Tell me if this sounds familiar.
There’s an industry facing pricing pressures that are incessant and highly public. The traditional channels that have delivered customers are evolving, to the point where there is no clear compass for the road ahead. New technology has made its mark and digital strategy and data are having a larger effect on overall performance. Non-branded and price-driven competitors continue to grow, and Amazon is bearing down.
I’m not talking about the healthcare industry, but rather retail. And lately, I’ve been wondering if what’s happening in retail foreshadows what’s next for healthcare.
Consider the predicament of Macy’s. Last September, Macy’s announced it was hiring 80,000 temporary workers for the 2018 holiday season. For a retailer that had literally been to the mountaintop and back – the stock had peaked at $72 in 2015, only to trade at $19 two years later – Macy’s seemed to have recovered and was checking the boxes on all of the things you’d expect a smart retailer to be doing.
It had invested $200 million in improving the store experience for its top 50 locations. It awakened to the reality that the retail world required digital-first customer engagement and, in turn, added new features to its mobile app. It had restaged its loyalty program and launched Backstage, an off-price business to compete with the likes of TJ Maxx and Nordstrom Rack.
Riding a solid economy into the final quarter of 2018, it looked like Macy’s was right where it wanted to be. Initially the results were positive: The entire retail industry saw online sales on Thanksgiving Day rise 28% from 2017, and Macy’s share price basically doubled from where it had been one year earlier.
And then, just like that, it was over. On January 10, Macy’s announced that same-store sales had grown just 1.1% for the holiday season – which prompted an almost 18% drop in its share price, its worst market day ever. Broader alarms sounded throughout the industry, which brought down competitors as well, and analysts opined that Macy’s entire recovery strategy – which, for the record, many of them had lauded – now had to be called into question.
Something about this news nagged at me. Macy’s seemed to have been doing most everything right, to the point where a strong 2018 holiday season seemed like a sure thing. But that was it: There was no sure thing. And the disruption facing the retail business, while certainly at happening at an accelerated pace, has some parallels to what is happening in healthcare: price pressures, a consumer (or patient) increasingly in charge, Amazon shaking things up, and more.
Since healthcare is an industry that aspires to manage outside forces and operate in a sure-thing environment, what can it learn from the experience of the retail industry? Here are three thoughts:
1. Learn to love the problem.
I have a colleague, Ashish Toshniwal, who absolutely lights up when he hears about a client problem with no obvious solution. Healthcare companies, on the other hand, hate the problem, and with good reason. They compete in a highly regulated, high-stakes industry and are engineered to operate within tight bounds. It’s not made for change by design.
But today healthcare finds itself in the crosshairs of change, and this isn’t likely to change anytime soon. And change means problems. The most successful healthcare companies in the next ten years will be the ones who, like Ashish, love the problem and change their own internal mindset to embrace situations where there is no obvious solution.
The retail graveyard is littered with venerable names, like Lord & Taylor and Henri Bendel, that couldn’t get their organizations to love the problem. These companies, who together had been in business for over 300 years, survived right up until the moment they didn’t. This same fate awaits some venerable healthcare companies.
2. Get real.
This is an interesting point to make to an industry that often seems to portray a world right out of the movie Pleasantville, where everything is seemingly perfect. Newsflash: your customers aren’t buying it anymore.
For a retail analogy, look at Victoria’s Secret. VS has been slowing down in large part because its primary customer is connecting more with the authentic pitch being delivered by brands like Aerie than by the Pleasantville-like brand image of unattainably sexy supermodels. Connecting real health solutions to the mindset of the times doesn’t just make marketing sense. It makes business sense, as seen by the rise of next-generation health brands like Hims, Oscar, and OneMedical.
Staying in touch with the times also applies to media channels. The retail business for years relied on consistent media channels – newspaper, radio, Sunday circulars, and television – until some of those channels were either gone or shadows of their former selves. But many retailers kept going back to the same well long after the well had run dry.
The parallel to healthcare could not be more striking. While pharmaceutical companies in particular have a heavy presence in television, we already know that traditional commercial television is in decline. In 2018, 33 million adults (13% of the population) cancelled their traditional pay-TV service without resubscribing; that number is expected to grow to 45 million by 2020.
The maddening thing about this situation is that the technology that has driven the rise in new media channels (and the erosion of the traditional ones) should enable healthcare marketers to better serve its customers and deliver better outcomes. In today’s world, engagement and media channels ought to be the first thing everyone is talking about in brand planning, not the last.
3. State your purpose and behave like the business you want to be.
The fastest-growing retailer of 2017 was Primark. If you don’t know much about the company, it’s because Primark only opened in the US in 2015, though they’ve operated in Europe since 1969. Go take a look at its website: Prominently featured is a tab titled Our Ethics, in which Primark tells the story of “how we keep our prices low and our standards high” and outlines their supply-chain approach “from sourcing to store.” Another current example is Panera, which has elevated itself above the sameness of fast-casual dining by its 100% commitment to clean food.
Healthcare companies need to look in the mirror. Unlike most retailers, they have a purpose and should shout it from the rooftops, letting the world know the commitment and inspiration required to develop medicines and care practices. Let people know that you care – and show it.
If your behavior as a brand or company doesn’t align with your stated purpose, you’re a fake. We operate in a transparent world; the quickest way to lose trust is to act differently than what you claim to be.
There’s a line in politics: “As Ohio goes, so goes the nation.” For our industry, the analogous lingo should be “as retail goes, so goes healthcare.” The healthcare industry is becoming a convergence of science and consumerism, and the one sure thing we face is significant change. Healthcare should pay attention to the forces shaking up retail to prepare for this change.
Ned Russell is managing partner, healthcare at MDC Partners