Marketing hospitals is stupid
That comment came from a discussion with an operations director at a health system, who was told by the senior vice president for strategy that “anyone spending time or money on marketing a hospital is stupid.” (The names in this story have been changed to protect the innocent and short-sighted.)
To give this a little context, the SVP had focused most of her efforts on business development, and specifically, on acquiring physician practices and building physician referral channels. So the comment was really about comparing the value of marketing to that of business development when it comes to business growth. In addition, it’s assumed that “marketing” was meant to equate “consumer marketing.”
Not surprisingly, we take a tad bit of exception to classifying an entire discipline as stupid. But for starters, let’s acknowledge the reality: when it comes to affecting immediate and substantial business growth, typically nothing can be as effective as acquiring physician practices, specialty practices, or merging hospitals and health systems. The surest way to increase market share or dramatically increase volumes is to lock-in independent referral sources, or acquire competitive businesses. In essence, organizations are “buying” new patients, and mergers and acquisitions are a time-tested way in any industry to grow business. In healthcare, one sign that hospitals and health systems recognize this power can be seen in the growing cache of business development titles. Often, what used to be senior marketing titles now include ‘business development,’ and business development is typically seen as a higher-level discipline than marketing throughout the industry.
Does that mean spending time, energy and money on marketing your hospital is, in fact, stupid? Er, not exactly. Let’s start with the well documented fact that the majority of mergers and acquisitions in business fail. For example, a BusinessWeek article titled “When CEO’s Go Courting, Watch Out,” cites research showing that 60-70% of deals fail, stating:
“Mergers tend to destroy value, not create it.”
One of the primary reasons for this is that trying to mush two corporate entities into one is not easy, and if not handled well, costs increase, efficiency drops, service and quality suffer, and customers flock to competitors. The same can of course happen in healthcare, so simply buying patients by acquiring a physician practice doesn’t guarantee a hospital will keep those patients. Systems become ineffective, doctors aren’t happy, negativity abounds, patients flee. Marketing communications, of course, can play a huge role in communicating the benefits of a merger, and can help specifically target patients with important information and service recovery efforts. Acquisitions reflect a hospital’s desire to obtain patients, but they don’t necessarily reflect what patients themselves want. Without effective marketing communications, it would be very difficult to maximize the impact of a key acquisition or merger.
Second, consumer marketing should help create demand, regardless of what acquisitions are made. Strategies such as driving orthopedic surgeries through joint pain classes, or offering heart disease screening to build downstream cardiac business, are all driven by consumer marketing. There is no doubt that much of a hospital’s business is referral driven, but sophisticated organizations don’t stop there, realizing there are many opportunities to drive patients in through marketing directly to consumers.
Which brings us to the third point – business development and marketing shouldn’t be an either/or proposition. Unless your plan is to acquire all the providers in your market (or you live in Canada), there will always be competition for healthcare services. And whenever there is choice in a market, you will need to fight for your customers using marketing and brand building strategies. Compared to the big growth spike that comes from a large merger or acquisition, ongoing consumer marketing may seem like a long, slow slog. But it will pay dividends when done well. In the end, if both you and your competitors are pursuing strategic business development, but only one of you is also investing in marketing, who do you think will come out ahead?
What do you think? Is marketing a hospital a waste of time? Do you hear statements like this from senior leadership? How do you respond?