- “Stopping Outshopping” provides a good practice model for healthcare executives, by exploring the Scarlet Hospital case. Activating as an insulated business, Scarlet Hospital never stood back in terms of providing qualitative and modern services, although it enjoyed the favorable condition of not having relevant competitors, which could have allowed the company not to strive for quality. Not being complacent is the key of longevity for Scarlet Hospital and Barr (2010) acknowledges that businesses need to change, to permanently adapt on the changing customer needs and market trends in order to remain relevant. This is the lesson that Scarlet Hospital teaches healthcare executives: Being permanently committed to provide the best healthcare services although the business environment could allow the luxury of not doing so, indicates social responsibility for the community, which appreciates and rewards this benefit by contributing to organization’s longevity (Barr, 2010).
- The discussion about perception refers to brand positioning and placement in consumers’ minds of the values and qualities of a given brand (Aaker, 1996). Hence, in Scarlet Hospital’s case, the battlefront of perceptions refers to improving this healthcare institution’s positioning into the consumers’ minds, ahead of other, competitive services. Beri (2007) notes brands occupy various spaces or positions in consumers’ minds, which reflect the perception about specific brands and customers’ association with the values that the brands communicate. Considering that advertisements that sustain the Salem healthcare institutions intend to suggest to Walnut Grove community that “big city” medicine is better, moving the battlefield into the perception territory, Timothy means that Scarlet Hospital needs to clearly approach its positioning. By establishing an effective, competitive positioning, clearly specifying Scarlet Hospital’s values, the advertising messages promoting the local Walnut Grove healthcare institution need to create attributes and values with which the community members should identify themselves, through mental associations.
- Developing a marketing communication plan for coming with effective and aggressive advertisements implies market research. In this sense, it is required to apply Michael Porter’s Five Forces, for understanding the nature of the competition and the existent market threats, for creating a solid strategy for addressing the findings. The Five Forces theory comprises “(1) threat of new entrants, (2) bargaining power of buyers, (3) bargaining power of suppliers, (4) threat of substitute products or services and (5) intensity of rivalry among firms and industries” (Henry, 2011, p. 67). The threat of new entrants is the main concern for Scarlet Hospital, facing the new players from Salem, which promise better healthcare services. Nevertheless, there should be researched if the prices that the Salem hospitals propose are relevant for the Walnut Grove community. Similarly, there should be investigated whether the Walnut Grove community, which constitute the bargaining power of buyers, are interested in healthcare quality or the services’ prices more, or if they are looking for the best price/quality mix. As any other industry, the healthcare domain also depends on suppliers, which can make a competitive difference between different rival companies. Giving the nature of healthcare institution, there can be assumed that rival companies work with the same or similar suppliers, which can influence the prices for their products or services, reshaping the entire industry in terms of price and/or quality. The threat of substitute products, in Scarlet Hospital’s case, refers to the existent outpatient care, which did not impose serious competitive problems over the years. The existent rivalry in Scarlet Hospital’s marketplace previous to the inauguration of the interstate highway is practically inexistent, as the case reveals.
Based on these findings, the advertisement messages should take into consideration:
- The messages of new entry rivals. Scarlet should respond to these messages that position the “big city” healthcare as better by reminding the Walnut Grove community that it had been committed to delivering the best quality services even when it was the single provider on the market and that it will stay committed to these principles;
- The price/quality needs of the buyers (Walnut Grove community). Scarlet Hospital should propose a competitive strategy, comparing its rivals’ pricing and services with its own and proposing a reconstructionist approach addressing both innovative and high quality services and relevant, market sensitive prices (Chan Kim & Mauborgne, 2009).
Therefore, the advertisement message should define the competitive advantages that Scarlet Hospitals possess: long-term qualitative commitment to customers, price sensitivity and nearby, immediate care (which needs no out of town travel).
- In building up a defensive plan, Scarlet Hospital’s employees should apply a balanced scorecard approach, by creating a strategic planning, transforming the organizational goal of becoming more competitive in the context of the upcoming new entry rivals into clear and practical actions (Marquis & Huston, 2009). If I would be asked to shoring up the defensive plan, I would suggest establishing a metric based performance, addressing the nature of services provided, the quality assured and the time required for managing various services, improving them to reach comparable with the best market’s performance. Requiring for a quality audit to assess the validity of the performance based metrics, would allow the accurate and truthful communication of the fact that Scarlet Hospital offers the best healthcare service, generating increased credibility. In addition, as a defensive mechanism, I would suggest creating annual subscriptions for the most profitable and valuable patients, for assuring market share retention. By investigating the new entry competitive companies’ services and products several months prior to the inauguration of the interstate highway, Scarlet Hospital can compare services, and improve where necessary, by establishing key performance indicators, so that the existent customers not to feel attracted to go outshopping, when the services are available locally. Finally, taking advantage by its outdoorsy, mountain location, the healthcare organization can engage the existent customers into remaining their loyal customers, by developing wellness related facilitation, specific to mountain region, such as salt baths or outdoor taichi and breathing exercises, good for health.
- Timothy Rogers considers a-priori that the interstate highway will generate the threat of new-entry rivals with the worst case scenario of Scarlet Hospital’s closure. However, a SWOT analysis is required to understand the company’s internal strengths (S) and weaknesses (W), as well as its external opportunities (O) and threats (T) before deciding on the course of action that should be taken. Scarlet Hospital has always offered qualitative services, even when there were no actual competitors on its market, therefore its intrinsic focus on quality is a considerable strength. Similarly, people from Walnut Grove community need not to travel outside this area, for Scarlet Hospital guarantees competitive healthcare services, which is a great facility for old people and for those who do not possess cars, or have busy schedules and prefer not to travel. Besides, traveling to Salem would take 40 minutes to reach and 40 minutes to return, not to count the bureaucracy specific to big city hospitals. Therefore, remaining to Scarlet’s services means time efficiency for customers, which is another strength. The Walnut Grove area is very well-known for its members, but Salem has new attractions, which can be a weakness for Scarlet Hospital, as its current patients might go outshopping for healthcare services mostly for accommodating other needs, which Walnut Grove cannot provide in terms of shopping or entertainment. The improved transportation is a threat for Scarlet Hospital, as it facilitates its current patients’ easy reach to other healthcare providers. It is however, a challenge for maintaining its current customers, but also an opportunity for attracting new customers, from Salem. As easy as customers can move from Walnut Grove to Salem, Salem’s residents can come to Walnut Grove for their healthcare services, enjoying qualitative services at accessible prices (more accessible than its “big city” competitors). In addition, the innovative strategy proposed above for retaining the customers, namely creating wellness facilities, customized on the mountain resources (fresh and clean air, pollution free), can be addressed also for attracting new customers, from Salem, turning the tables on Salem-based healthcare providers. This would position Scarlet as a brand committed to offering qualitative services at fair prices, with attractive mountain customized wellness services. Scarlet Hospital can improve its competitive marketing positioning by communicating these benefits in Walnut Grove and in Salem.
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Barr, J. (2010) “The single biggest threat to longevity? Complacency” Northeast Pennsylvania Business Journal. March, pp. 14-15.
Beri, G., C. (2008) Marketing research. New Delhi: Tata McGraw Hill.
Chan Kim, W. & Mauborgne, R. (2009) “How strategy shapes structure”. Harvard Business Review. September, pp. 73 – 80.
Henry, A. (2011) Understanding strategic management. New York: Oxford University Press, Inc.
Marquis, B., L. & Huston, C., J. (2009) Leadership roles and management functions in nursing: theory and application. 6th edition. Philadelphia: Lippincott Williams & Wilkins.