Front Porch: Focus On Marketing & Training Helps Maintain Edge
Over the last year or so, people in the prospect pool for CCRCs watched and waited as interest on their savings and the value of their investments withered away—practically overnight. The real estate market froze in many markets and languished, at best, in others. These unprecedented and largely unexpected financial challenges clearly caused a negative impact on occupancy rates for many CCRCs.
In not-for-profit CCRCs overall, the 2008-09 financial recession caused an average drop in occupancy of approximately 3%, according to Dan Hermann, Senior Managing Director and Head of Senior Living Finance at Ziegler Capital Markets. Of course, numerous CCRCs didn’t see a drop at all, while others saw occupancy drop a lot more than 3%. Location mattered.
And according to information gathered in August 2009 through Ziegler Research’s Continuing Disclosure Call program, 74% of borrowers indicated that they experienced an impact on occupancy due to the real estate downturn; among borrowers engaged in filling units, 83% reported an impact.
“But now the drop in occupancy levels appears to have bottomed out,” said Hermann. “It’s definitely improving. We’re seeing a recovery rate of 0.5% to 1.0% in the not-for-profit CCRC sector. The average occupancy rate is now at about 91-92% across the country.”
Effective marketing on the front burner
One effect of the drop in CCRC occupancy levels is that providers have begun to focus on marketing strategies, often making it a #1 management team initiative. But marketing has always been on the front burner at Front Porch, based in Burbank, California. Perhaps that is why Front Porch has historically averaged about 2% above the industry average in terms of occupancy. And while occupancy rates at Front Porch communities did dip during the darkest days and months of the past year, effective marketing tools, flexible strategies, and a proven sales training program helped Front Porch retain that 2% margin throughout the recession, according to Joan Woodworth, Senior Vice President of Sales & Marketing, even though many of its properties are located in Southern California—among the areas hit hardest by the burst real estate bubble. Now that the economy is recovering, Front Porch’s occupancy rates are heading back to normal levels, which still means 2% above the industry average. “September 2009 proved to be a very good month for us,” Woodworth said. “We had a higher than average number of move-ins. October was very good, as well.”
Front Porch consists of 11 full-service retirement communities in California and two adult rental communities—one in Louisiana and another in Florida. The newest community, Walnut Village in Anaheim, California, opened October 1. “When the markets crashed last fall, we were definitely too far along with the property to put it on hold,” explained Mary Miller, CFO. “Generally speaking, we haven’t put any of our projects or plans on hold. Rather, we believe that the long-term demand for our product will continue, so we have continued to invest capital in our communities.”
Presales at Walnut Village, which is an entrance-fee CCRC, were at 84% when financing was structured in May 2007, according to Miller. “We actually got up to 90%,” she said, “but because of the economy in general and the real estate market specifically—with people not able to sell their homes or not feeling comfortable with the pricing—our presales had dipped below 60% by the time Walnut Village opened. But now that it’s open and residents are moving in, we expect sales to improve going forward.”
For most of the presales cycle at Walnut Village, Front Porch offered a 90% repayable contract, which is what the marketplace indicated it wanted at the time. “It had really good acceptance in 2006 and 2007 when the stock market was doing well,” said Miller. “Then, last year, we recognized that it might be beneficial to offer additional options on the contract that wouldn’t require as much upfront cash but would still provide a reasonable financial return for Front Porch. So we offered 50% repayable and a fully amortized contract, which gave the sales team some flexibility and additional tools that they could offer.”
Front Porch doesn’t offer across-the-board discounts to prospects. Specials are individualized to the communities and range from offering a move manager or even paying for the cost of moving to taking a percentage off the price of an accommodation that is difficult to sell or in a less desirable location. To encourage presales at the new Walnut Village, for example, people who put down a deposit within a certain period of time were given a charter membership package that included benefits such as upgrades and special finishes within the units. And when the housing market collapsed, and Orange County (where Walnut Village is located) was hit so hard, Front Porch brought in a relocation service to help prospective residents with home sales and moving arrangements. That helped push them along in the process.
“We’re very careful, though, not to set precedents that we can’t maintain,” Miller emphasized, “and have tried to be more creative and a little more flexible than we were when every community was at 98% occupancy with a huge waiting list. The current market environment has challenged us to really connect with prospects, to really understand what’s in store for each of them, and to do something that addresses their needs while preserving the appropriate financial return for us and fair treatment for everyone. You can’t simply give away the store to one prospect and not another. Residents talk to each other!”
Promotion and training—definitely not discretionary
Some providers think of promotional initiatives and sales training as discretionary spending and, therefore, easy programs to cut when times get tough—they prefer not to cut staff or operations, and it’s often difficult to quantify results for some PR or training expenditures.
Miller, however, came to Front Porch from the consumer packaged-goods industry. The way they approached budgeting at the company where she worked before joining Front Porch was to set the advertising and promotional budgets first—“so we could invest in the brand,” she said. “Nobody was allowed to touch those budgets. Everyone had to meet their overall business targets by reducing overhead or other types of spending. At Front Porch, investing in sales, marketing, brand support and capital improvement of our communities has always been a high priority that is supported by the whole management team.”
A focus on the individual is the underpinning of Front Porch’s market positioning, according to Lee Ratta, Senior Vice President of Organizational Advancement, whose responsibilities include corporate branding. “That allows us to have unique products in each location,” she said, “and that’s something that the market seems to embrace. All our brochures, advertisements, and direct-mail pieces feature actual residents in real situations to project a strong sense of authenticity.” Just last May, in fact, Front Porch won three gold and four silver awards from the National Association of Home Builders for the best print advertising and marketing collateral in the 50+ housing community category.
“Our marketing pieces really do emphasize the individual resident experience,” added Miller. “They highlight the fact that we’re here to facilitate life as the residents want to live it, not to impose our way of living onto them. One of the objections that people have about moving into a retirement community is that they perceive it as institutional and that they’re giving up their independence. So we try to help them understand that moving to our community will actually facilitate a continuation of their wonderful life and make it easier for them to function better. I believe that really resonates with people but haven’t seen a lot of other organizations using that approach.”
In addition to print ads and sales brochures, Front Porch does quarterly direct-mail campaigns for each of its communities, as well as email blasts aimed at the “influencer” market, including adult children. Marketing a new CCRC, however, is approached differently from marketing an existing community, as introducing any kind of new product to the market requires an intensive message buildup. “It’s sort of like peeling an onion,” said Ratta. “You’re constantly planning new bits of information to be released periodically to pique interest. It’s a courtship, whereas marketing an existing CCRC basically involves making offers. So the approach is different, and the targets are different.”
Front Porch also continues to strengthen its sales training program despite the tight economy, adding new training modules and additional creative ideas to the program to keep the sales team motivated and to meet market needs. The Web-based program delivers sales skills through e-learning modules and both live and recorded webinars. “We designed the program by speaking with the sales team to learn what they needed and what was important to them,” said Woodworth. “Team members are required to participate and are monitored, so having a program designed by them and for them has been important in terms of getting buy-in.”
The program also includes supplementary resources, as well as an area where team members can share best practices. And at all times, each salesperson can determine where he or she stands in terms of team goals. “Our salespeople are highly leveraged on commission, and we track sales activity weekly,” Woodworth said, “but their success ultimately results from their individual focus and determination. That is provided by the motivation and information they get from the training program and the support that they get from senior management.”
While Front Porch’s sales training program is copyrighted, the company could offer it to other organizations through partnerships or management contracts—effective tools that Front Porch has used to provide expertise and service in areas that include operations, IT, finance, development, affordable housing, HR, branding, marketing, sales and fund development. One of those affiliations actually resulted in the partner (Sunny View Lutheran Home in Cupertino, California) becoming a full-fledged Front Porch community in 2005.
“Our ability to help organizations who wish to partner for growth but retain their identity and mission, even as their operations become strengthened or consolidated through our organization, is a key aspect of Front Porch,” noted Ratta.
“But one important thing we’ve learned with regard to marketing in this economy is that there’s no silver bullet,” Woodworth emphasized. “There’s no single sales strategy that works. Effective marketing requires a combination of strategies, a lot of determination on the part of the sales team, and a lot of support from management.”