If you don’t take time to truly understand what your customers want, it’ll cost you later. Customer research is an often-forgotten step that pays off in lucrative ways, writes insights and advisory partner Barbara Jones.
If you’re familiar with what happened when Coca-Cola changed its formula in the 1980s – causing a massive customer exodus then a very expensive return to its original drink recipe – you’ll know that overlooking what your customers want can be costly. When it comes to the ‘recipes’ used by developers and operators in the retirement living sector, all too often, the customer’s needs are overlooked. This is a mistake that can carry a hefty price tag. Missing the mark with customers could cost operators millions in the longer term, thanks to unsold stock and the costs of covering recurrent fees.
The good news is that extensive customer research before development application can help operators avoid this expensive pitfall. Gathering customer insights early on helps you determine the right mix of amenities, apartment sizes and finishes, as well as the blend of service support (lifestyle and care) needed by your core customers. If your development takes all of your customers’ needs into account, it’s much more likely their retirement living decision will swing in your favour.
Many retirement living operators do basic desktop and market research, but this doesn’t go far enough to fully recognise what customers are looking for. By contrast, in-depth research gathered by talking directly to customers in your catchment helps maximise your revenue line and minimise your market risk.
What happens when retiree customers get forgotten?
One operator* learned the value of customer insights the hard way when it launched a luxury village in a competitive market. Instead of doing customer research, the operator assumed the model used for previous villages would work in this new area. But sales proved to be slow. When Marketability carried out extensive customer research, it became clear the village had been incorrectly positioned as a premium product. It wasn’t as luxurious as customers had expected – and, it turned out, retirees in this area wanted more financial choice. Armed with a better understanding of customer needs, Marketability changed the positioning of the village and introduced more financial options, including flexible DMF options. The impact was relatively fast, with 30% of customers snapping up these options, and sales taking off.
The lesson: if this research had been done before DA, it would have saved the operator hundreds of thousands of dollars.
After years of DA approval changes, another operator* knew its physical product was smaller than competitors in a market obsessed with size. After research Marketability was able to create a value proposition around the development’s services and its engagement with the community – two factors that appealed to customers. Understanding the customer meant we could position the development at a premium compared to competitors. This resulted in strong off plan sales, with an average of 4 sales per month for the first 6 months.
The lesson: the customer proposition goes way beyond the physical dwelling and is unique to each customer segment.
What type of research hits the mark?
Effective strategic customer research is a type of qualitative research that involves speaking directly to potential customers and influencers – put simply: over-55-year-olds and their children. This is done using in-depth one-on-one interviews or focus groups (either face-to-face or online, depending on need). It’s intensive, and costs more money than a once-over-lightly quantitative research approach – but the returns more than make up for it.
The cost of customer research works out at less than 0.25% of a project. That was an investment which certainly paid off for one operator, which used the insights from customer research undertaken before DA to create a unique financial model that really appealed to customers – so much so, the operator was able to sell units for prices an impressive 30% above expectations. Remarkably, the development completely sold out in mere months.
Not understanding what your customers want can cost you later down the track, so it’s important to opt for customer research early in the development process.
Remember, this is not an industry where a one-size-fits-all model will work. Retirement living is usually the last major dwelling decision customers will make, so they will understandably scrutinise every detail before they buy in to your development (or your competitors’). Operators who understand that, and accommodate their customers’ needs and motivations from the outset, will reap the rewards later.
*These examples have been deidentified to protect the commercial interests of the operators