Joint Ventures in Senior Care Industry: Success of HISC
According to Nation Bureau of Statistics of China, as of the end of 2016, there is a total of 2.3 billion people aged 60 and over and estimating 4.8 billion by 2050. In 2016, there were approximately 4 million people within the old age group who are disabled and handicapped, accounted for 18.3% of the population.
The surging growth of the old age population has slowly placed a burden on the government of China, initiating development in the elderly care services and industry.
The growing population of old age also signifies a market potential, and a business opportunity. Causing several foreign caregiving or retirement brands to enter the Chinese market within the past few years.
What is HISC?
Home Instead Senior Care (HISC) is a well-known homecare services established by Paul Hogan and Lori Hogan in 1994, located in Omaha in Nebraska, US.
Within 20 years, through joint venture with CCPG, HISC now acquired over 1100 locations in 12 countries, with 650,000 caregivers, providing 5 million hours of non-medical services, total revenue of over 10 billion USD.
The success from HISC is owed to the expansion plan example from another internationally well-known elderly care service brand known as Right at Home.
Right at Home first entered the Chinese market in 2011 in joint ventured with the Beijing CAJ Senior Care Limited Company, which was established in 2009. Right at Home established 15 locations all in the first and second tier regions of China, providing professional nursing services.
Similarly, HISC signed an operating agreement with CCPG (Chang Cheng Property Group) in 2013, joint ventured with CCPG, establishing its first location in central Shen Zhen, officially entering the competition in China. Fortunately, with the success of HISC, HISC opened its second location in Wu Han in 2015.
To focus on the expansion of HISC into China, let’s use the concept of 4P and SWOT to analyze the advantages and disadvantages the brands will experience in the Chinese market.
Concept of 4P
HISC mainly provides three different senior care services, companion service, personal care and medical care services, which are targeted towards clients diagnosed with dementia related illness.
Accommodation are made to each new client, by first undergoing consultation with a customer specialist to find the most suitable caregiver for the clients need. For example, a middle-aged woman from China who is passionate about singing was matched with a caregiver who also excels in singing, to sing along with the client.
The selling point of HISC is their focus on personalized services and caregivers to provide clients with a one-of-a-kind experience while establish relationship and connection.
For clients who experience memory deficit, HISC caregivers organizes an journal for the client for their day to day experience, giving them the opportunities to look back into their past, while allowing the caregivers to quickly understand the client better to provide greater service.
The average hourly fee for HISC in China is 50 RMB per hour, according to the services provided, the lowest monthly expense starts at 3980 RMB for day time care services, and over 10,000 RMB for 24 hours services. However, in United States, the average hourly fee is $19.50 on average, special services for $20 – $23 per hour, and a minimum of three hours per service requests.
HISC in China have adjusted the services fees accordingly to the development of the economy and the average population. By doing this, HISC is able to avoid the high price tag that the population may steer away from while increasing brand reputation.
CCPG is able to actively promote and gain access to community resources for HISC, and adjustably operate under the true demands of Chinese clients.
The benefits of joint venture are quite apparent for both parties in this case, factors like management, services, operating methods and strategies from oversea is able to lessen the burden of current senior care development in China. Also, in terms of marketing strategies, employee training, shortening the time needed for business development and growth.
The current obstacle faced by HISC is to reach out to their target audience, and notify these audiences of the services they need are available at their fingertips.
Despite the marketing focus on Weibo and Wechat for HISC, the content published have little impact for the organization. Attaining 200,000 followers, but a shortage in engagement and shares.
The target audience of HISC in China is not the ones who need to service, but the family members or guardians who are able to uphold the expense for them. How to attract their target audience? HISC may take a look at the “Ai Nong” as a reference for marketing.
Ai Nong is a senior care service, which provides housekeeping and caregiving services on their own platform. Previously before 2017, Ai Nong focused on offline brand exposure and advertising through active engagement in the senior care community, non-profit organizations, events, and other type of interactions, whereas their online marketing consists of work of SEM, and sponsored advertisements.
Taking a look at the financial report by Ai Nong, the three major profitable services from their organization includes, caregiving, caretaking, and training, but nearly 40% of the revenue is generated from senior care services.
There are two contributing reason for the results. First, the lack of online presence, Ai Nong have only joined Weibo on March of 2017, Wechat official account in the April of 2017, therefore its extremely difficult to be apparent among all other organizations. Another cause for the results is the lack of large, creative online and offline functions to attract their targeted audiences.
In United states, the average age of caregivers is aged between 45 to 55 years old, and average client age is between 82 to 85 years old with 90% of the clients being females.
However, in China, the qualifications for caregivers at HISC includes the following, applicant must be between age 22 to 60, no medical backgrounds required, a bachelor’s degree needed. Once the candidate has passed the interview, HISC will provide the necessary training attained from the U.S. to elevate the skills of the caregivers, including language courses, taking up approximately one week for the complete training process.
It is crucial for caregivers to be able to adapt and assimilate the knowledge and practice from the training, in order for the perform with quality and efficiency. For example, an professional HISC caregiver can help an handicapped client to urinate, clean, make the bed and more within only 10 minutes.
Physical and psychological care
The difference between caregivers at HISC and Housekeepers is the difference in services provided for any handicapped and disabled clients. Especially for those suffering in dementia, to provide professional care to the client.
HISC are able to give clients full respect to all of their decisions, for example, clients who are handicapped who prefer to shower are given the options to privatize any body parts they wish to, rather than simply towel cleaning their body, to show respect for clients without harming their pride and dignity.
Adjusting to the cultural practices
Due to the cultural differences, Chinese households are quite resistant to door to door sales, as it frequently involves frauds and scams. To gain the trust of clients, HISC uses a referral system for potential clients, where HISC caregivers are first referred to any medical related practitioners to have practitioner refer to clients for a meeting and consultation. To closer connect with their audiences, HISC also have plans to provide free consultation to families.
High-end caregiving services can be quite lavish at times. The services provided by HISC often requires a higher financial status to support the expense. Unfortunately, the potential clients are scattered over the different regions of China. In order to be able to reach out to these audiences, location is a crucial factor in the decision of expansion to China. Locations target should be within the first-tier cities, which is more developed, to reach out to the audiences.
Senior care industry in China have only began slowly developing within the last few years, and the service and market development is still in its early stages.
Businesses who foresee the potential in this industry are faced with several problems, such as lack of experience, training, management, and branding. Brand reputation is one of the most important factor in the industry, for businesses who are planning to enter the industry will have a difficult time achieving great results in a short time span, as brand reputation requires time to accumulate.
However, with success of joint venture, the interest for the industry have peak once again. Additionally, with the growing numbers of handicapped elders and the burdens of the younger generation on senior care, caregiving services will be the first choice for most family households
The conservative mindset of elderly induces a preference for retirement at home. With the traditional culture, family and home are their roots, leaving home signifies independency and separation from their roots, which is why most seniors resist against retirement homes.
What most seniors need is improvement to their current lifestyle and environment rather than a complete change in their environment. Providing the medical caregiving support needed under their current condition without disrupting their habitual lifestyle, and HISC is able to achieve this goal by providing at home services up to 24 hours, while allowing client to feel as life has only gotten better and not changed.
In 2013, The government of China have noted several improvements plans toward the senior care industry, such as the taxing of oversea senior care organizations in China while lowering the requirements for oversea investments to encourage activities within the industry.
(Chart above displays the set of China’s implementation plans to move forward with senior care from 2010 2017)
In the current prospect of the senior care industry, there is a lack of quality service due to low requirements to housekeeping providers, which occupies a large sector of the senior care industry, affecting the prospect of the entire industry.
The role of HISC in the industry is specialized care and services, which can work in collaboration with housekeeping services. Caregiving services from HISC is focused on specialized medical care and personal care, whereas housekeeping services is able to maintain overall lifestyle and environment.
In China, there exist countless organization in the senior care industry, also with their own unique marketing and services.
For example, Brightown is the classic standard organization cater to handicapped, disabled, or dementia related clients. Brightown provides professional dementia training to caregivers and also provides 24 hours services, personal housekeeper to clients. Residents of Brightown also have the privilege of having a 24 hour housekeeper, including regular health check-ups. All considered, Brightown is one of the high-end and high-quality service providers within the industry.
Another several example is Finetree, who have received B-series finance targets post-procedural, stroke, bedridden clients, providing medical consultation, treatment, medication and others.
iZhaohu, who have received A-series finance while provide offline caregiving services using technology to collect data and analyze caregiving process.
Xiao Bo who have received pre-A series finance of 300 million dollars in 2017, established their own set of unique offline professional caregiving and housekeeping services, recognized by many in the same industry.
Despite the variety in the industry, for a population like China, there is still a lack in numbers, variety, services, and details to meet the demands of the population. Therefore, organizations that are able to grasp the quality caregivers and resources are the ones who hold the advantage within the industry, especially in the current prospect, such as HISC.
Avoid Economic Risks
With over 20 years of experiences, the innovative services and business model of HISC have been beneficial to the new emerging Chinese market. However, due to the cultural difference in comparison to other markets, the market may require several more years to fully adapt to the “outsiders”
In all cases of partnership, especially oversea brands and organizations, first party are required to regularly evaluate service quality, while clearly stating any necessary responsibilities, consequences within the contract can withheld a safer solution to bring in a steady developing party.
According to some of the articles by Fairfax in 2017, RFG, which is the top franchising organization in Australia led hundreds of franchises face against bankruptcies, due to their competitive and cruel business model.
There are two sides to every decisions, partnership and joint venture may not be the solution for all businesses. Organizations targeting the Chinese market must carefully and comprehensively understand all aspects of the Chinese market to, without a doubt, benefit.