Above: Dr Peter Wilton from the University of California, Berkeley.
By Yasmin Noone
Retirement village operators must not solely rely on the advocacy efforts of their industry peak body, Retirement Villages Australia (RVA), but instead actively build a loyal client base of their own consumer advocates via innovative business and marketing techniques.
This is the belief of marketing lecturer, Dr Peter Wilton from the University of California, Berkeley, who captivated an audience of retirement village operators with his presentation on how businesses can achieve success through reinvention, at the RVA’s 2011 National Conference in Melbourne this morning.
Dr Wilton, who is also the CEO of the consultation company, ORBIS Associates, commented that although the RVA is a very effective industry advocate, the organisation alone can not do all the advocacy work that is required in order to advance the interests of its members and the industry as a whole.
Instead, members must build advocacy and loyalty among their own residents, who will then move the operator forward and make it profitable.
This is imperative if operators are to survive and thrive in a tough, constrained environment like the retirement village industry.
“Your future is not a random event,” Dr Wilton said. “It is actively created.
“[But] how do you operate in a constrained industry? How do you challenge assumptions?”
The answer, he said, is simple. “You innovate…Focus on differentiation and competition, not price.”
According to Dr Wilton, retirement village operators, in search of success, can travel one of two paths – they can either proactively and continuously improve, building on what they have always done as time goes on, or they can they can innovate and stand out from the crowd.
Using the case study of Kodak and the digital camera, Dr Wilton explained this point.
“Digital cameras were a reinvention strategy, and intuitively a new way of creating value that had not been done before.
“Kodak created but rejected the first digital camera. Why? It ignored digital as it believed it was inferior.
“Why? Because they talked to their customers [about the product] but they talked to the wrong customers … [like] the professional photographer. What do professional photographers want? High quality and high resolution. But the first digital camera was less than one megapixel.
“So Kodak ignored it. That’s the problem with reinvention and innovation. When you [first] look at the [new product or service], it looks inferior.”
But, Dr Wilton said, a successful, newly innovated product – once marketed – will increase in popularity and change the usual way of doing things, for both the innovative organisation and its industry competitors.
On the other hand, just like Kodak, if operators continue to keep doing as they have always done, then they will be exposed to a greater risk of being pushed out of the market as their competitors reinvent and innovate.
“It’s nice to do continuous improvement but to get ahead, it’s not enough.”
Dr Wilton believes the key drivers of an organisation’s reputation and indeed, the extent to which it innovates, are uniqueness and relevance.
“Think of everything you do to create value for residents. How unique is that and how relevant is it to the stakeholder or customer?”
Levels of uniqueness, he said, fluctuate between two extremes – ‘parity’, where an organisation is exactly “the same as the customer’s next best choice” and ‘unique in class’ (the ultimate goal of any business), where an innovative company becomes the industry leader because it stands out from the crowd.
The midpoint between the two domains is “best in class” – where an organisation examines every other organisation in the industry/country/world and benchmarks. The net result is that the organisation is considered to be one of, or among, the best in that specific group.
“Best in class is nice. It’s good. But the problem is that you are still part of a class … [when the] goal is to stand out.”
Using Apple as his next example off the ranks, Dr Wilton, described how an organisation reaches ‘unique in class’ status.
“[Around] 84 per cent of Apple’s consumer base is considered to be disciples and advocates of the organisation”.
Apple, he said, achieved this statistic via four techniques. Firstly, it employs traditional methods of continuous improvement, doing what others in the technology industry are doing, but in a unique way.
“Apple does hardware, tablets, MP3 players – the same things that everyone else does.
“But its [products] are different in the way they look, different in the way they interface … Essentially, they are products in a class by themselves.”
Apple products also solve problems which have been previously impossible to solve.
“For example, [take] the iPod … [Years ago,] the problem was that people couldn’t get music easily and legally?
“Apple solved the problem with the iTunes store.”
The third technique Apple used was to create a “unique and tangible experience in a retail environment”. Thus was born, the Apple Store.
Finally, the company created a very particular brand and image, which Dr Wilton says his international audiences always describe as “cool”.
“You too can be like Apple,” Dr Wilton told RVA conference attendees.
“If you all do [what Apple did], you will have 84 per cent of your client base as your disciples.
“But why is it important [for consumers to be advocates of your brand]? Do you need to do all that work? Do you need to be like Apple?
“The answer to that depends on what kind of relationship you want with your customers.”
Customers who are loyal to a company and actively advocate its brand are generally important to success, according to the presentation, and more so in a constrained economic climate like the one within which retirement village operators currently exist.
‘Attitudinally loyal’ customers “are going to be just influential about what policy will be as the RVA would be on a national advocacy level”, he said.
“[They are] important for you and important for the industry … and are important in an industry that’s relatively mature but that is [now] challenging assumptions about how to grow a village.
“You can earn the right to create loyalty by being unique and relevant.”
The pay-off for attitudinal loyalty, according to Dr Wilton, is more profit, as studies show a strong connection between profitability and attitudinal loyalty.
“But the key to building it is to be unique in class.”