and income groups helps determine the primary measure of the potential market area. At Love & Company, we have implemented a source that provides more granular breaks in counts of households by age and income (five-year intervals including ages 65-69, 70-74, 75-79, 80-84 and 85+) than other more traditional databases (which only had breakouts for ages 65-74 and 75+). This allows for more accurate segmentation of the market and less “extrapolation,” or fewer assumptions.

A lot of aging-related changes begin to occur between the ages 70 and 74, and this age group represents a near-future market, so it is helpful to be aware of the numbers here.

We have observed that in many if not most markets the greatest growth in households ages 75+ has been in those with incomes of $100K+, reflecting the stable and growing economy since the financial crisis, coupled with the growth in investment and housing markets. This is an area that is worth monitoring going forward with the current market disruptions that are occurring.

Similarly, data on home values by age are important since the sale of a prospect’s home often funds entrance fees. Applying an overall median home value for a market is not as robust as understanding the distribution of your target market within various home values; that is, how many households that fall into the age 75+ category have a home value that allows them to afford your entrance fees?

Competitive Environment

We have all observed that the expectations of the markets are changing as new cohorts with different experiences and skills enter our markets. The availability of new types of amenities can and does affect the marketability of our communities. So, if analysts have not freshened their lists of services and amenities that they are documenting, you may miss important information about your marketplace.

Some of the newer market analysis elements to explore include:

Technology

Many technologies are being introduced to retirement living communities today, but two seem to rise to the top for consumers: (1) telehealth, and (2) resident portals for information, service management and communication. Are prospects seeing these technologies at your competitor communities? If so, they are likely to expect them from you as well.

Another area of technology that is just now gaining traction (although we’ve all thought about it for a long time) is robotics. With today’s staffing shortages, communities are beginning to explore resources in this area, particularly in dining and housekeeping roles. Early adopter communities that are already using robots are reporting that not only do residents not mind them, but also they are actually enjoying these new means of staff support. If your competitors employ robotics, they may well be creating an interesting experience for residents while addressing staffing/operating issues that will, in the not-too-distant future, help to control costs.

Amenities

We’ve experienced a wide array of new amenities in our site visits. The most common we have seen include gaming technology (like golf) and other sports simulators, pickleball and increasingly sophisticated outdoor dining.

Market studies and their design process should never remain static and do require regular updating. Senior living is continually evolving, similarly requiring an evolving approach to conducting a transparent and comprehensive market analysis.

Resources

Many emerging amenities are identified in the updated Senior Housing Trends: 2021-2022 in the Next Generation Amenities section by Michael Martin of RLPS.

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