Customer Loyalty: A Strategic Opportunity in Challenging Economic Times

The health care industry is facing economic headwinds: surging inflation, pandemic-driven staffing shortages and rising competition from novel disrupters. About half of all hospitals reported a loss in 2022, according to Kaufman Hall, and the outlook for 2023 isn’t much better.

Today’s conditions demand a new business model, one that centers on customers first—not products or services.

For decades, health care leaders have gauged success mainly by volume—the number of surgeries, treatments and procedures delivered. Health systems compete for market share by expanding the scope of those offerings, innovating new ones and improving quality. The thinking is: build out capabilities and demonstrate excellence; more high-value patients—and revenue—will follow.

But that approach fails to consider the primary sources of growth and revenue: customers and their buying behaviors. Customers ultimately determine how health care is consumed. Even the most comprehensive System of CARE (Clinical Alignment and Resource Effectiveness) will be ineffective and wasteful if it fails to deliver what customers want.

Customer-based strategies should focus on creating longitudinal and loyal relationships and earning the right to serve customers in a comprehensive way. This approach not only has a dramatic positive financial impact but also delivers more streamlined and efficient care.

The goal is to better understand customers, their buying behaviors and their experiences in the health system. How do patients end up with one provider versus another? What influences that behavior—brand, referral, health plan, or online or word-of-mouth research? What are the barriers and pain points customers face while seeking care? What keeps people engaged in their own health care, encouraging them to find care in the right health care facilities at the right time?

This customer-centric business model is sweeping across other industries, and health care is ripe for transformation as well. But many health institutions are embracing this change slowly and timidly because they are not aware of the rapid financial results it can generate.

Most health systems have already added new customer-related performance metrics and have begun offering virtual health services or hiring more customer service staff. But true customer transformation requires deeper, systemic changes.

Here are eight key elements of a customer-driven growth strategy.

1. Shift the success mindset from delivering optimal services to building a loyal and valuable customer base.
2. Recognize that market share and service mix alone are not sufficient as the primary goal. Growing the number of loyal and highly valuable customers who trust you with all of their needs year over year is the true North Star to achieve superior financial performance and outcomes.
3. View each customer as an investment. Elevate the importance of the customer’s long-term value to the business over any individual transaction.
4. Focus on metrics tied to customer actions—customer acquisition, retention, churn, lifetime value and share of wallet. Understand what drives each of these. Measure and track loyalty behaviors across your customer base.
5. Think cross-functionally—resolving a customer pain point often spans multiple touch points across disparate operational silos. Redesign and value creation must happen at the customer journey level, not at the silo level.
6. Recognize that customer experience strategy must be self-funding and is dependent on demonstrating early wins. Develop a strategy for incremental near-term wins achieved through insight into customer behaviors (revenue capture, cost elimination or both), which can then fund more innovative investments that introduce transformative customer experience elements.
7. Learn from disrupters. These competitors promise personalized patient experience and care access. They elevate convenience above all and focus on locking in customer relationships.
8. Wrap value-based care initiatives in customer-centric thinking to achieve both optimal financial results and patient engagement.

Today’s health systems are being asked to take on more risk, to keep patients healthier over time, while managing the most challenging economics they have ever experienced. Health systems can’t succeed if they don’t know their customers and earn their loyalty. Even those that get by today competing on high-value transactions alone will soon find themselves outgunned and locked out of relationships with customers in the market. A customer-first model is the most viable option for financial stability now and for long-term sustainability.