Seniors housing is at an inflection point where new products and services must be conceived and implemented to serve a changing consumer profile. This is precisely the time for innovative operators and developers to shine.
A CRISIS IN CUSTOMER ENTHUSIASM
At its core, seniors housing is a consumer product. Its livelihood depends on consistent positive experiences with the “customer,” whether it be residents, their families, hospitals or insurance providers. Ostensibly, customer satisfaction is positive. According to an April 2012 study released by the Center for Retirement Research at Boston College entitled “Cost and Concerns among Residents in Seniors Housing and Care Communities: Evidence from the Residents Financial Survey” that polled over 2,600 residents across 158 communities, the majority of respondents (59 percent) either “strongly agree” or “agree” to the statement “the community offers me good value for my money.” However, upon closer investigation, only 15 percent “strongly agree,” whereas 41 percent either are “neutral,” “disagree” or “strongly disagree.” This implies that for every customer that is enthusiastic about the product, at least 2.5 customers harbor reservations about the value proposition.
Measuring customer enthusiasm, not just customer satisfaction, is becoming increasingly important to leading consumer brands. Satmetrix, a customer relationship software company, created the Net Promoter score, which takes into account the percentage of consumers who feel neutral or worse about a product and those who are highly satisfied. Leading brands, such as Apple and Amazon, have a Net Promoter score of around 75 percent.
Using the data from the Boston College study, the Net Promoter score for seniors housing is -25 percent. Of the 29 industry segments that Satmetrix tracks, not one of them has a negative average score. Clearly, there is an opportunity for communities to provide outstanding services to residents and their families in new and different ways, especially as conditions and consumer expectations change.
KEY TRENDS IMPACTING CONSUMER BEHAVIOR
Several key trends are impacting consumer behavior. Some of the most significant trends include:
1. Preference for aging in place. Aging in place—defined here as the desire of seniors to stay in a particular residential setting as long as possible—has always been the preference among the majority of seniors. For example, a 2004 study conducted by AARP and MetLife, “The Future of Retirement Living,” found that 86 percent of people over age 65 would prefer to continue living in their home over other alternatives. As aging in place becomes more feasible with the proliferation of home care services and innovative technology solutions, it is likely that seniors will be able to age in place longer in their homes before moving to seniors housing. Similarly, for those in seniors housing, residents may prefer to age in place within independent living longer before moving to higher levels of care.
2. Seniors and their families are significantly less wealthy now than they were five years ago. We have yet to see the full depth of the impact of the recession and housing crisis. The Federal Reserve recently released a report indicating that the median net worth of American families fell 39 percent between 2007 and 2010, to $77,000, a level not seen since 1992. This change has impacted both seniors and their adult children, both of whom are often contributors to the cost of long-term care for seniors. As a result, most seniors will be even more focused on the absolute cost and customer value proposition than they were even five years ago.
3. Seniors have an increasingly negative view of the future. According to a 2012 study released by Zillner, a marketing company focusing on seniors, two-thirds of seniors polled in 2011 had a pessimistic outlook on the economy whereas only 44 percent had a pessimistic view in 2009. The study also identified healthcare coverage and associated costs, unemployment and Social Security as rising concerns. As a result, seniors are more likely to be conservative about their expenditures, including seniors housing.
STRATEGIES FOR SUCCESSFUL OPERATORS AND DEVELOPERS
These trends offer an opportunity for progressive operators and developers to create products and services that differentiate themselves in this new market environment. Suggested strategies to consider include: