Boosting satisfaction in retirement villages: financial benefits 

Written By Michael Jeffrey
Boosting satisfaction in retirement villages: financial benefits

As the person at the helm of a retirement village, mastering the art of building great relationships with your residents is key. It sounds simple, but we all know it's anything but. Keeping everyone happy is a bit like juggling; it takes skill, patience, and sometimes, the ability to keep smiling even when you drop a ball or two.

Think of your retirement village as a little community with all sorts of personalities, needs, and expectations. From the age of the buildings to how much say everyone has in the Friday night drinks lineup, loads of things can affect how content people feel. And let's not forget the budget! It seems like there's always a tightrope to walk between making improvements and keeping the finances in check. It can get pretty overwhelming, right?

But here's the thing – the effort is totally worth it. Keeping your residents happy isn't just good for them; it's great for you and the village as a whole. Let's zoom out for a sec and look at the big picture. Sure, keeping residents happy is a big part of your job, but there's more to it, like making sure the place is spick and span, the money's being spent wisely, the staff are on their game, and the list goes on.

And then there's the bottom line. Whether you're running a for-profit gig or a not-for-profit, the powers that be are always keeping an eye on the finances. Occupancy is the name of the game here. Full houses and quick turnovers when a spot opens up mean the cash keeps flowing. Of course, this all assumes your prices are right and your village feels like somewhere people want to live.

So, how do you keep those occupancy rates up? By making sure your residents are more than just happy – they need to be your biggest fans! The good news is that creating a buzz of happiness around the place doesn't have to cost the earth.

Now you might be wondering, "How happy do my residents need to be to really make a difference?" and "How can I boost their happiness in a way that I can actually see and measure?" Well, have you ever heard of the Net Promoter Score (NPS)? It's this nifty little tool that might just be what you're looking for. Let's dive into that and see how it can help us make our little community the happiest place it can be.

What is NPS?

NPS is a metric that measures the willingness of customers to recommend a company or product to others. It is calculated by asking customers how likely they are to recommend a company on a scale of 0 to 10, and then subtracting the percentage of detractors (those who would not recommend the company) from the percentage of promoters (those who would).

Why NPS is important to measure in retirement villages

There are a number of reasons why NPS is important for you to measure in your retirement village. First, NPS is a key indicator of customer satisfaction. Customers who are satisfied with their experience are more likely to recommend the village to others, which can lead to increased occupancy rates. Second, NPS can help identify areas where you can improve the resident experience. By listening to the feedback of residents, you can make changes that will make your residents happier and more likely to stay. Third, NPS can be used to track the effectiveness of marketing and sales efforts. By measuring NPS over time, retirement villages can see how their efforts are impacting the perception of the village and the likelihood of customers to recommend it to others.

How do you calculate NPS?

To calculate the Net Promoter Score (NPS), start by surveying customers with the question, "On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?" Categorize the responses as Promoters (9-10), Passives (7-8), and Detractors (0-6). Then, subtract the percentage of Detractors from the percentage of Promoters. The result is the NPS, which can range from -100 to 100. Passives count towards the total number of respondents, thus affecting the percentages, but they do not directly affect the score.

Let’s work that through with a practical example you could use in your retirement village context.

A retirement village in Hobart conducted a survey of its residents to measure their NPS. The survey asked residents how likely they were to recommend the village to others on a scale of 0 to 10.

The results of the survey were as follows:

  • 50% of residents were promoters (score of 9 or 10)

  • 30% of residents were passives (score of 7 or 8)

  • 20% of residents were detractors (score of 0 to 6)

To calculate the NPS, the retirement village subtracted the percentage of detractors from the percentage of promoters:

NPS = 50% - 20% = 30%

This means that the retirement village had an NPS of 30%.

Working Example:

If the retirement village has 100 residents, then:

  • 50 promoters

  • 30 passives

  • 20 detractors

NPS = 50 - 20 = 30%

This means that 30% of the residents are promoters who are likely to recommend the village to others. To look at it in a negative way, 70% of your residents are not actively providing word of mouth recommendations and 20% are actively working against your sales and marketing efforts in the way they talk about the village to others. Think about the impact the satisfaction of your residents will have on the reputation in the wider community and the obstacles you have to overcome if the NPS is low or negative.

What does the research say?

  • Residents are 4 times more likely to recommend your village to others if they are very satisfied (a promoter) than just satisfied (passive) with the village. (MA Wylde,2009) 

  • Customer satisfaction is found to have a significant positive effect on profitability in various industries. (Yeung, Matthew & Ennew, Christine, 2001)

  • In assisted living or a serviced apartment environment where continuum of care is offered, socio psychological factors had the strongest influence on resident satisfaction, followed by cost and value, medical services, availability of activities, food and beverage services, design, rooms, management and staff, location, and spiritual environment. The study results further indicated that resident satisfaction had a positive impact on WOM and satisfaction with life. (Suja Chaulagain, Jianwen Li, Abraham Pizam, 2022)

What Promoters and Detractors are likely to feel in your retirement Village

A recent study in Australia by Ferguson G, ’t Hart B, Shabnam S, 2023 showed that those residents who were promoters (very satisfied) were more likely to

  •  feel grateful for a service that exceeds their purchase expectations

  •  feel connected to others inside

  •  or  outside the lifestyle village

  •  feel ‘heard’ by the service provider 

  • feel that they have retained their independence.

  • Would recommend the village to others

The same study showed that those residents who were dissatisfied describe their experience as

  • broken promises, specifically those made at the time of purchase 

  • not feeling ‘connected’ to others inside the village

  • feeling unheard or ignored by the service provider 

  • the service not meeting their needs

  • Would not recommend the village to others

These findings suggest that NPS is a valuable metric for retirement villages in Australia to track and improve. By focusing on improving customer satisfaction and loyalty, retirement villages can increase their chances of success.

Implications of the research

  1.  Focus Beyond "Satisfied" to "Very Satisfied": Merely satisfied residents might remain with your village but are less likely to become enthusiastic advocates. Initiatives should target "wowing" residents to achieve the highest levels of satisfaction.

  2. Word-of-Mouth is Directly Tied to Satisfaction: Studies highlight that residents learn about a village through existing residents as village tenures increase. This emphasizes positive word-of-mouth driven by genuine satisfaction as a primary growth engine.

  3. Attributes Beyond the Physical Matter: High satisfaction was influenced more by the community's policies, personnel, programming, and services than the physical structure. This reinforces focusing on the lived-in experience, not just amenities.

  4. NPS as a Diagnostic Tool: Use the NPS question ("How likely are you to recommend...") as a starting point. More important is to follow up and uncover the "why" behind the scores for targeted improvements.

  5. Long-Term Resident Experience is Key: The study's focus on resident referrals highlights the importance of a resident-centric culture across the entire resident lifespan,  not just during the sales stage.

By systematically measuring resident satisfaction and using the information to drive improvements, you can create a positive and fulfilling living environment for your residents, leading to increased satisfaction, loyalty, and a thriving retirement community.

 So let's explore the impact NPS can have on your revenues..

Further evidence of NPS impact on sales

  • Research shows that NPS correlates with organic growth rates among competitors, with NPS leaders outperforming their peers by a factor greater than two times 1 2.

  • Improving NPS can lead to increased revenue growth, as seen in examples like Dell, where converting detractors into promoters resulted in significant revenue increases.

  • Studies have shown that a 10+ increase in NPS score correlates with a 3.2% increase in upsell revenue, and a 7% increase in NPS equates to a 1% increase in overall revenue 4.

  • Additionally, following NPS best practices like surveying multiple times per year and closing the loop on feedback can enhance customer retention and reduce customer acquisition costs.

The Impact of Net Promoter Scores on revenues in Retirement Villages

In the context of retirement villages, a higher NPS can lead to higher occupancy rates in a number of ways. 

  1. Residents who are  very satisfied (promoters) with their experience are 4 times more likely to stay in the village and recommend it to others. High word of mouth referrals increases the number of potential buyers for a property when it comes on the market. Decreasing the length of time the property is on the market and puts upward pressure on the sale price. Both can have a significant impact on your bottom line.

  2. A high NPS can help retirement villages attract new residents by creating a positive reputation. 

  3. A high NPS can make it easier for retirement villages to raise rates and negotiate better contracts with vendors.

Based on the research highlighted above, it’s hard to know the specific impact improving NPS will have on occupancy rates. The actual impact of an increase in NPS on occupancy rates will vary depending on a number of factors, such as the size of the village, the location, and the competition. However, the evidence suggests that a higher NPS can lead to significant increases in occupancy rates.

How to calculate the impact of NPS on revenues

 Use this calculator to work out the additional revenues you can make from increasing your NPS. You will need to know a few things. Including

  1. The number of properties you have and the current vacancy rate over a year (approximately)

  2. Your DMF as a percentage. If you are not sure then leave it at 5%. It’s the industry average

  3. Add the average value of a property in your village. It doesn’t need to be exact. This is really just a guide to help determine the DMF figure

  4.  If the monthly fees and sinking fund fees are of interest to you then add those in. Otherwise reduce to $0.

  5. Now decrease or increase the average vacancy rate to get a sense of the impact on the revenues you can generate.

How can a retirement village manager improve their NPS?

There are a number of things that you can do to improve your NPS. Some of these things include:

  • Focusing on the resident experience: You should make sure that your residents are happy and satisfied with their experience. This can be done by providing high-quality care and services, creating a welcoming and supportive community, and listening to the feedback of residents.

  • Communicating with residents: Retirement villages should communicate regularly with your residents to keep them informed about what is happening in the village and to get their feedback. This can be done through newsletters, emails, town hall meetings and retirement village communication apps like Pluss Communities.

  • Recognising and rewarding employees: Retirement villages should recognise and reward their employees for their hard work and dedication. This can help to create a positive work environment and improve the quality of care and services that residents receive.

  • Using technology to improve the resident experience: Retirement villages can use technology to improve the resident experience in a number of ways. For example, through a platform like Pluss Communities they can use technology to:

  • Partnering with other organisations: Retirement villages can partner with other organisations to provide residents with access to a wider range of services and activities. This can help to create a more vibrant and engaging community.

In the context of a retirement village, NPS can be a valuable tool for understanding the resident experience and identifying areas for improvement.

For example, a retirement village with a high NPS might have residents who are:

  • Satisfied with the quality of care and services

  • Feel connected to the community

  • Feel safe and secure

  • Would recommend the village to others

On the other hand, a retirement village with a low NPS might have residents who are:

  • Dissatisfied with the quality of care and services

  • Feel isolated or lonely

  • Feel unsafe or insecure

  • Would not recommend the village to others

Use your NPS scores as a selling point

Once you have raised your NPS scores in your retirement village, you can use them as a selling point. Operators like Australian Unity, LDK, Aveo and Helping Hand have all reported on their NPS score in their annual reports over the years or mention it in their marketing efforts. A high NPS score communicates to potential buyers that they too are likely to be satisfied with living in your retirement village. If explained in the right way, it can give propsects peace of mind about their purchasing decision. If you are going to do this then make sure you have invested the time to record it accurately. You don’t want to damage your reputation by falsely reporting the results. learn more about the risks of getting it wrong and what to do to avoid, from the creators of the NPS system.

Research has shown a positive correlation between NPS and profitability. By focusing on improving the resident experience, you can enhance your NPS and reap the financial benefits. Implementing strategies to improve resident experience, such as conducting regular satisfaction surveys, acting on feedback, and creating a vibrant community, can lead to increased resident loyalty, positive word-of-mouth, and ultimately, a thriving and financially sustainable retirement village.

While NPS has been criticized for its limitations and potential for manipulation, it remains a valuable tool when used alongside other metrics to understand customer sentiment and drive improvements in customer experience. Ultimately, the true value of NPS lies not just in the numerical score but in the qualitative feedback it provides, guiding businesses to enhance relationships with customers and drive long-term success 5.



Citations:

  1. Anderson, E. W., Fornell, C., & Lehmann, D. R. (1994). Customer satisfaction, product quality, and profitability: Differences between goods and services. Marketing Science, 13(4), 348-370.

  2. Bolton, R. N., & Lemon, K. N. (1999). A Dynamic Model of Customers' Usage of Service: The Role of Satisfaction, Dissatisfaction, and Trust. Journal of Marketing Research, 36(2), 184-196.

  3. Property Council of Australia. (2020). Retirement Living Census.

  4. Australian Retirement Village Association. (2021). ARVA National Benchmarking Report.

  5. Ferguson G, ’t Hart B, Shabnam S. Satisfied versus dissatisfied: Experiences of retirement village living. Australas J Ageing. 2023; 42: 455-462. doi: 10.1111/ajag.13160

  6. WYLDE, M. A. et al. Satisfied Residents Won’t Recommend Your Community, But Very Satisfied Residents Will. Seniors Housing & Care Journal, [s. l.], v. 17, n. 1, p. 3–13, 2009. Disponível em: https://research.ebsco.com/linkprocessor/plink?id=65189f98-5f61-3ee9-9adb-44821cb720e5. Acesso em: 15 mar. 2024.

  7. Baehre, S., O’Dwyer, M., O’Malley, L. et al. The use of Net Promoter Score (NPS) to predict sales growth: insights from an empirical investigation. J. of the Acad. Mark. Sci. 50, 67–84 (2022). https://rdcu.be/dBm4P

  8. Mittal, V., Han, K., Frennea, C. et al. Customer satisfaction, loyalty behaviors, and firm financial performance: what 40 years of research tells us. Mark Lett 34, 171–187 (2023). https://doi.org/10.1007/s11002-023-09671-w

  9. Kennedy, David & Coates, Dominiek. (2008). Retirement Village Resident Satisfaction in Australia: A Qualitative Enquiry. Journal of Housing for the Elderly. 22. 311-334.

  10. Yeung, Matthew & Ennew, Christine. (2001). Measuring the impact of customer satisfaction on profitability: A sectoral analysis. Journal of Targeting, Measurement and Analysis for Marketing. 10. 106-116. 10.1057/palgrave.jt.5740038. 

  11. Chaulagain, S., Li, J. and Pizam, A. (2022), "What matters, and what matters most? Exploring resident satisfaction in continuing care retirement communities", International Journal of Contemporary Hospitality Management, Vol. 34 No. 7, pp. 2472-2495. https://doi.org/10.1108/IJCHM-09-2021-1105

Michael Jeffrey
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