The Accidental Marketer

We’ve all experienced it – the “we’ve always done it that way” attitude or the “we’re in the business of running our business” and not satisfying a consumer need. And there have been some spectacular business fails to illustrate this.

Take Blockbuster, an entrenched retailer and not an entertainment provider. I was part of a team launching Pay Per View movies on Cable TV in the late 90’s, we had a distant shared ownership with Blockbuster. We wanted to brand it “Blockbuster at Home” but was greeted with incredulity and a statement that they had 1,000 plus stores to run.

Even big modern brands get it wrong too. Consider Amazon and music. I worked for Amazon in the early days, as a great as they were, they were a warehousing retailer. Books and CDs came in, in bulk and out individually in the post. They had the customer base and the music connections but also had big warehouses that needed filling. It took a new entrant from a different industry, Apple, to invent legal online music distribution. Even though all of us at Amazon HQ were illegally enjoying and sharing online music from the likes of Limewire at the time, so we knew it was the future.

So it seems that you either have to be bold and have some head time to think about breaking your current business model by truly understanding the business you are in (and indeed the consumer need you are fulfilling) or you need to come from a different industry, unburdened with all the baggage of how your business or industry runs.

And we have seen many examples of this from Uber to AirBnB, smart modern businesses launched to satisfy a consumer need. They built these businesses in the way that they did because they knew no better - or should that be worse?!

But it’s not just cool new businesses capitalising in the modern consumer zeitgeist of the sharing economy that benefit from this approach. The other day I was having lunch with a very old friend of mine who owns and runs a very successful chain of Care Homes – a business that he got into by accident when buying a chain of pubs!

Now Care Homes have been much in the news of recent, either for poor service, abuse or going bust due to expensive leases and the high cost of care. Yet his go from strength to strength, are very profitable and he is constantly fighting off Private Equity approaches.

Over a second bottle of wine I quizzed him as to why he was successful. This friend of mine comes from the hospitality industry, he used to own, run, manage chains of pubs and restaurants. The best of which succeed because they give consumers what they want: Great ambience, great food, good company, great service and of course good value.

So when he took over his first few homes (that came with a bundle of pubs) he approached them with the mind-set of a hotelier rather than a HealthCare professional. To him service was something that should be valued and maximised and not costed and minimised per head.

Each of his homes has a Brasserie to eat in, somewhere where your family can come and join you for lunch. They have hairdressers, masseurs and beauticians. They have a cinema room and a bar. And each has an S class Mercedes and driver to take you to the shops or to collect your relatives. They all have the décor of a new country house hotel. All of which is inclusive in the weekly fee (even your visiting relatives food).

I was stunned and fell into the trap of expecting this to be all at some exorbitant 5 Star fee. But he explained to me that he was generally 10% cheaper than his competitors. He also paid his staff better. So offered more, had higher service costs, charged less but had the highest profitability.

Why and how? What he found was that this approach meant he had very low marketing costs, even a waiting list. His residents, or guests as he likes to call them, are happier, which means they live longer, are healthier and require less care. This means he has the highest occupancy rate (virtually 100%), lower staff turnover and thus higher profits.

Such has been his success that he recently sold a home to a Healthcare Private Equity group, experts in running Care Homes, who were attracted by his high profitability per head. The first thing they did was to switch it to their standard operating procedures - no all-inclusive rate, no free extra services, cut staffing costs etc. etc. and you guessed it - occupancy rates down, staff turnover up and of course profitability down. Whilst they scratch their heads he’s just waiting for the right time to buy it back.

So as I praised him for being a Marketing genius and a leader in Customer Experience, he corrected me, and said that he was just doing what he had always done. Built great hospitality and places where he would be happy for his own parents to stay. The rest looked after itself.