Data for Healthcare Market Planning: Finding Your Next Growth Market
We see the healthcare industry as having strong opportunity and value-add for data & analytics in expansion decisions, particularly for specialized services like dentistry, senior care / living, or home health.
The industry is particularly well suited to a data-driven market planning process due to:
A well-defined target market for specialties
Availability of competitive information
Lack of widespread use today
Healthcare groups can use data as a competitive advantage for market planning because it’s still an emerging differentiator in the industry - not all groups are using it to its fullest value. Many use demographic reports, which provide helpful information, and a robust data-driven market planning framework provides an additional level of sophistication to the market planning process.
A data-driven market planning framework focuses the time and attention of the leadership team in the areas that hold the highest potential for the business
With high investor activity in the healthcare market, market planning becomes an important aspect of growing the business. Growing strategically and intelligently will unlock future value by having a presence in attractive areas that align with your target market.
So, how do you pick the right markets to move into next? Where do you acquire or build? How do you make this decision and what value can data & analytics provide in the process?
A Data-Driven Growth Framework for Healthcare
Growing businesses want confidence that the markets where they operate have the right characteristics in place to succeed. In healthcare, we find that this usually means:
The market size is large and growing
The target market for the business lives and/or works in the area
The level of competition supports a new entrant or is a healthy level for acquisition
An area that meets the above criteria typically gives businesses confidence to enter the market.
In our framework, we address each of these steps with a combination of data & domain expertise to surface the markets with the highest potential for the business.
This data-driven approach ensures that (1) the business is in markets that are large enough to justify the investment; (2) there’s alignment between the specialty and the people that live / work in the area and (3) competition won’t hinder success.
Below, we’ll detail how data & analytics addresses these points to enable expansion decisions for healthcare teams.
Large, Growing Market
Here, we want to know that there are enough people to support a healthy business and a growing population typically means more favorable competition ratios over time and gives reason to believe that the area is worth investing in over the long-term.
The most common data point we look at is population size and growth. We’ll typically screen at a level of population that makes sense for the business, like cities with more than 25,000 population or counties with more than 100,000 population, in addition to looking at 5-year population growth.
Businesses that operate in urban environments will look for different market size & growth characteristics than suburban, and there’s no need to have a one-size-fits-all approach.
We look at (1) where the business has existing locations today and (2) the business’ stated strategy to come up with an initial set of size and growth criteria that fits the business.
Through this first step, we want to ensure that the time, resources, and capital that a business invests in a new location or acquisition will be worthwhile. We do this through determining the threshold for market size & growth that makes sense for a business and eliminating all areas that don’t fit that profile.
The Target Market Exists
Market size answers whether the area is large enough, but it doesn’t answer whether the right customers live there. For practitioners that serve the general population it might be enough, but for specialties, we need to go a level deeper.
For example, a pediatric dentist may want to be in an area that has families, K-12 schools, and children.
A senior living facility may look for an area with an above average population age 55+ or an area with strong characteristics to draw an older population.
Knowing if the target market exists requires:
Defining what type of patient or characteristics make the facility successful
Looking for the areas that have that target patient / characteristic
We see target markets oftentimes defined by the age of the population, income levels, or presence of distinct characteristics like a high workforce (suggesting private insurance) or nature of surrounding businesses (near a hospital, K-12 schools, etc.).
This extra step above and beyond market size separates the areas that are large from those that are large and have high-potential to the business.
Level of Competition
The last criteria is fairly obvious. An area with good demographics and above average competition isn’t an area where most businesses will want to operate.
Here, we typically look at population to provider ratios or other metrics that adjust for population size. We benchmark to industry standards or create a comparative benchmark from the data we have.
For example, we might consider 2,000:1 to be a benchmark ratio for general dentistry (2,000 people for every dentist). Now, if we find an area with 1,500:1, we consider that above average competition, and 3,000:1 to be below average.
Ultimately, the exact ratio is less important than the relative interpretation of the value. When we see an extreme outlier - a number very far from the expectations - we surface that, but otherwise we’re looking to ensure that competition won’t inhibit the business’ ability to succeed.
Bringing it Together
We use data to focus a team’s attention on the areas that have the highest potential for a business to succeed.
The above criteria are our way to cut through the noise and surface the places that a business can look for growth. We think of it as a way to remove the places that won’t work for the business, leaving those that merit the time and attention to look into further.
Going through this process usually involves:
Defining the search area (the regions, states, or areas to screen)
Developing the screening criteria (population size, demographic characteristics, success drivers for a business)
Screen & prioritize (pull the data, apply the filters, and rank those that are left)
The business now has (1) a roadmap for the number of high-potential expansion markets available to them and where they are and (2) an objective, replicable process to assess new markets and growth opportunities.
We find this exercise to be a valuable way to shrink the problem from “Where to grow?” to “Which of these markets makes the most sense for our business?” It combines data & analytics with domain expertise to grow intelligently through a methodical, data-driven framework.
Think this might be of value to your business? Reach out to us through our contact page or by email at jordan@bean.consulting.