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Chapter 16

Effective Marketing Management

What You Will Learn

•  Marketing involves a comprehensive approach that can give a nursing facility long-range competitive advantages.

•  Creation of exchanges based on expected and perceived value is at the heart of marketing. Value perceptions can be influenced as well as created.

•  Marketing includes certain functional activities. It also incorporates a client-focused attitude that must permeate the entire organization.

•  Successful communication of value leads clients to perceive that the value they expect will be realized.

•  Depending on the size and nature of the long-term care market, segmentation can help identify the target market from which the nursing facility will draw customers.

•  In market targeting, the nursing home administrator decides whether to take a mass-market approach or a segmented approach.

•  Management should evaluate whether or not the nursing facility is appropriately positioned within its target market. Semantic differential can help management focus its efforts on improving the facility’s position.

•  The marketing mix provides the tools necessary for positioning a facility in the target market. Product, price, place, and promotion have numerous applications that are specific to long-term care.

•  Most nursing facilities can be differentiated in one form or another to create a perception of value. Differentiation is also used for segmentation and niche marketing.

•  The preadmission inquiry process is about personal selling but using a social services approach.

•  A facility’s associates can play a key role in customer relations.

•  A variety of promotion and public relations tools can be used in nursing home marketing.

Introduction

Effective marketing distinctively places a facility’s offerings before consumers. Marketing is often neglected by nursing home administrators (NHAs), because many NHAs fall victim to what can be called the “word-of-mouth syndrome.” Word of mouth is not a marketing strategy, yet its hidden potential can be unleashed through marketing. Facilities that use a marketing strategy can, in time, gain a clear-cut competitive advantage over facilities that do not.

Because of a fairly widespread misunderstanding of what marketing is, it remains, for many health care facilities, nothing more than a “buzz” word, and some well-intentioned NHAs merely undertake a few haphazard steps and call it marketing. Some random “marketing” efforts are frequently undertaken when new competitors enter the market and an existing nursing facility has an increasing number of empty beds that become more and more difficult to fill. In a state of panic, NHAs may launch an advertising campaign, start renovating the facility, or plan a facility open house. Such haphazard efforts may produce temporary results, but they often fail to change the long-range outlook. Marketing is about “building census,” not “chasing census” (Schram, 2005).

Marketing is often equated with customer service, advertising, selling, or community relations. These activities are merely some of the action components of marketing, which is much broader in scope. Marketing incorporates a comprehensive approach that calls for developing a plan, carrying out that plan, and taking corrective action as necessary. Marketing must also permeate all aspects of a facility’s operations. Marketing is not a quick fix for a major census decline. Marketing involves consistent effort.

Marketing: A Value-Driven Process

The American Marketing Association has furnished one of the most widely accepted definitions of marketing: “ Marketing  is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals” (American Marketing Association, 1995). The marketing process—its planning and execution—is undertaken with the goal of creating exchanges between two or more parties in which each party gives something of value to the other party or parties in the exchange. All parties in the exchange perceive benefits from entering into the exchange.

Assessing Value Perceptions

Successful marketing strategies are anchored in the basic philosophy of delivering value to the customer. The term  value  signifies the worth that is perceived by each party in an exchange. Value is individual specific; each individual tries to determine how his or her needs can be adequately met at the least cost. For example, wide variations exist in how different customers evaluate value when shopping for an automobile. For some consumers, a Mercedes or a Lexus is the best value; for others it may be a Ford Taurus. Some look for value in a brand-new vehicle, whereas others look for the same in a preowned car. Similarly, nursing home shoppers determine value by evaluating a number of variables. For example, perceived value can vary according to a facility’s size, layout, décor, amenities, location, reputation, ownership status (whether the facility is for profit or nonprofit), and price. Unless the consumer is private pay, price mainly refers to whether the services would be covered under Medicare, Medicaid, or private long-term care insurance. In Drucker’s (1974) words, “The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself” (p. 64).

Influencing Value Perception

An exchange is likely to occur when the client’s expectations and perceptions of value are matched by what the nursing facility has to offer ( Figure 16–1 ). As a first step in marketing, the NHA must understand how value is generally perceived by the community and how the facility and its services may be packaged to project that value. Drucker (1974) stated that the customer, not the business, determines what value is. However, because the perception of value is not something tangible, it can be shaped by information and education. This is where marketing comes in.

Customers do not always know how they should evaluate health care services, and many things are not obvious to people when they first visit a facility. Helping potential clients overcome information barriers adds value. At a very fundamental level, the client should be able to understand how the facility’s services would be tailored to address the patient’s clinical and social needs, what different options are available to pay for the services, which option might be best.

Creating Value

Marketing is not just confined to information and influencing people’s perception of value. Marketing has much to do with the creation, promotion, and delivery of value demanded by the customer. Astute marketers study changes taking place over time in the characteristics, realities, needs, and beliefs of customers. Social and cultural change often redefines expectations and needs. Clients’ expectations for long-term care have been evolving toward more independence, greater control over lifestyle, and living arrangements that are less institutional for the patient. The next generation of well-educated, health-conscious, and financially well-off nursing home consumers will demand emphasis on health promotion, improved amenities and comfort, and having a voice in the facility’s operation. Astute NHAs will create value through innovative solutions in nursing home design, furnishing, and service delivery. Successful NHAs of the future will anticipate and respond to change. A facility’s complacency in recognizing the forces shaping value creation will risk inviting competitors to enter the market with innovative ideas, and these competitors could snatch away clients.

Figure 16–1  Marketing Principles Resulting in Value-Based Exchanges

The Marketing Function and Its Goals

Marketing practices embrace two interrelated principles: (1) marketing is a function that incorporates a set of marketing activities, and (2) marketing is an attitude that must permeate the entire organization (Majaro, 1993).

Marketing Activities

Marketing is a continuous process that remains dynamic. First and foremost, marketing includes all activities that are necessary for understanding customer wants and needs and for aligning existing services or creating new services to meet those wants and needs. Second, marketing activities include developing a strategy, plans to carry out the strategy, putting the plans into action, and evaluating results. Both are “carefully formulated programs, not just random actions” (Kotler & Clarke, 1987, pp. 5–6).

Organizational Attitudes and Orientation

Marketing is also a client-focused attitude that must permeate the entire organization. An old business axiom fittingly illustrates the organization-wide attitude that is necessary for marketing, “The sales department isn’t the whole company, but the whole company had better be the sales department” (Czinkota, 2000). Positive leadership and human resource practices are essential for building an organizational culture in which all associates behave according to the values and philosophies desired by management. Nursing homes often neglect the critical role of what is termed  internal marketing , that is, to train and motivate the staff to provide better services. Negative staff attitudes generally have a ripple effect that negates the effectiveness of an external marketing campaign. Hence, internal marketing must precede conventional marketing campaigns if the latter are to succeed (Cooper & Cronin, 2000).

Organizational values provide the underpinnings that define and direct a nursing facility’s orientation and thrust. For instance, Majaro (1993) emphasized “customer orientation” as an organizational value above “profit orientation.” Customer orientation requires all personnel to focus their activities and behaviors on satisfying the needs and wants of residents, family members, and visitors. In essence, customer orientation is a proactive approach that is centered on offering solutions to the problems customers now face and also anticipates new issues and concerns that may emerge. Customer orientation presupposes that a primary focus on profits is unwarranted, because by making customer satisfaction its primary mission, a facility can achieve higher profits than by placing its primary focus on profits. The misplaced emphasis on profits helps explain why many nursing facilities are caught in a downward spiral of losing patients, which inevitably translates into lower profitability.

Marketing Goals

According to a well-known marketing theorist, Philip Kotler (1991), “Marketing consists of actions undertaken to elicit desired responses to some object from a target audience” (p. 7). Kotler’s definition highlights actions or activities that must achieve certain results.

The desired response from a target audience is the consummation of an exchange based on the value expected and perceived by the target audience. An exchange results after the nursing facility has successfully communicated value that the client is seeking. Successful communication will lead the client to perceive that the expected value will be realized. Satisfaction with the exchange, however, continues only when the delivered value equals the value that was communicated to the client.

Successful exchanges build a facility’s census, leading to higher occupancy that improves or remains stable. Besides attracting patients, marketing exchanges would also result in successfully recruiting qualified associates; obtaining finances at attractive terms for a new construction project; preserving the facility’s licensure, certification, and accreditation status; attaining higher levels of clinical quality, staff satisfaction, and profits; and achieving goodwill in the community. Thus, marketing has broader goals that are interrelated.

Most marketing activities are designed to address issues of market competition. Other marketing activities are intended to elicit decisions from family members and other parties to bring patients to a nursing facility. The rest of this chapter focuses on this goal.

Marketing Strategy

Successful marketing requires a core strategy, which is a comprehensive game plan. Simply put, a marketing strategy outlines where and how the nursing facility will compete in the marketplace (Bovée et al., 1995), which requires spotlighting the target customers. How well the nursing facility will compete depends on how well the facility positions itself in the target market by using an appropriate marketing mix.  Figure 16–2  illustrates the steps necessary for developing a marketing strategy.

Segmentation and the Target Market

The long-term care market is very diverse, because it includes various community-based services and a continuum of institutional settings. Therefore, identifying and selecting appropriate target markets becomes a necessary strategic step for a facility. To an extent, community-based and institution-based services represent natural segments in the long-term care market, but these broad markets should be further segmented. For example, the skilled nursing facility market can be segmented into Medicaid, Medicare, and private pay. Specialized services, such as Alzheimer’s care or intensive rehabilitation, also represent distinct market segments.

Figure 16–2  Steps in Developing a Marketing Strategy

Purpose of Segmentation

Value perceptions vary greatly among those who seek nursing home placement. Hence, in nursing home marketing, a large heterogeneous market should be divided into smaller, more homogeneous segments of customers and potential customers. This process of dividing a large market into smaller segments, each with its distinct characteristics, is called  market segmentation . The purpose of segmentation is to identify distinct market segments of which one or more will constitute the  target market , which is that part of the overall market from which the nursing facility will attract customers. One of the main goals of targeting a small number of market segments is to better understand the needs and desires of customers and to better match the facility’s package of services to meet those needs. This goal is easier to accomplish in a client group that is more or less homogeneous, in terms of services needed, than it is to achieve in a diverse group. Once the needs of the target market are clearly defined, the nursing facility gains the advantage of creating or redesigning services most appropriate for those patients. The more closely a nursing facility can match its services to the value clients are seeking, the more successfully it can market its services and attract patients.

Segmenting by Demographics, Needs, and Preferences

The nursing home market should be segmented first by demographics, then by clinical needs, and again by client preferences (Exhibit 16–1). For instance, pediatric and geriatric care cannot be mixed unless the facility has distinct areas for such services. Institution-based services have some natural segments according to care levels, such as retirement living, assisted living, skilled nursing, specialized care, and subacute care. Although most nursing homes are confined to delivering skilled nursing care, many have captured other segments of the market by adding assisted living, retirement living, or other services along the continuum of care, such as adult day care. Continuing care retirement communities (CCRCs) cover the entire continuum, yet they segment the market on the basis of whether patients have the means to pay an entry fee and whether patients desire to receive continuing care as their health declines. Within the private-pay market itself, some subsegments are based on clients’ sensitivity to price. Some clients are looking for high-end services and amenities for which they are willing to pay more, whereas other clients are content with more basic services at a cheaper price. Specialized niches for services such as head trauma care, ventilator care, intensive rehabilitation, and Alzheimer’s care also present an approach to segmenting the market. Clearly, a nursing facility administrator should decide which particular segment(s) of the market the organization can most adequately serve.

Selecting Market Segments

Choice of market segments should not be driven by what the nursing home thinks it would like to have as its target market. Rather, the facility’s choice should be based on a careful evaluation of the needs and desires of the target market and on the extent to which the facility possesses the location, physical structures, equipment, staff competencies, and other resources. The facility’s strengths and competencies in providing services should be matched to the needs and desires of the target market. Second, market segments can be identified in areas in which unmet needs exist or in areas in which the competitors may be weak. For example, if the target market is large enough for an upscale facility in which clients would receive pampered treatment, such as private rooms, individual telephones and flat-screen television sets, and restaurant-style table service in a plush dining room, such an operation can fill unmet demand.

To be useful, market segments must be evaluated according to four criteria (Kotler, 2000). Each segment must be:

  1.  Measurable. The size and other characteristics of the segments, such as ability to pay and client preferences, must be measurable. In other words, there must be some way to assess the number of potential clients with desired characteristics in the segment.

Exhibit 16-1    Market Segments Based on Demographics, Needs, and Preferences

Demographics

Pediatrics

Older adults

Young disabled

Women only

Pay source: personal funds, private insurance, Medicare, Medicaid

Clinical Needs

Short-term rehabilitation

Intensive rehabilitation

Skilled nursing care

Independent retirement living

Assisted living

Alzheimer’s care

Wound care

Head trauma care

Ventilator care

AIDS care

Adult day care

Client Preferences

Facility close to home

Menu selection

High skill mix of staff

High-end private pay

Low-end private pay

Private room

Nonregimented personal routines

Décor and furnishings

Transportation services

Safety

Amenities

Desire for continuing care

  2.  Sizable. A segment should be the largest possible homogeneous group worth going after with a tailored marketing program. In smaller communities, for example, segmenting the nursing home market will make sense only if there is a sizable number of clients who may need a particular type of service. Otherwise, segmenting the market will not be appropriate because it will simply result in several segments too small to go after.

  3.  Accessible. The facility must be able to effectively reach and serve the market. Because accessibility is governed mainly by the facility’s location, the facility should evaluate the needs of its surrounding community. It should also assess how far people may be willing to travel to receive certain services not offered by competitors and whether clients will travel to the facility’s particular location to get those services. For example, people may travel some distance to get specialized services. On the other hand, clients may not want to travel to a facility located in a working-class neighborhood if they are looking for high-end private-pay services.

  4.  Differentiable. The segments should be differentiable according to client needs and preferences. For example, some of the architectural designs and the Green House concept are highly differentiated from traditional nursing homes. But differentiation can be achieved in a number of different ways, as discussed later in this chapter.

Market Targeting

Market targeting is the step that follows segmentation in implementing a marketing strategy. Market segmentation does not imply that the facility must target only one segment. How many segments and which particular segments to target will depend on (1) the segment’s overall attractiveness, such as its size, growth potential, and profitability; and (2) the organization’s mission, objectives, and competencies (Kotler, 2000). In most instances, a nursing facility can pursue three types of targeting strategies:

•  Single-offer, mass-market coverage

•  Single-segment concentration

•  Selective specialization

Single-Offer, Mass-Market Coverage

Most nursing homes go for a single-offer, mass-market coverage, in which market segments are ignored. These facilities offer standard skilled nursing care, and they try to attract anyone in order to increase the occupancy. As illustrated in  Figure 16–3A , one generic product is designed to suit everyone’s needs, and little room is given to accommodating client preferences. Such a strategy may work well in communities where the segments are indistinguishable or the size of the overall market is too small to render profitable segments. In most large urban and suburban markets, however, a mass market approach may not produce the results an organization desires.

Single-Segment Concentration

Single-segment concentration ( Figure 16–3B ) is a targeting strategy in which the facility produces one specialized offering for a single segment. Examples of this strategy include a specialized rehabilitation facility; a facility specializing in subacute care services such as head trauma, wound, and ventilator care; or a facility catering only to high-end private-pay clients. Such a strategy can pose high risks, particularly if a facility launches into specialized offerings on the basis of hunches and assumptions rather than on a thorough research of the market.

Figure 16–3  Market Targeting Patterns

Selective Specialization

Depending on a facility’s size, layout, location, and resources, a selective specialization approach may be the most desirable. In this strategy, a facility produces specialized offerings tailored to the needs and desires of different market segments ( Figure 16–3C ). As an example, the same nursing facility can offer high-end décor and amenities for wealthy private-pay clients in one section of the facility, short-stay rehabilitation and postacute services in a separate Medicare section, and Alzheimer’s care in a distinct specialized unit.

Positioning

Every facility holds a certain position in the marketplace. Potential customers and key stakeholders form mental images and perceptions of the nursing facilities that they are familiar with, have seen advertised, or have heard about in a media report or from friends and neighbors. People use such perceptions to mentally rank a particular facility and its services while comparing it to other facilities in terms of how favorably they view a given facility.

Kotler and Andreasen (1996) define  positioning  as “the act of designing the organization’s image and value offer so that the organization’s customers understand and appreciate what the organization stands for in relation to its competitors” (p. 191). Positioning is not what is done to a product. Positioning is what a marketer does to create a favorable image about the product in the minds of the prospective clients.

The NHA should find out how the facility is positioned, that is, what people think of it and its services, and what type of reputation the facility has in the community. Two important questions need to be asked:

  1.  To what extent do people in the target market recognize the facility?

  2.  How favorably do people feel toward the facility?

Obtaining more detailed information about how people may have arrived at forming a particular image of a nursing facility is often necessary. Such detailed information can be collected using techniques such as  semantic differential  (Kotler & Andreasen, 1996). In this technique, market researchers select a relatively small set of dimensions that are important to people. The dimensions may include items such as quality of care, reputation, friendliness of the staff, comfort, and décor. Potential clients are asked to rate the facility and its competitors on each of these dimensions. The results show a facility’s rank on each of the dimensions in relation to its competitors. A facility’s position is particularly useful within the context of its target market, because this position shows what potential clients think. Management can then decide whether the facility is appropriately positioned. If the facility is not desirably positioned, semantic differential can help management focus its efforts on improving its areas of weakness.

Market repositioning becomes necessary when a change in the existing position is desired. Before a facility can be effectively positioned, the NHA should put down in writing a “statement of position” and a “positioning statement” (Luther, 2001). The  statement of position  specifies how the facility is currently positioned. The  positioning statement  highlights how the facility should be repositioned. The size of the gap between the current and desired positions will dictate the amount of effort and resources necessary for repositioning the facility. Advertising campaigns, ease of locating the facility on the Web, the facility’s Web page that is easy to navigate and gives concise and precise information that clients are looking for, news stories in the local media, open houses and facility tours, community health fairs, and a suitable marketing mix are some of the means that can be used for achieving the desired position.

Marketing Mix

A marketing mix provides the tools necessary for positioning a facility in the target market. The four factors of the marketing mix—product, price, place, and promotion (known as the 4 Ps— Figure 16–4 )—are well known, but they pose special challenges for implementation in health care marketing. The next section explains how to use the 4 Ps.

Implementing the Marketing Mix

In health care marketing, the 4 Ps of the marketing mix do not operate in the same manner as they do for a manufactured product that people can touch, see, try out, and even return if they are not satisfied. The health care product, with the exception of the facility’s amenities, is—for the most part—intangible. The primary clients, the people who make the buying decision and evaluate value, are often not the patients themselves, but their surrogates (such as family members). Services are produced only when customers are there to receive them, and care delivered to the patients goes mostly unobserved by these primary clients. The product’s most desired features, such as quality, are not simple for the clients to objectively define and evaluate. Pricing is often beyond the facility’s control, because the facility relies heavily on third-party reimbursement. Place is generally fixed in terms of where the facility is located, its size, and its layout. Promotion presents challenges, because the product is difficult to showcase.

Figure 16–4  The Marketing Mix

Product

The long-term care product is a package of some tangible but mostly intangible elements. The socioresidential structures of the person-centered care model comprise the main tangible component. People can see and feel the living environment. Clients can also taste the food being served, notice the building’s cleanliness, smell odors, and observe staff members’ attitudes and responsiveness. Family members who regularly visit the facility can also observe the patient’s personal hygiene and some of the services being provided for the patient. However, a lot more goes unobserved, because families cannot be in the facility all the time. By extrapolating from what they can observe and feel, clients formulate judgments about the care elements that they do not see.

Bovée and colleagues (1995) described the product component of the marketing mix as a “bundle of value” that meets expectations of customers in the target market. The worth of a product is measured in terms of the benefits it delivers. Through the NHA’s efforts in leading, coaching, training, and coordinating, the various departments of a facility can work together to deliver what customers want in quality, timeliness of service, and responsiveness to their needs. Differentiating the product, which is discussed later, is another strategy for creating value and positioning the facility in the target market.

Price

Price refers to the cost a consumer bears in exchange for the product or service. Generally, price signifies a direct cost to the customer. In health care, however, third-party financing and reimbursement insulates the customer from the price of services. The NHA has little to no control over how much Medicaid and Medicare will pay. Although the consumer bears some out-of-pocket costs to cover deductibles and copayments, these costs are the same regardless of which nursing home the customer chooses. Hence, pricing as a marketing strategy becomes inconsequential in many instances.

Pricing strategies are pertinent in some market segments, such as private pay, and also in managed care and Veterans Administration (VA) contracting. Pricing decisions in these market segments are based on such factors as buyers’ willingness and ability to pay, the facility’s production costs, and market competition. In the private-pay market, high prices are sometimes used to create a top-of-the-line image, whereas low prices can be used to undercut the competition (Bovée et al., 1995). In contracting with managed care and the VA, pricing can be tricky because contracts are generally awarded to the lowest bidder in closed-bid contests. A low cost of production relative to its competitors can enable a facility to offer a price that can win a contract. Sometimes, especially in managed care contracting when open negotiation rather than closed bidding is used, the NHA has more flexibility in pricing.

There are many reasons patients are admitted to facilities in which the building and furnishings may not be upscale, even though these patients are covered under third-party reimbursement, which entitles them to go to any certified nursing home of their choice. One common reason for admission to facilities that are not upscale is the unavailability of beds at upscale facilities when the patient needs to be admitted. However, customers also assess three main types of indirect costs that they weigh against the benefits in determining the value of the product they consider purchasing:

  1.  Family members face the opportunity cost of time required in traveling to the facility for regular visits.

  2.  Psychological costs are attributed to feelings of anxiety and guilt family members may have.

  3.  Clients also incur social costs from the embarrassment of placing a loved one in a facility with a poor reputation.

Although travel time is a function of the facility’s location in relation to where the family members live, the facility can take steps in helping people overcome their anxiety and guilt through social service counseling, regular communication, and family support groups. The facility should market to the community and to prospective and current clients any such formal programs it may have available. When a facility is spartan in appearance, other features such as friendliness of staff members, security, and other quality of life elements should be emphasized.

Place

Place is where services can be purchased, that is, the facility’s physical location (Majaro, 1993). Choosing the site for building a new facility is a strategic decision, but location also deserves close study when acquiring an existing facility to enter a new market. Another situation in which location becomes a critical factor is when deciding whether to add more beds to an existing building or to open a new facility at a different location. The cost of capital is often the driving consideration in such decisions because expanding an existing facility is cheaper than building a new one. But even in growing markets, facilities can face low census growth after adding new beds when the critical factor of location has not been adequately studied. The trend in recent years has been to locate nursing facilities near growing suburban populations, whereas in the past, facilities were often located close to hospitals to maintain ongoing contact with hospital discharge planners, facilitate transfer of patients, and make it convenient for doctors to visit their patients in the nursing home after they had finished making rounds in the hospital.

Although location is the most obvious factor when one thinks of place, in marketing strategy place also refers to the  channels of distribution —the mechanisms used for bringing products and customers together to create an exchange. For example, a long-term care facility may offer noninstitutional services, such as home health care, hospice services, and Meals On Wheels; these services are taken to wherever the patients reside, regardless of where the facility itself is located.

Place also refers to physical access. For example, accessibility and clearly marked signs on adjacent access roads make it easy to find the facility. An adequate number of parking spaces as close as possible to the facility should be reserved for clients. Well-manicured landscaping and lawns, flower beds, and adequate lighting draw attention and create a welcoming appeal. Access also refers to the times when a patient can be admitted to the facility. For example, is the facility ready to admit patients in the evenings and on weekends? What does the facility do when a patient needs to be admitted but no beds are available? The nursing home should develop relationships with hospitals and other long-term care facilities and have policies that facilitate patient admission at all hours. When a facility is full, it can temporarily place the patient in another facility and work out a smooth transfer when appropriate accommodations become available.

In long-term care, place also includes regular contact between the patient and family. Many facilities have unrestricted visiting hours.

Promotion

Majaro (1993) defines  promotion  as “the communication system that creates awareness of the product, its features and benefits, and its location of purchase, and also reassures the customer after the purchase has taken place” (p. 22). Promotion can also be defined as a controlled and integrated program that uses communication methods to effectively present an organization and its services to prospective customers and highlights need-satisfying attributes to facilitate sales (Engel et al., 1994). Bovée and colleagues (1995) pointed to several objectives to be achieved through promotion:

  1.  Providing information. Information creates awareness, but it also educates and explains how a facility’s unique array of services can address problems that potential customers may be facing.

  2.  Stimulating demand. The ultimate goal of all promotion is to influence behavior. Promotion should instill a desire in potential customers to lead them to a purchasing decision when the time comes for placing a patient in a nursing facility.

  3.  Differentiating products. Many nursing homes are alike. A strong promotional program is often what sets these facilities apart. On the other hand, a facility may have differentiated products such as rehabilitation, special dining features, or outdoor events, which can be effectively used for market positioning.

  4.  Reminding current customers. Even existing customers need to be reminded of the facility’s benefits in order to prevent them from switching to a different facility. Also, once a patient has been admitted to the facility, family members need reinforcement that they made the right choice.

  5.  Countering competitors. Without engaging in “name calling” or naming its competitors, a facility can effectively counter promotional campaigns of its competitors.

  6.  Responding to negative news. On occasion, even the best nursing homes are likely to become victims of negative publicity focusing on an unforeseen event—or even something that could have been prevented. In such circumstances, not saying anything can be perceived as admission of guilt and create negative public opinion.

  7.  Building image. Positive news stories of events can be powerful elements in building a facility’s image.

Promotion should be driven by the other three Ps. For example, to emphasize its rehabilitation services a facility may provide factual information on how many days an average patient stays in the facility for active rehabilitation before being discharged home. To emphasize value, a facility may highlight how affordable an attractive and comfortable environment can be. Promotion and advertising must clearly emphasize how to get to the facility, as well as how to contact the facility by telephone and by the Internet. Promotional strategy and tools are discussed later in this chapter.

Competitive Differentiation

Even nursing facilities that do have a marketing program often engage in undifferentiated marketing. Also called “mass marketing,”  undifferentiated marketing purposefully ignores market segmentation and targets the aggregate market using the same marketing mix for the entire market. Mass marketing takes a generic approach by marketing a uniform package of services to the entire market, using the same product to try and appeal to all prospective clients. Because only one undifferentiated product is promoted, marketing costs are minimized. However, this strategy leaves the facility vulnerable to competitors that can differentiate their products. When nursing facilities operating in the same market provide commonplace services, marketers refer to it as the “me-too” syndrome (O’Malley, 2001). A market in which most other nursing homes are me-too, a facility can gain competitive advantage by distinguishing itself from its competitors. Kotler (1991) asserted that every product and every service, no matter how commonplace, can be differentiated. Differentiation can be used effectively for positioning a facility in the target market.

Differentiation Strategy

Differentiation  is a competitive strategy in which a facility modifies its product or service so that customers can clearly see added value and distinguish the facility’s offer from that of its competitors. For example, two nursing facilities may be similar in their quality of clinical care, but one facility may be able to differentiate itself by offering a selective menu, a restaurant-style dining experience, family-style dining, or a brunch buffet. Other facilities achieve differentiation by offering an array of support services for family members. In fact, by thinking through their marketing mix, administrators can find numerous opportunities for differentiation. A facility’s affiliation with a hospital or other recognized agency, its layout and atmosphere, its quality-of-life features, its recreation and activity programs, its staff skill mix, and its staffing levels can all be used for differentiation.

In long-term care marketing, differentiated offerings can be used in three ways, depending on what an organization wants to achieve:

  1.  Creating unique value

  2.  Segmenting the market

  3.  Niche marketing

Creating Unique Value

As already mentioned, distinguishing the facility from other competitors by offering extra value is one use of this strategy, which may be used without segmenting the market. In this case, the facility tries to attract patients by offering extra value that other facilities do not offer.

Segmenting the Market

Segmentation, by its very nature, requires differentiation and often provides the logical basis on which to create differentiated offerings. Using a different marketing mix for each segment can add value.

Niche Marketing

Some long-term care facilities have used the differentiation strategy to concentrate on a single market segment through a high degree of specialization in a particular service. Examples include Alzheimer’s care facilities, rehabilitation facilities, and noncertified upscale facilities that cater to wealthy clients. This type of a concentrated marketing strategy is called  niche marketing  or niche creation.

Personal Selling

Personal selling, called “salesmanship” in marketing literature, requires one-on-one contact with clients. In long-term care, generally the buying decision is made only after a personal contact with someone at the facility.

The main objective of personal selling is to understand individual needs and offer solutions tailored to meet those needs. In the process, the facility often learns first-hand how its image is being perceived by the clients that it comes in contact with. One of the aims in personal selling is to reinforce a positive image; another aim is to change a negative image with information.

The preadmission inquiry process is about personal selling but using a social services approach. For example, one must be forthright if the facility is not equipped to adequately address what the patient needs. A relentless pursuit to fill vacant beds (census chasing) with little regard for the patient’s needs and the facility’s ability to serve those needs often turns out to be the wrong approach, and backfires in the form of dissatisfaction, negative word-of-mouth publicity, and even lawsuits when things go wrong.

In many markets, customers have several nursing home choices. It is estimated that a customer visits an average of 3.4 facilities and phones 4.2 facilities before choosing a nursing home. Also, a growing trend involves not just the adult children but also the spouse of a potential patient in the selection process (Macknick, 1998). Hence, preadmission inquiry should be a highly professionalized process. The process is also highly individualized and should be adapted to the patient’s and the family’s specific circumstances. Making people feel at ease and taking the time to listen is an art. Only genuine empathy and mutual trust will make people comfortable enough to disclose some very personal information. Private issues—such as the patient’s incontinence, dementia, or combativeness—are not generally shared with total strangers, nor is information on personal finances. Hence, some “icebreaking” conversation is necessary before discussing sensitive issues.

McKenna (1991) explains that the deluge of exaggerations and unsubstantiated claims made by various service providers results in confusing people. Customers need reassurance, particularly when they are buying a piece of the future, as they do in purchasing nursing home services. They are looking for an organization that conveys integrity and has credibility before they will entrust a loved one to that organization. Therefore, the facility should adequately train all intake workers and backup personnel.

The facility tour is used primarily to build credibility. This tour should be designed to give a first-hand look into how the facility would meet the multifaceted needs of a patient. Key features and services of the facility should be given particular emphasis. For example, a visit to the physical therapy area where other patients are receiving active treatments can be reassuring. The potential client is often positively impressed when the intake worker introduces the therapist who takes a few minutes to give simple explanations of the therapeutic procedures the prospective patient is likely to receive. Similarly, other key associates, such as the supervising nurse on the nursing unit, should be introduced to the visitors.

The post-tour interview must conclude with what is referred to as “closing the sale.” Simply put, closing of a sale is an unobtrusive offer to admit the patient. Macknick (1998) pointed out that an offer to admit the patient is extended in only 2% of the cases when prospects come into the facility for a preadmission inquiry. Closing the sale is an art and requires confidence. A simple statement, such as, “We would be delighted to serve Mrs. Kemple’s needs through our excellent staff; when can I call you back?” is all that is required, unless the prospective clients clearly are not interested. The next day, a follow-up telephone call is appropriate.

Customer Relations

Administrators who manage some of the most elegantly furnished and well-decorated facilities sometimes wonder why they lose patients. These facilities often have customer relations problems. On the other hand, some plain-looking nursing facilities are able to maintain full census while their competitors struggle.

Kotler and Clarke (1987) consider the personnel of an organization as the 5th P of marketing (the other four being product, price, place, and promotion, as discussed earlier). Clients often judge quality and their satisfaction with services by how employees interact with them rather than by the technical quality of services, something that clients generally cannot assess. Customers observe the staff’s behaviors and attentiveness to tasks; they evaluate the staff’s responsiveness to problems; they notice whether the employees are friendly and cheerful; and they rely on the staff for information on their loved one’s condition. When they visit the facility, family members also notice how other patients are treated. Family members use such clues to form opinions about the facility’s reliability and dependability because they cannot be at the facility all the time. Negative observations create psychological stress that dilutes the perception of value.

Following are some suggestions for building better customer relations:

•  Acknowledgement and helpfulness. Associates should greet and smile when they pass family members and other visitors. The receptionist should acknowledge with a cheerful greeting anyone who enters the facility and inquire how they can be assisted. Kotler and Clarke (1987) point out that the airlines are known to run all flight attendants, sales agents, and other staff members who have customer contact through “smile school.” In the hospitality industry, employees are trained in customer relations and client interactions. Nursing facilities must do the same.

•  Empathy and compassion. True compassion requires associates to “be in the customer’s shoes” and imagine what the other person must be going through, and interact accordingly.

•  Contact and communication. Regular contact and factual updates on the patient’s condition build trust. When family members are informed about how the patient is doing, it is also important to explain what is being done to address the patient’s needs. Timely follow-up by associates on questions and concerns raised by family members is critical. Professional staff members should not merely inform, they must also educate clients so that expectations are maintained at a reasonable level without making it sound that staff members are giving excuses. This education should include explanations of why certain expectations may be unreasonable.

Promotion and Public Relations Tools

The main objective of a promotion and public relations campaign is to position the nursing facility (discussed earlier) and to build and maintain a positive image of the facility through effective communication. Promotional efforts are targeted at would-be customers, whereas public relations—also called community relations—are directed at other key stakeholders and the community at large. Examples of these stakeholders include the facility’s associates, community health care agencies, physicians, the local media, legislators and other public officials, and other agencies such as the local police and fire department. Promotion and public relations work hand in hand, and many of the promotional tools can also be used for public relations. Developing a uniform strategy, however, is essential in order to communicate the same message through several different media. The NHA should establish a budget for promotional activities and should also allocate resources for advertising, printing informational materials, and public relations programs. The NHA should also decide which channels of communication will be the most cost effective in achieving the promotional goals. If necessary, the facility’s budget and resource allocation should also allow for expenses related to hiring a professional marketing firm or a public relations firm.

Advertising

Advertising  includes all forms of paid, non–face-to-face communication with a target audience. Advertising uses an identified sponsor. An advertising campaign should use all available media—print, airwaves, and electronic. Advertising incurs investments for which the paybacks are not always known, and advertising’s effectiveness can be determined only by how much progress the facility makes toward certain measurable outcomes, such as an increased number of inquiries.

The advertising message should be carefully crafted. An ideal message encompasses the AIDA framework: It gets attention, holds interest, arouses desire, and obtains action. The problem, of course, is that ascertaining these attributes is difficult without extensive field testing, which is expensive. However, the NHA can use some innovative approaches, such as testing the message using a focus group consisting of family and staff members. Extensively used in marketing research, a  focus group  consists of about 8 to 12 people who participate in an unstructured session with a skilled moderator to discuss their thoughts and feelings about something they are likely to be familiar with.

The advertising message must include a selling line. A  selling line  is a carefully crafted brief message used in advertising to interpret the facility’s positioning statement. The selling line should contain the benefits sought by individuals who make the buying decision (Luther, 2001). It is important that advertised messages be free from any misleading statements or claims that may be construed as warranties or promises about clinical outcomes or the quality of care (Becker, 2001). Some basic information must be included in all advertisements and printed on all promotional materials. For example, all advertisements and promotional materials must contain the facility’s name, logo, street address, location, telephone number, and Web address.

Publicity

The term  publicity  refers to nonpaid communication of information about the facility and its services, and it plays an important role in the facility’s promotion and public relations strategy. The fact that the facility does not pay for publicity distinguishes it from advertising, and it should be used as a primary channel of promotion. Getting free publicity in the local media is not as difficult as it may sound. Opportunities for publicity can be categorized into three main areas:

•  Announcements

•  Human interest stories

•  News events

Announcements

The media play an important public service informational role, and members of the media are frequently looking for information that would be of interest to the general public. Announcements for programs such as health fairs, health screenings, and educational seminars are accepted without charge by many community newspapers and radio stations.

Human Interest Stories

Human interest stories and follow-up reports on various events are also of interest to the community. Examples include noteworthy events in the lives of certain residents in the nursing home; substantial fund-raising efforts organized by the facility or carried out in collaboration with other local agencies to support foundations such as the American Heart Association, the Alzheimer’s Association, or the Arthritis Foundation; celebration of a landmark anniversary of the facility; or a celebrity’s visit to the facility. Brennan (1981) reported on examples of numerous human interest stories published in local newspapers across the country. Some notable stories included residents participating in yoga classes, nursing students training at a local nursing home, a family reunion that included five generations, a resident who had served as an altar boy at the local Catholic church, and residents featured in an Easter parade.

News Events

News events featuring the facility, its staff, or residents should be transmitted to the local media. Examples include the facility’s outstanding performance on the certification survey, accreditation by the Joint Commission, appointment of a new administrator, ground breaking for a new facility, or ribbon cutting for a new service.

Personal Contacts

An extremely important part of a facility’s promotional strategy is the facility’s personal contacts with referral agents. Referral agents are professionals in the community who are in a position to influence prospective clients about choosing a facility. Regular personal contact with physicians and hospital discharge planners is critical because these professionals are often consulted by families when they place a loved one in a nursing facility. Personal contact is also established when the administrator or other key personnel make presentations before community groups, such as the Rotary Club or a women’s auxiliary. Personal contact can be effectively combined with disseminating promotional materials such as business cards, facility brochures, or photo albums.

Promotional Materials

Brochures, business cards, newsletters, photo albums, DVDs, and websites are commonly used as promotional materials. The quality and content of these materials must be developed with the aim of accomplishing the facility’s positioning goals. For instance, positioning high-end services by using an ordinary black-and-white brochure would be counterproductive. On the other hand, a simple facility located in a rural area and known mainly to its local population need not spend money on developing a costly brochure.

In highly competitive markets, different types of promotional materials are necessary, and each one is designed to serve a different purpose. An administrator who meets a physician in the nursing facility’s hallway for the first time will give the physician a business card. An administrator will also hand a business card to the receptionist when making a personal call to a physician’s office. Brochures are used in a variety of ways: they are included in the packet of information that is handed to prospective clients during the preadmission inquiry; they are kept in the facility’s lobby to be picked up by visitors; they are left with hospital discharge planners to be handed out to prospective clients; and they can be distributed to the public during events such as health fairs. The facility’s newsletter is a vehicle for regular communication with the associates, current residents and their families, and key stakeholders. Photo albums are left with key referral agents such as physicians and hospital discharge planners to use in promoting the facility’s services to prospective clients. Video cassettes or DVDs can be used with likely prospects. Especially when the patient or the spouse cannot personally visit the facility, a video or DVD can be very effective in showing the facility’s living environment. The video or DVD can also be effectively used during speaking engagements to supplement an oral presentation. The facility’s Web pages can be designed to create a virtual facility tour, using action photographs that include people engaged in various activities. For privacy reasons, obtain written consent for taking and using photographs of people, and avoid identifying individuals in photographs (Miller & Hutton, 2000).

Event Promotion

Event promotion is accomplished by organizing programs and special events at the facility—programs and events to which the community is invited. This strategy serves two main purposes: (1) it can, depending on the type of event, generate free publicity, often both before and after the event; and (2) it creates promotional opportunities by letting key stakeholders and the public see first hand what the facility is like. Certain events are targeted at specific stakeholder groups, such as a reception for physicians, which may also include social workers and nurses from surrounding hospitals; a special event for nursing students from area colleges; or an event to honor community volunteers. Other events include wider audiences. An open house in conjunction with the dedication of a new facility or a new addition attracts interested audiences. A facility’s landmark anniversaries, such as the 5th and the 10th, present excellent opportunities for special celebrations to which the local community should be invited.

Terminology for Review

advertising

channels of distribution

differentiation

focus group

internal marketing

market segmentation

marketing

niche marketing

positioning

positioning statement

promotion

publicity

selling line

semantic differential

statement of position

target market

undifferentiated marketing

value

For Further Thought

Case

Sometimes It Works, Sometimes It Doesn’t

Jim Beaufort was appointed as the administrator of Marshall Nursing Center, a 230-bed skilled nursing facility located in a large metropolitan area. The facility’s occupancy rate had gradually declined from 82% (188 residents) a year ago to 74% (170 residents). Three months ago when Jim was hired for the job, the company’s vice president of operations, Ronald Ortner, was upfront about the declining census. Ortner was particularly impressed with Jim’s business degree in marketing, and how Jim had enthusiastically talked about using a “mystery shopper”* to get information on the competitors of a nursing home he had previously managed. Jim knew that his work was cut out for him. When offering the job, Ortner had said, “I am giving you a 20% raise over what you were making at your old job; I want this facility turned around in a year’s time.” To that Jim had confidently responded, “Oh, you will see a trend change much before that.”

Jim spent the first 3 months on the job getting to know the staff, residents, and some of the family members. He made written notes on some of his observations:

•  The certification survey 6 months ago was satisfactory. There were no serious deficiencies.

•  Some issues with building cleanliness have been addressed with the housekeeping supervisor.

•  Department head meetings had been sparse and irregular.

•  Food was the most common complaint from residents and family members, but so it is at every other facility.

•  The licensed nursing staff is stable, but high turnover of certified nursing assistants creates some staffing shortages. Overtime is high, and the director of nursing says that there is some burnout among both nurses and CNAs.

•  The facility’s expenses are below budget; the previous administrator must have been a “penny pincher.”

•  Patients are scattered throughout the building. Many of them are occupying private rooms, whereas Medicaid pays only for semiprivate accommodations.

Jim thinks that he has just 9 months left to increase the census and keep his job. So, he embarks on formulating a marketing plan:

•  Free up as many patient rooms as possible in one section of the building by moving patients to other occupied parts of the facility. Start an adult day care center by using some of the empty rooms.

•  Hire one additional RN and one LPN to alleviate the feelings of burnout among the staff. Start a CNA training program at the facility.

• Send a mystery shopper to the three main competitors to evaluate how they handle the inquiry process. Have the mystery shopper evaluate Marshall’s inquiry process as well. Improve the admission coordinator’s personal selling skills.

•  Purchase advertising at the local newspaper, radio station, and TV station that would say:

Marshall Nursing Center has excelled in providing high-quality nursing and rehabilitation care in this community for more than 20 years. Our staff’s caring is like a healing touch. We are accepting new patients. Bring your loved one here and see the results for yourself.

“That will get people’s attention,” Jim thought to himself.

•  Discard the black and white brochures and replace them with a four-color brochure with some pictures and the same message used in advertising. Place these brochures in hospital waiting rooms and doctors’ clinics.

•  Invite the hospital’s discharge planners to dinner at a fine restaurant. Explain to them the facility’s new marketing plan and ask for their help in referring patients.

•  While the marketing plan is being implemented, Jim will personally handle all preadmission inquiries, using the admission’s coordinator for backup.

Jim was confident that in another 6 months the facility’s census would start turning around, but it only deteriorated further. Frustrated, he starts looking for another job. Sitting in his office, he moans, “Marketing is just a theory: sometimes it works, sometimes it doesn’t.”

* A mystery shopper, also referred to as a “secret shopper,” is a marketing professional who specializes in visiting and evaluating business practices, posing as a potential client.

Questions

1.  How should Jim have handled his job interview with regard to the declining census?

2.  Do you agree with Jim’s statement: Marketing is just a theory: sometimes it works, sometimes it doesn’t? Explain why marketing may not work.

3.  Evaluate Jim’s marketing plan. What main improvements would you make?

4.  Critically evaluate the promotional message.

FOR FURTHER LEARNING

American Marketing Association

http://www.marketingpower.com/

American Advertising Federation: Trade association of the advertising industry

http://www.aaf.org/

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