The desperate situation of the UK Care Industry. The perfect business case study

The state of the care industry in the UK is desperate and fascinating. Desperate, if you are one of the poor sods seeking care and fascinating because of the business decision it faces. It would make a first class business school case study.

Summary of the case study

Around 45% of care home residents pay the fees themselves.

The local authority pays all the fees of 36% of residents. The remainder are mix of state and personal payments.

Because local authorities are unwilling or unable to pay the full rate it forces the care home to overcharge the private paying residents £100/week for exactly the same service.

The upside for the care home is that selling to local authorities is B2B but the private payer is B2C. So there will be a difference in the cost of acquiring customers.

This is a quote from one of the experts in the care home industry

“The entire care home sector for older people is being kept afloat through cross subsidies from . . . residents that pay privately,” said William Laing, founder of the consultancy. Self-funding care home residents were in effect being charged an additional £8,000 a year “care tax”, he said.

Read this press comment for a summary of the situation.

So marketing director what do we do?

Change to only accepting private payers?

Try and increase the percentage of private payers?

Put out head in the sand and hope for the best?

At the moment the care industry is adopting the last of these options plus appealing for more money to be spent by central government on care. At best this will be too little too late. At worst it will not happen.

An interesting dilemma. If you want to see the 'model answer' to the case study then read my new book This I Know. Dick Stroud

Fake news takes many forms. Misrepresenting or omitting facts is widespread in the Ageing Industry

The headline in the Guardian newspaper reads : "Pensioners now '£20 a week better off' than working households."

Blimey, you think to yourself. Here I am working away and the retired couple, living next door could be £1,000/year better of than me.

Needless to say the source of the data is the Resolution Foundation who has taken it upon themselves to be the voice of Millennials against their nasty parents. To be honest, that was a bit of fake news as well, although it is not far from the truth

If you read past the headlines then you discover this "£20 a week better off' is after taking into account housing costs. Mmmm, what exactly does that mean?

You then read a bit further and find this statement.

The report shows a sharp divide in wealth levels among pensioners. The top fifth of pensioner households account for 74% of employment income, 66% of investment income, and 52% of occupational pension income. In contrast, the poorest fifth of households are almost entirely reliant on benefit income.

Now this is the real news in the report. The top 20% of pensioners own the lion's share of the wealth and income. Another headline could be that "20% of pensioners are reliant on the basic state pension that is one of the lowest in Europe".

We all indulge in fake news and select the 'facts' that support our views and suppress or hide those that don't. Dick Stroud

One in 16 retired households will enjoy £1m of spending over their future lifetime. That's a fact you should know

Tilney is a company of financial advisers/investors. I think it is fair to say that you must read their research findings with that in mind. That said, their analysis of the future spending of different age groups is fascinating. I have never seen anything like it before.

You should definitely read this report : The cost of tomorrow - Forecasting our future spending

The findings are based on the latest ONS Family Spending Survey. The researchers calculated how much a household would spend at each stage of life based on the typical life expectancy for someone of that age.

The researchers calculated the spending for the top and bottom quarter of households in each category according to the income characteristics of each age group. Additional insight came from a survey of 2,007 adults aged over the age of 45 years.

Here are some factlets for you to consider.

From the age of 65, the top quarter can expect to enjoy spending £683,000;
the average over-65 household £420,000

Housing costs diminish with age – so a typical retired household can
expect to spend £99,500 on having fun, £41,000 of which is on holidays

One in 16 retired households will enjoy £1m of spending over their future
lifetime, and is able to devote disproportionately more to the finer things
in life

Not as if you need telling, but this data spells out the magnitude of the consumer spending by older people. It illustrates the huge regional differences and the differences between the most affluent and least affluent 25% of the age group.

Well done Tilney for producing such a good research report. Dick Stroud

"on demand' access to GPs but at a price. Going to be big business.

A few days back I blogged about the terrible problems we have in the UK with out health service and whilst it causes hardship for so many people it also provides a massive new business opportunity.  The UK's NHS is in terrible shape and getting worse fast. Great news for the private health industry

As I explained in This I Know, there has always been full range of health services for those that can pay, including primary care. Not surprisingly, as the NHS implodes, there will a greater demand for the services from echelons of society who in the past would never have considered using their credit cards for something they had assumed was 'free'.

One of the most acute problems is trying to get to see a primary care doctor (we call them GPs in the UK). One solution to this problem is the Uber style GP services from companies like Babylon Health and Push Doctor. 

This is only the start and as this article shows the provision of on-demand private GP services is already underway. Maybe this startup venture will not succeed but it marks the direction of the future. Dick Stroud

$1,400,000,000,000.00 is one hell of a lot of debt = US student debt

The unrelenting upward plod of this graph, showing the level of US student debt, worries me for two reason.

Reason 1. Most of the debt is owned or guaranteed by the federal government. The student loans that the government holds directly on its balance sheet now represent almost 30% of the total consumer debt. That is one hell of a lot of money that we all know will not be repaid in full. Think of like sub-prime housing debt. These are the loans provided to people, many of whom will never be able to pay them back. First reason to be a bit worried.

Reason 2. Those young people (and some older souls) who are trying to pay repay this debt will not be spending it on products and services. Get the picture? This is one hell of a large drain that will slow consumer expenditure. Those of you besotted by Millennials might want to ponder on this point for a while.

Other than that, we can be totally relaxed! Dick Stroud

We will increasingly grow old before we grow rich or even moderately well-off

The UK is going through a navel-gazing process to look (yet again) at the state of pension saving. We do this every couple of years - everybody gets very worried - and then we do nothing about it.

A couple of days back a lady (Sofia Stayte) who is head of the Independent State Pension Age Review was addressing a conference and made a statement that should strike terror into businesses.

This is what she said

Phasing out of defined benefit schemes, the rocketing cost of housing, and low levels of private savings meant even today's high earners would lean on the state for the majority of their income in old age. This would force a shift in expectations of what retirement means.
When we look at analysis 20 years in the future, most people on all income deciles will depend heavily on the state pension because they will not have much private wealth."

You can download her PowerPoint presentation from the conference web site. 

When I was writing my latest book (This I Know) I spent a lot of time looking the lack of wealth accumulation in younger age cohorts and even though I know the arguments it still scared me.

We rely on accumulating wealth during our working years that can be converted into income when full-time work stops. We are now in a world where the young and middle aged will become old before they become rich. In truth, before they have any meaningful levels of wealth.

Of course there will always be rich and poor in all ages. Ms Stayte's argument, which I agree with, is there will be more in the poor category with every passing year.

I hope, but don't expect, businesses are thinking about this and the implications. Dick Stroud

Customer Journey Mapping is difficult and invariably incomplete. Wise words from NN/g

This month's Nielsen Norman Group's newsletter is about (Remote Customer Journey Mapping).

The process of customer-journey mapping usually involves bringing together a cross functional team of different roles and levels of seniority. It’s crucial to bring people from various teams and departments together to ensure that the customer journey is accurate, and also that everyone in the company supports the process and the outcomes. But how can journey mapping work when teams are not merely metaphorically siloed within an organization, but are physically siloed — geographically dispersed — as well?

Our experience confirms these views. Customer journey mapping is difficult, but not impossible, but where it invariably flounders is in the implementation of the results.

The newsletter references some great tools like UXpressia and Mural. They look terrific.

What none of these tools can do is to explain, let alone evaluate, the age-friendliness of the touchpoints they are attempting to improve.

The vital component for any customer journey map or evaluation is to be able to take every single touchpoint and to ensure that it is fit for purpose for all ages of customer. And, the only way you can do that is to understand all the aspects of physiological ageing and to apply them to each and every touchpoint.

Does this sound difficult?

Well we have made it easier for you to do. Download the free iPad app from iTunes and follow your nose and all will be explained.

Just do it.

Dick Stroud

Use of social media in the US is plateauing - especially amongst the young and old

Pew Internet is a bit like OFCOM in the UK. It publishes excellent market data for zilch.

So, if you want to know what is happening with the uptake of digital in the US you should download the most recent fact sheets. To get a quick summary read Laurie Orlov's comments.

I think the graph makes the point about how the uptake of social media is levelling off and in the case of the 65+ starting to fall.

My bet is the UK data will be very similar. Dick Stroud

A fortune to be made in population ageing? Are you willing to risk your own money?

A few years back it was a novelty to find any form of financial instrument that was based on demography and population ageing.

Now they are popping up all over the place. There is even a STOXX index for ageing and demography. This is the index for Europe Demography and for Global Population Ageing. 

One of the largest funds, that invests in equities that have exposure to population ageing, is operated by Fidelity (Global Demographic Fund)

If anybody should be investing in these funds it should be me. Last year I took a punt at the Fidelity fund. What I hadn't factored into my calculations was Mr Trump and his attitude to the Pharmaceutical industry - shall we say a tad antagonistic.

So far I am up on the investment but nowhere near the level of an investment in a global equity tracker.

What is the moral to this story? I am sure in the long-run these are sound investments, but, in the short term they are just as vulnerable to unrelated changes in the economy as any other specialist fund.

If you work in the Ageing Blob you really should be putting your money where you mouth is. Dick Stroud

Another week, another government report about ageing, yet nothing will change

In my latest book (This I Know) I sum up the attitudes towards population ageing, of the Ageing Business's three groups of players , like this:

Government .....wishes the issue would go away
Businesses .... always have something better to do
Older Consumers .... are unprepared and 'hope for the best'

Instead of taking decisive actions Government is reduced to distractionary activities. God knows how many reports it has produced, and ignored?

Another one appeared last week  Fuller Working Lives A Partnership Approach published by the DWP. The word 'turgid' sums up the 50 pages of analysis that is about as interesting to read as a telephone directory. For those of you who don't remember, telephone directories were the books that listed names and telephone numbers.

No doubt a bunch of civil servants, ably assisted by members of the ageing blob, thought that had done a splendid job in crafting the document. Sure it has generated a bit of media coverage but nothing more.

The failure of the three groups, government in particular, to come to terms with demographic change creates huge business opportunities.

There is something wrong about making money out of the failure of others but there you go - storm clouds and silver linings etc. Dick Stroud

Can't walk and chew gum at the same time. That's marketers in the cosmetic industry for you

Maybe I am being a tad unkind to this group of marketers. No maybe I am not, because it seems that from  Lauder to L’Oréal, Shiseido to Sulwhasoo, they are obsessed with the dreaded Millennials.

Sure you will find Helen Mirren, if you look long enough on the L'Oreal web site, but she seems  something of a token oldie. A year or so back I talked with a marketer from the company and she confirmed that they are ultra youth centric and scared stiff that any association with older women might in some way contaminate the brands. Yep, that old argument that goes back to pre-2000.

This article from Global Cosmetics News makes the point that the industry has to come to terms with selling to both old and young consumers. Now that requires real marketing skills. Dick Stroud

Combine innovative technology to the needs of older people and you get a successful business. I am not so sure.

I should be unreservedly delighted at the high levels of venture funds and the numbers of young entrepreneurs seeking to make money out of new products and services for older people, based on new technology.

Of course I think it is good thing and have been delighted to take part in panels judging new digital products. But yet, I get an uneasy feeling about the whole thing.

I think the reason for my unease might date back to the long period of time I spent as a marketer in the IT industry. There were always 'hot' markets and technology that was going to radically change the way we did business. Invariably, nothing much happened and it was the slow grinding development of technology and markets that created the new opportunities.

A visual representation of this journey from unquestioning enthusiasm to either failure or long term success was best shown by the Gartner Hype Curve.

I get the feeling that we are somewhere between the peak of inflated expectations and the trough of disillusionment for most of the products aimed the ageing in place and care and medicine in place markets.

It will be interesting to see what Laurie Orlov makes of where we have got to in her forthcoming publication,  Market Overview of Technology for Aging in Place that will be published in Feb.

Let's hope she is more optimistic. Dick Stroud

We are 'under-prepared' for the rise in older people. So says Bloomberg. It is much worse than they think

Bloomberg has calculated an index of the actual dependency ratio based on each country’s statutory pensionable age, not the arbitrary figure of 65 that is normally used. This is the number of workers who are paying tax and supporting each retired person.

So for instance, Nigeria, with a statutory pensionable age of 50, has only 4.8 workers supporting each senior, compared with 19.4 as indicated by conventional measures. Russia has 2.4 instead of 5.1, and Colombia has 4.5 instead of 9.4.

Asia could be facing the toughest choices in allocating resources. The Asia Pacific Risk Center estimates the region’s elderly population will rise 71 percent by 2030, compared with 55 percent in North America and 31 percent in Europe.

This index is an improvement on using the arbitrary number of 65 but it is still giving an over optimistic picture. The two big factors it doesn't take into account are:

The downward pressure on wages, and hence the tax that is paid bv the remaining 'workers'
That many older people are ejected from the workplace well in advance of the statutory retirement age.

It would be relatively easy to model these two factors into the Bloomberg index. I dare to think what the result will show. Dick Stroud

Tech-Enabled Home Care by Laurie Orlov - don't think - download it

This is a no-brainer report that you should read if you have the faintest interest in technology and ageing. What is more, it is free.

The report starts: "Growing life expectancy and shrinking assets limit options of older adults in late life, leaving those who may need care more likely to receive it at home. The biggest constraint for this industry is scarcity of willing workers. Although a greater role for technology is envisioned by many, the highly fragmented home care industry has made incremental progress in achieving it.

Laurie Orlov really understand the issues of technology and ageing and is able to cut through the nonsense that is talked about the subject . Just download and read it. Dick Stroud

Terrific presentation, wonderful graphics, mightily impressive sounding words. What the hell does it all mean?

I am a member of the Royal Society of Arts.  It publishes a beautifully produced magazine. The articles are littered with eye grabbing graphics and impressive sounding words and lots and lots of words like  'progressives', 'caring', 'communities', 'involvement' etc etc.

After reading a few pages I dump it in the waste bin and swear I will never bother to read again, until the next edition appears and I give it another go, but it always ends up with the same outcome.

The title of the articles sound interesting and relevant but the content is primarily created to enable the authors to preen rather than to inform.   

I fear that the exhibition that is going on about how the creative industry can respond to population ageing is in the same category as the RSA magazine. What a disappointment. 

Here are a couple of sources where you can read about the event JWT and Creative Review.

Dick Stroud