They’re available, if you know the right consultant. If your sole interest is finding someone to lend you millions of dollars, a made to order market study could be just the thing. But, and it’s a big but, you could be missing a golden opportunity to maximize your profit or to minimize your losses. Just because someone might be in a financial position to lend you lots of money doesn’t mean they’re especially smart. If that were the case no seniors housing project in history would ever have failed. More money than brains didn’t get to be a common saying because of the rarity of that combination of factors.
But how do you do that? How do you produce a market study that provides the answers your client wants? It’s surprisingly easy if you have limited professional ethics.
First of all a heavy reliance on gobbledygook helps. Interestingly, if you google gobbledygook, the fist definition that pops up is this:
language that is meaningless or is made unintelligible by excessive use of abstruse technical terms; nonsense. As in “reams of financial gobbledygook” (emphasis theirs)
Here’s a good example. A recent market study (not one of ours I hasten to add) outlined the occupational distribution of residents of the Primary Market Area (PMA) in question. A very formal table is included in the analysis and the section concludes with this statement: “The table reveals that A, B and C are the three top occupational fields within the PMA.”
The problem with the data and the analysis is that occupational characteristics are completely irrelevant from the perspective of market success, or lack thereof. So why include it? Because it lends an entirely illusory sense of ponderous respectability to the market study, that’s why.
Non-financial gobbledygook often appears in the form of psychographic analysis. Another definition for you:
Noun the study and classification of people according to their attitudes, aspirations, and other psychological criteria, especially in market research.
I would be the first, well, perhaps among the first, to respect the use of psychographics when planning, for example, enormous shopping centres. You would want to know if the neighbourhoods surrounding your intended site were more likely to prefer a Cabelo’s Outdoor store to a Saks Fifth Avenue store. Of course some mega malls include both but that is the point—we are talking about mega malls that attract thousands of shoppers every day. Your typical seniors housing project attracts around 5% of the 75+ population in a small radius around the building. Do you think the aspirations of neighbourhood residents will have much impact on the marketplace success of the building? If you answered no to this rhetorical question you get a gold star but again, the inclusion of psychographics in a market study lends an air of spurious respectability to the analysis (spurious respectability being one step up from ponderous respectability).
But let us move on from gobbledygook to unverified statistics. These appear surprisingly often in market studies. Here is how one of our competitors explains their use of unverified statistics:
Since this study was not intended to be used for court purposes or for arbitration, some of the information set out may not have been fully documented or confirmed by reference to primary sources.
Which specific information this disclaimer refers to is never indicated.
But let us move on to manipulating the competitive landscape as I like to call it. Every market study in the seniors housing industry must compare, however imperfectly, demand and supply. The larger the demand and the smaller the supply the better the prospects look for someone wanting a made to order study. Suppose there are 850 units in the Primary Market Area (PMA) but demand indicators suggest a current and future need for only 600. What to do? Simple—“adjust” the supply total by describing 250 units as uncompetitive for various reasons, all of them entirely up to the discretion of the market analyst.
You think I am exaggerating? I’m not. Shouldn’t someone care? They don’t. What they want is their $50 million loan. What about the lender though? Shouldn’t they care? You would think so but you would be wrong about that too.
All of this reminds me of my brief career in civil litigation, preparing income loss reports in cases of motor vehicle accidents (MVAs as we affectionately called them) and medical malpractice lawsuits. Unless you are in a no-fault auto insurance jurisdiction there are going to be two sides in these disputes, meaning expert reports are required of both sides, reports that are ruthlessly dissected by the other side. None of that happens in the seniors housing industry.
To be fair, at most times the landscape isn’t littered with bankrupt projects. But the landscape IS littered with projects that could be generating more revenue than they are and/or with investors who could be earning a higher return on their money in some other venture.
How to do it right is a whole other story that we will revisit in a later blog post.