Brookdale’s Sales Transformation and the ‘Madness’ of Typical Senior Living Practices

Brookdale Senior Living (NYSE: BKD) is undergoing a “sales transformation,” CEO Cindy Baier said during the company’s Q2 2021 earnings call last week.

This struck me as a dramatic statement, and Baier went on to say that the sales transformation is one three key pillars of the company’s pandemic recovery plan.

So, I was surprised that no analysts on the call asked for more specific information about what this sales transformation involves.

Upon further reflection, I realized that Brookdale is not the only provider to be revamping its sales practices, and I believe that the industry could be at a turning point with regard to sales, for several reasons:

• Pandemic pressures have forced new sales approaches and highlighted shortcomings in typical practices
• Investors and owners have largely disregarded how senior living sales are conducted, but some are paying closer attention and recognizing a major opportunity to drive performance
• Large providers such as Brookdale, Discovery Senior Living and Capital Senior Living (NYSE: CSU) are among those that are revamping their approach to sales

‘No one cared’

David Smith, the co-founder and chairman of senior living sales enablement platform Sherpa, was not surprised by the analysts’ apparent lack of interest in Brookdale’s sales transformation.

For about 30 years, he has observed that analysts, investors and owners overlook opportunities to improve the senior living sales process, he told me. He believes that they are not all that interested in driving occupancy beyond the threshold to meet financial obligations.

“My hypothesis is that as long as at the property level you were able to pay the rent and management fee, no one cared about the last 10%,” he said.

The pandemic has started to make a difference, in his view. With occupancy at historically low levels, margins down, financial covenants breached and the entire industry in lease-up, capital providers are more closely scrutinizing how sales are conducted.

For instance, Sherpa recently was contacted by a real estate investment trust (REIT), the company’s Co-Founder and President Alex Fisher told me this week.

Sherpa did a data analysis with the REIT, comparing the performance of their top operators against Sherpa’s top clients. The data showed significant better results from top Sherpa performers. Even though the data is compelling, REIT leaders are sensitive about not dictating how their operators run their businesses, Fisher said.

This is particularly the case with operators in triple-net leases. The growth of RIDEA structures makes it easier for REITs to influence operations, and is another reason why capital providers are beginning to recognize sales shortcomings and consider investments to improve, Smith said.

Investing in a customer relationship management platform (CRM) like Sherpa’s is not what he is pushing, he was quick to say. The primary investment needs to be in hiring enough sales professionals and in changing the senior living sales paradigm, he argued.

His approach, dubbed Prospect-Centered Selling, is explained in a book that was just published in June 2021, titled “It’s About Time!” The title emphasizes the key concept: Move-ins increase when sales professionals spend more time with prospects.

The prevailing approach to senior living sales does not reward time spent with prospects and instead focuses on other metrics. For instance, in earnings calls for REITs and operating companies like Brookdale, there is routinely a focus on the volume of sales leads coming in, which is considered indicative of future move-in activity.

“From the investor perspective, from the CFO perspective, the high-value lead is the one that’s going to close quickly, speed-to-lead,” Smith said. “That’s the worst lead; it has the worst length of stay. And so the value of the lead in terms of revenue is the worst, it has the highest impact on disrupting your staff.”

Furthermore, because leads that close quickly tend to be higher-acuity residents, they make other sales harder, because the atmosphere of the community starts to feel more medicalized, Fisher pointed out.

Whether or not the Prospect-Centered Selling method is the solution, it seems obvious to me that the usual senior living sales process is indeed broken — that is apparent in various articles that we have run over the years on SHN, and in every mystery shop that I’ve done in the course of reporting stories. Unanswered calls and sales pros who barely ask a question before trying to sell me on a community are typical in my experience, and I’m not alone, as a recent Bild & Co. mystery shop showed:

• 43% of sales counselors listed community amenities with no association to caller’s need
• 29% of counselors offered no information on their communities
• 64% of counselors showed no empathy or concern for caller’s situation

Statistics like these no longer surprise me, so it is confounding that analysts, investors and owners are not clamoring for more information about how occupancy could be boosted by improvements in the sales process.

“I want analysts to say … what’s the formula? How many leads is the salesperson working, and are they dedicating less than an hour per prospect worked on average, or more than an hour?” Fisher said. “Because we know that plus-two hours per prospect will increase your conversions anywhere from 36% to 42%. That data is there. So this is the madness. Stop the madness.”

New approaches

The heartening news is that some large providers are taking on sales transformations.

Speaking with my colleague Tim Regan after Brookdale’s earnings call last week, Baier provided some additional details on what the company is doing. And Brookdale Senior VP of Sales Rick Wigginton also provided some insights when he spoke at the Senior Housing News Sales & Marketing Summit earlier this year. Among the takeaways:

• Brookdale President of Senior Living Cindy Kent is deploying her Six Sigma skills, with a team reviewing the entire sales process and identifying areas to work on
• The sales process has been “streamlined,” Baier said, with a strong emphasis on local outreach
• Nearly a fifth of Brookdale’s sales hires in 2020 were returning to the company after leaving it in the past, Wigginton said, and employees are being trained as “corporate athletes” for the long-haul
• Brookdale is getting creative in how to engage with referral sources, such as by offering virtual continuing education courses for medical professionals

The efforts to engage with medical referral partners makes sense given that Brookdale is focused on growing its assisted living and memory care segments. The company achieved 110 basis points of sequential occupancy growth in this part of the portfolio, outpacing industry averages, last quarter.

As time passes, length-of-stay will be an indicator of whether Brookdale is focused on speed-to-lead to capture high-acuity residents with urgent needs, Smith noted. This can be a viable market niche to serve, but he thinks that it is not a necessity to go after this demographic.

“The vast majority of people that could benefit from assisted living are higher functioning, and [many providers] just don’t have the ability to convert them before the crisis happens,” he said.

Another publicly traded provider, Capital Senior Living (NYSE: CSU), also has focused on evolving its sales processes as part of an operational turnaround.

Some of the changes were structural, such as eliminating regional sales managers and altering the reporting structure so that sales would no longer be siloed from operations, and sales teams would have more direct lines of communication with executive directors.

Such changes would benefit many more providers, in Smith’s view. Having “dual lines of authority” is commonplace, in which budgetary authority rests with different people than those — from executive directors up to regional leaders — who bear the responsibility for driving occupancy.

Such misalignment can lead to budgetary misallocations; for instance, top operational leaders have an ingrained assumption that sales conversion rates can’t be changed, and therefore they allocate “way excessive amounts of money” in marketing to glean more leads, Smith and Fisher said.

Discovery Senior Living is another large provider that has recently made big moves in its approach to sales, launching a centralized call center staffed entirely by in-house employees rather than a third party, as is more typical. Initial data showed that inquiry-to-tour conversions increased by 10% after the center came online. The goal is to reach a 50% inquiry-to-tour ratio, Discovery CEO Richard Hutchinson told me during an SHN+ TALKS.

Smith is cautious on call centers, noting that it’s a difficult format in which to forge an emotional connection with a prospect during the all-important initial contact. But he credits Discovery for taking an in-house approach.

“I remember Emeritus, years ago, under Jayne Sallerson, did it that way,” he said. “It’s more effective if your culture is brought into the call centers so that the sales approach and the sales culture reflects the building and the community and the brand.”

Ultimately, what may be needed is an industry-wide appreciation of the fact that senior living is a unique product that demands a unique sales process.

On the low-acuity side of the spectrum, the sales approach in senior living might be too similar to the hotel industry, where brands resonate strongly with consumers and therefore marketing becomes paramount to driving sales, Smith said.

On the high-acuity side of the spectrum, senior living sales might be too influenced by the skilled nursing world, where “selling” is frowned upon given the needs-based nature of the services, Fisher suggested.

“This is a complex, emotional, multi-step type of sale,” Fisher said, of senior living. “Investors need to start believing that we need a sales approach that actually addresses the complexity of the sale, in order for us to capture more than the thin slice … that we’re capturing — because that’s not going to be enough any more to get us to healthy margins and high occupancy.”