Product Offering Strategy UNC Kenan-Flagler Business School STAR Project team April 16 th, 2010

Product Offering Strategy

UNC Kenan-Flagler Business SchoolSTAR Project teamApril 16th, 2010

Executive Summary

Strategies for Reaching the Target Market AreasThe Developmentally Disabled CustomersThe Elderly Customers

The Product Offerings StrategyCurrent Product Offering EvaluationStrategies for the ElderlyStrategies for the Retirement Communities

The Pricing StrategyPricing Strategies

AGENDA

Secondary data sources include interviews and focus groups including over 30 individuals

3

Existing Customer Interviews - 5

Developmentally Disabled and Caregivers - 8

Elderly Focus Group Interview - 911

22

33

- 3 Case Managers and 2 Customers

Individual Interviews

Institutions44

55

- Jerry Passmore – Director of the Orange Country Department of Aging- Kate Barrett – Aging Transitional Administrator- Lori Cox – Case Manager/Clinical Social Worker Both DD and Elderly

- Galloway Ridge: Doug Oliver – Assoc. Exec. Director- Carol Woods: Ken Reeb – Director of Finance,

Nikki Bodkin – Director of Business Services- The Cedars: Sarah Flynn – Executive Director,

Angie Wynne – Director of Home Care and Clinic Lisa McCormick – Director of Nursing William Anna – Director of Plan Services

4

Directly target consumers utilizing local support organizations and adjust the product offering to reflect the true value to consumers

• Conducted interviews and focus groups to identify product offering and pricing strategies• Performed secondary research to determine target market areas

Project Overview

Target Market Areas• ARC chapters and senior centers can be utilized to increase product awareness with caregivers and elderly by conducting information sessions

Offering• Focus a different product offering to caregivers, elderly, and institutions

Pricing • Increase monthly prices and charge extra for premium products• Provide institutions with volume discounts

Recommendation

Target Market Areas

Organize discussion groups and sponsor events involving caregivers through local support organizations

Reaching Caregivers

6

*All ARC chapters, senior centers and institutions we approached expressed their willingness to support the initiatives of companies such as CMI.

To increase product awareness communicate directly with end consumers utilizing local organizations which support the developmentally disabled

Case Manager Case Manager Caregiver

Caregiver

Caregiver

Caregiver

Caregiver

Caregiver

Caregiver

Caregiver

Utilizing The ARC Chapter

Caregiver Caregiver

CaregiverCaregiver

Caregiver Caregiver

Caregiver

Caregiver

7

North Carolina, Georgia, and Virginia have the strongest demographics for the developmentally disabled population

(Source: U.S. Census Bureau, U.S. Census 2000 and The ARC)

Target States Evaluation

8

The ARC Chapters Disabled Population Median Income Rank Aggregation

Count Rank Count Rank Income Rank Aggre-gate

Overall rank

New York * 56 1 827,717 1 $55,401 3 5 1

North Carolina 47 2 374,324 2 $46,107 5 9 2

Virginia 23 3 297,524 5 $61,044 2 10 3

Georgia 23 3 358,052 3 $50,549 4 10 4

Maryland 11 7 207,710 7 $70,005 1 15 5

Tennessee 18 5 323,913 4 $43,662 7 16 6

Kentucky 17 6 254,826 6 $41,763 8 20 7

South Carolina 3 9 203,934 8 $44,326 6 23 8

West Virginia 5 8 130,085 9 $37,870 9 28 9

In North Carolina, target the top five counties with high populations of developmentally disabled

Developmentally Disabled Population Map (North Carolina)

(Source: U.S. Census Bureau, 2006 American Community Survey)

10,000 ~

5,000 ~ 9,999

3,000 ~ 4,999

1,000 ~ 3,000

0 ~ 1,000

Asheville

Charlotte

Greensboro Raleigh

Fayetteville

9

Leverage the local ARC Chapters to expand product awareness in these counties

Counties with The ARC chapter

Counties without The ARC chapter

The ARC Chapters in North Carolina

(Source: The ARC of the United States)

Charlotte

Greensboro Raleigh

Asheville

Fayetteville

10

In Georgia, the majority of the developmentally disabled population reside near Atlanta


10,000 ~

5,000 ~ 9,999

3,000 ~ 4,999

1,000 ~ 3,000

0 ~ 1,000

Atlanta

Developmentally Disabled Population Map (Georgia)

11

Leverage the local ARC chapters in the surrounding Atlanta area



The ARC Chapters in Georgia


Atlanta

12

The Washington DC, Richmond, and Harrisonburg triangle area should be targeted for the developmentally disabled market

Developmentally Disabled Population Map (Virginia & D.C.)


10,000 ~

5,000 ~ 9,999

3,000 ~ 4,999

1,000 ~ 3,000

0 ~ 1,000

Washington

Richmond

Harrisonburg

13

Leverage the existing ARC chapters to increase product awareness



The ARC Chapters in Virginia Washington

Richmond

Harrisonburg


14

Utilize local organizations in the target areas to increase product awareness and overall sales

Recommendation for Developmentally Disabled Population

Focus on target area in each state

Utilize local organizations to communicate directly with end consumers11

22

- The ARC is the main organization, which supports the developmentally disabled - Major target cities have one or more ARC Chapters

- North Carolina: 5 major counties- Georgia: Atlanta Metropolis- Virginia: Washington DC, Richmond, Harrisonburg triangle area

15

Utilize the vast number of Senior Centers and the institutions to communicate reach out to the elderly and caregivers

Elderly

ElderlyElderly

Elderly

Utilizing Senior Centers

Elderly

Elderly

Elderly Elderly

Elderly

Elderly

16

Case Manager

Caregiver

Caregiver

Caregiver

SeniorCenter

SeniorCenter

Target New York, Georgia, and Virginia, along with North Carolina, for the elderly market

(Source: U.S. Census Bureau, U.S. Census 2000)

Target States Evaluation

17

Institutions For Elderly Elderly Population Median Income Rank Aggregation

Count Rank Count Rank Income Rank Aggre-gate

Overall rank

New York * 1,115 1 2,607,672 1 $55,401 3 5 1

Georgia 539 2 981,024 3 $50,549 4 9 2

North Carolina 516 3 1,139,052 2 $46,107 5 10 3

Virginia 498 4 940,557 4 $61,044 2 10 4

Maryland 295 8 679,565 6 $70,005 1 15 5

Tennessee 464 5 819,626 5 $43,662 7 17 6

South Carolina 357 6 596,295 7 $44,326 6 19 7

Kentucky 296 7 565,867 8 $41,763 8 23 8

West Virginia 62 9 285,067 9 $37,870 9 27 9

Target the six North Carolina counties with a high density of institutions for elderly

Institutions for Elderly density Map (NC)


Asheville

Charlotte

Greensboro

RaleighBurlingtonWinston-Salem

21 ~ 623

16 ~ 20

11 ~ 15

6 ~ 10

0 ~ 5

18

In Georgia, target Atlanta and the surrounding areas which have the highest density of elderly institutions

Institutions for Elderly density Map (Georgia)


Atlanta

21 ~ 623

16 ~ 20

11 ~ 15

6 ~ 10

0 ~ 5

19

In Virginia, target Washington DC, Richmond, and Virginia beach

Institutions for Elderly density map (Virginia & D.C.)


Washington

Richmond

Virginia Beach

21 ~ 623

16 ~ 20

11 ~ 15

6 ~ 10

0 ~ 5

20

Utilize senior centers and institutions in the target area to increase product awareness and overall sales

Recommendation for Elderly population

Focus on target area in each state

Utilize senior centers and institutions to reach out to elderly more directly

11

22

- Senior centers are a good starting point to start reaching out to both the elderly and the caregivers - Institutions are being approached by competitors. So, winning over the institutions will be key to gaining market share.

- Target Counties with high density (> 20) of institutions and senior centers- North Carolina: 6 major cities- Georgia: Atlanta Metropolis- Virginia: Washington DC, Richmond, and Virginia Beach

21

Product Offering Strategy

Caregivers of Elderly and Disabled• Keep current product offering• Customizable sensor list is the preferred shopping experience

Elderly• Primary concerns for self are falls and access to emergency

care• Provide a product offering which includes the PERS system and

a fall sensor

Retirement Communities• Provide discount options to promote higher purchase volumes• Provide a VCM-”lite” option

23

Each of the 3 market segments should be provided customized product offerings to maximize the value from each segment




a fall sensor


24


25

The current product offering for the caregivers of the developmentally disabled and elderly is appropriately structured and should be continued going forward

Going Forward

Continue offeringproducts as lists.

Emphasize SimplyHome’s personalized

approach.

What we learned• Caregivers prefer the ability to select an individualized set of devices and do not value the convenience of picking a bundle.• Shopping for safety devices is an emotional experience, in which a personal approach makes the buyer feel more confident in their investment.

One of the biggest concerns for caregiver families was the reluc-tant behavior of the elderly to reveal their health condition

One of the biggest concerns for caregiver families was the reluc-tant behavior of the elderly to reveal their health condition

This concern could be addressed by Virtual Care Management and Online Monitoring

This concern could be addressed by Virtual Care Management and Online Monitoring

Caregivers identified these products as having the highest value to them: (In this order)

1. Fall Sensors1. Fall Sensors 2. Stove Sensor2. Stove Sensor 3. PERS system3. PERS system

26

SimplyHome should target the caregivers of the elderly by providing a solution to the fear of falls and the concern of handling electronic appliances




a fall sensor


27


The primary concerns of the elderly:• Falls• Access to emergency services

Concerns unacknowledged by the elderly but important to caregivers:• Forgetting• Missing medication• Wandering• General health situation

28

SimplyHome should target the elderly who are buying the product for themselves by providing a solution to the fear of falls

Of the elderly, 89% are concerned about falls; one-third about forgetting; 11% about missing daily medication

29

PERS with a fall sensor would be a very attractive product offering for the elderly

PERS with a fall sensor would be a very attractive product offering for the elderly

Daily concerns of the elderly

Wandering/DailyRoutine Change

Daily Medication

Forgetting

Falling

0 1 2 3 4 5 6 7 8 9

No. of Responses

29

More than 33%of adults 65 and older fall each year in the

United States

Sources: Focus Group Interview & Center for Disease Control and Prevention

Among older adults, falls are the leading cause of

injury deaths




a fall sensor


30


Virtual Care Manager “lite”

Virtual Care Manager “lite”

Technology

Helps keep res-idents in IL

longer

Helps keep res-idents in IL

longer

External resource to people on wait-

ing list

External resource to people on wait-

ing list

Pay per room along with volume

discounts

Pay per room along with volume

discounts

Monthly pay-ments, no contract

basis

Monthly pay-ments, no contract

basis

31

When targeting institutions, technology must be carefully packaged to provide most value

Institutions withlimited long-term

care spots

Institutions withlimited long-term

care spots

Nearby naturallyoccurring

retirementcommunities

Nearby naturallyoccurring

retirementcommunities

States withpending laws thatbridge institution

& community

States withpending laws thatbridge institution

& community

NichesNiches

Age of facility: Institutions that are new, developing or well established (15+ years w/reserves)

Age of facility: Institutions that are new, developing or well established (15+ years w/reserves)

Institutions that offer single family, independent living

32

Institutions with specific attributes are more attractive potential customers

Retirement community waiting lists

Ability to track resident progress and trends

Earlier detection of disease

Evidence to support resident moves

• Reports provide pattern recognition as well as physical data

• Allows residents to remain in independent living longer

Virtual care manager “lite” should be the primary product offering for institutions

33

Institution NeedsInstitution Needs VCM “lite” benefitsVCM “lite” benefits

More efficient use of long-term facilities

Resident NeedsResident Needs

34

Virtual care manager “lite” would benefit residents as well

Ability to remain in independent living longer

Feedback for caregivers

• Stove monitoring• Support for spouses with a disease• Lower expenses

• Reports to provide to children and family

VCM “lite” benefitsVCM “lite” benefits

Pricing Strategy

$0

$50

$100

$150

$200

$250

Caregivers Elderly Disabled Quietcare Gold

Pricing

Price/month

36

Value for the service varied across different customer segments but the consensus data shows that SimplyHome’s current offering is underpriced

(Quietcare Source: http://www.totalhomesecurity.com/quiet-care/)

Elderly Disabled Caregivers of Elderly

Fall Sensors

Stove Sensors

PERS

Online

Virtual Mgmt

Excited

Average

Might not buy

Good

37

All the 3 segments rated certain products to be ‘premium’ for which SimplyHome should charge a premium price

Scorecard for SimplyHome Products

Not bad

Stove

Senso

r

Fall S

ensor

Micr

owave Se

nsor

Incontinence

Senso

r

PERS Syst

em0

20

40

60

80

100

120

MaximumAverageMinimum

38

Caregivers would pay as high as $75/month for a fall sensor and $50/month for a stove sensor

Additional Sensor Values

Elderly care facilities would pay a premium over current prices

39

• $150 ~ $240

• Up to $300 would be reasonable

Price Range

CommentsThe Cedars

• $150 ~ $200

• Money saved from nurse giving medication reminders• $150 to $200/day to stay in an assisted living facility• A smaller installation fee with higher monthly fees

Price RangeGalloway

Ridge

• $70 ~ $100

• Residents here could afford up to $100/month• Up front investments are not a deterrent to them• Residents have to pay more to go to another long-term care facility ($88 vs. $283/day)

Price RangeCarol

Woods

Comments

Comments

40

Level % of Homes w/ technology

# of Homes

InstallationDiscount

Monthly Fee Discount

MonthlyRevenue

(with)

Monthly Revenue(w/out)

1 <20% <60 None None $4,200 $4,200

2 20-50% 60 – 150 $880 (20% off) None $6,300 $6,300

3 50-80% 150 – 240 $550 (50% off) 5% off $11,970 $12,600

4 >80% >240 $220 (80% off) 15% off $14,280 $16,800

Institutions prefer a particular set of payment options

Volume discounts (Sample - The Cedars, approx. 300 IL homes)

Pay-per-room with no minimum installation

Monthly fees passed on to residents with installation covered by institution11

22

33

Increase monthly subscription fee until the initial device cost is recovered

No upfront device and installation costs

41

Customers in the non-facility segments should be offered the option of increasing the monthly price to cover the high upfront costs

42

Directly target consumers utilizing local support organizations and adjust the product offering to reflect the true value to consumers

• Conducted interviews and focus groups to identify product offering and pricing strategies• Performed secondary research to determine target market areas

Project Overview

Target Market Areas• ARC chapters and senior centers can be utilized to increase product awareness with caregivers and elderly by conducting information sessions

Offering• Focus a different product offering to caregivers, elderly, and institutions

Pricing • Increase monthly prices and charge extra for premium products• Provide institutions with volume discounts

Recommendation

Next Steps

Conduct a quantitativ

e pricing and

costing analysis

Build a strategic

sales force growth strategy

43

Appendix

APPENDIX

Appendix Contents

APPENDIX45

Existing Customer Responses (Slide 46 – 49)

Existing Customer Testimonials (47)

Purchase Experience Observations (49)

Elderly Fall Sensor Focus Group Info (Slide 55)

Elderly Focus Group Response Data (Slides 56 – 59)

Willingness to Receive the Product (56) Independent Living Focus (57)

Technology Capabilities (58) Buying Preferences (59)

Costs Comparisons (Slides 60 – 61)

In-home Nursing (60) Assisted Living Nursing Care (61)

Concerns of Existing Customers (46)

General Response about products (48)

Thought about Premium products (50) Thought about product price (51-52)

Needs for new products offering (53-54)

APPENDIX

Interviews with existing customers echoed the concerns of the focus group participants

Peace of mind1

Independence2

Safety3

Convenience – easy, helpful4

Price - savings5

Feel comfortable contacting SH6

Double-checking safeguard7

APPENDIX

Similarly, safety and fear of unpredictable events are current customers’ primary drivers of seeking out SimplyHome’s technology

Before the SH system, one autistic child would run away 4-5 times a month, which was very dangerous since the child is non-verbal. Now with SimplyHome, the number of times is down to 1.

47

The mother of an elderly woman had fallen and laid on the floor through the entire night. The elderly woman was afraid the same thing would happen to her.

APPENDIX

Existing customers find the SH System very useful and mostly not intrusive

All respondents found the system useful Majority found the system

not intrusive, except for a small percentage of mentally

disabled customers

APPENDIX

SimplyHome existing Customers also prefer buying services through individual lists instead of bundles

Lists Bundles

More customizable

More personal

Promotes awareness of all

products

Convenient

Price-savings

49

APPENDIX

SimplyHome customers value premium features highly

OnlineMonitoring

StoveSensor

MedicationDispensers

Bed/ChairPressure pads

Valuable,NecessaryFeatures

APPENDIX

Some customers are not price-sensitive because they do not pay for the services directly

Technology is either privately funded or paid for by other entities

CommuniCare

Counties

ARC

Medicare

APPENDIX

Some customers find the initial cost too high

One customer found the initial equipment somewhat pricey although the monthly payments are not bad at all.

APPENDIX

SH can provide more value to existing customers by developing new products and addressing complaints

UnmetNeeds

Complaints

Suggestions

• Sleep apnea suction sensor

• Turn-around time when equipment malfunctions• Lag time of 3-4 minutes after sensor goes off• Depending on location, sometimes can’t hear notifications

• Change website to reflect not only elderly but also developmentally disabled customers• Try to find a way to work with Medicaid/Medicare• Specifically target the MRDD population, especially since there aren’t a lot of resources available to them

APPENDIX

Common developmental disabilities that have been served by SimplyHome technology

Bipolar disorder1

Defiant personality disorder2

Developmental-cognitive disorders3

Schizophrenia4

Cerebral palsy5

Autism6

Other mental disorders7

APPENDIX

The elderly should be approached with a product offering which includes the PERS system and fall sensor when they are making purchasing decisions for themselves

The PERS system and pendant answer the

concerns of falls and accessibility

to emergency services.

Elderly making their own

purchasing decisions are typically living independently and don’t see

the extra value of the additional

sensors for themselves.

The Focus Group participants were excited

about the opportunity of a

fall sensor.

If SH comes out with a fall

sensor, it can charge a premium

monthly fee, as the product is

highly valued by the potential customers.

55

APPENDIX

Only 11% of the elderly said they would be offended if their caregivers gifted this product to them

56

(Source: Focus Group with elderly with 9 participants)

How many of you would be offended if your loved ones gifted you with product/technology such as SimplyHome's?

APPENDIX

78% of the elderly chose living independently at home as their primary option

57


How important is it for you that you live independently (without moving to an assisted living facility or a senior living facility or a home)?

APPENDIX

Everyone claimed that they were quite comfortable using technology

58


How many of you say you are not comfortable with technology/few basic devices?

APPENDIX

A majority of the elderly expect their caregivers to buy this product for them

59


How many of you would buy the products such SH's by yourself and how many of you expect your loved ones will buy these products for you?

APPENDIX

High Cost of substitutes like private nurse care and nursing homes help SimplyHome offer its services at a higher price

Substitutes Private Nurses Elderly Care Institutions

Cost @$20/month it comes up to $175,000/year

$5000-$8000/month

Disadvantages Skeptical about trust and the fit issue

Guilt of not being able to take care of them

60

APPENDIX

Assisted living facilities indicated the value of the product which included a VCM-”lite” option was between $150-3000

No of Care Hours/day 2 4 8 12 16 20 24

Cost for Private Nursing Care at Home

Cost per (@20/hr)

Day $40 $80 $160 $240 $320 $400 $480

Month $480 $960 $1,920 $2,880 $3,840 $4,800 $5,760

Year $14,600$29,200 $58,400 $87,600 $116,800 $146,000 $175,200

Cost per (@30/hr)

Day $60 $120 $240 $360 $480 $600 $720

Month $720$3,600 $7,200 $10,800 $14,400 $18,000 $21,600

Year $21,900$43,800 $87,600 $131,400 $175,200 $219,000 $262,800

Cost per (@40/hr)

Day $80 $160 $320 $480 $640 $800 $960

Month $960$4,800 $9,600 $14,400 $19,200 $24,000 $28,800

Year $29,200$58,400 $116,800 $175,200 $233,600 $292,000 $350,400

61

Cost of Nursing care for 2~24 hours/day

Documents

Product Offering Strategy UNC Kenan-Flagler Business School STAR Project team April 16 th, 2010