Chapter 5 Case Study: Cocofump Hiyoshi
5.1 Company Background
Gakken, a publishing company of educational books and items, established a Cocofump as a department specializing elderly care service in 2004 in order to seize business opportunity of growing elderly care service business. Cofofump became one of the best-known residential service business for the elderly in Japan with annual revenue of about 10 billion JPY (2014) and company plans to increase its annual revenue to 50 billion JPY with 250 ~ 300 housings for 15,000 elderly people in 2020. Cocofump has 104 residential buildings for the elderly and each has different characteristics to satisfy different types of customers.
In order to respond the growing demand on elderly housing in Yokohama area, Hiyoshi building was founded in 2010 with a cooperation of Urban Renaissance Agency, a semipublic independent administrative institution which is responsible in governing housings.
Hiyoshi area is located in an area between center of Tokyo and Yokohama district, therefore, there are large number of working population who wish to have convenient commute to work and spend less for living expenses. Inside the residential building, there are multi-activities areas, a clinic, a home visit care center, and a cram school. Long term care center and nursery school are located within walking distance. One of the mission of this housing is to create a
“multi-generation exchange environment,” where different generations of people in local community can interact. Since this housing has both rooms for independent living and bedridden living, lifelong residential service can be provided regardless of the changes in customer’s physical conditions. Due to its lifelong residential care service model, some people started to live in this housing although they did not have any physical disabilities.
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Table 5.1: Company Profile
Source: Company’s annual report
Figure 5.1: Organization Chart
Source: Company’s annual report Foundation date: 2010/3/1
Capital 360 million JPY
Rent fee 135,850 ~ 228,050 JPY
Common service charge 4,600 ~ 7,500 JPY Service fee 26,250 ~ 32,550 JPY
Food fee 2000 JPY/ day
Rent fee 127,550 ~ 131,550 JPY
Common service charge 20,000 JPY
Service fee 32550 JPY
Food fee 1850 JPY/ day
Room size 34.65 ~ 70.41 ㎡ (10.48 ~ 21.29坪) (without nursing care)
18.08 ~ 22.96 ㎡ (5.46 ~ 6.95坪) with nursing care
Room number 81 (57 for independent residents, 24 for bedridden residents)
Employee number 85 stuffs (more than 80% are women,
45 part-time workers) 3500 total in group
Shared facilities Cafeterria, spa, machinery bath, personal bath, lounge, ktv, recreaetion rooms
Joint facilities
Clinic, pharmacy, home-visit care center, home care support office, day care center, short-stay house, cram school
independent living
assisted living
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5.2 Business Model Analysis
In today’s elderly housing industry, several new types of residential services started to appear in order to correspond to changing demands of customers. As the market gets attention with a growing prospective investment opportunity, more and more business entities entered into the market and it became more important to develop competitive business model over others. In the following chapters, companies’ business models will be analyzed using Osterwalder & Pigner’s business model theory, which utilizes nine building blocks of company’s business model; target customers, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structures.
5.2.1 Target customers
Cocofump Hiyoshi defines its target customers as “middle-income class elderly people (or their family) who wish to have a safe and enjoyable independent retirement life with supportive services as well as opportunities of cross-generational interactions.” Based on the interview, it is found that most of the current residents were moved from the local area since they are willing to maintain their social community and residential environment that they have been for a long time.
As stated earlier, this housing sees middle-income class elderly people as their target customer group, therefore the total monthly service fee is designed to be affordable for those people’s monthly welfare pension income (258,583 JPY average). According to the interview result, all rooms for independent life were fully reserved and about one-third of the rooms with nursing care services were also reserved mainly by local residents about a month before the opening day. Since this area has a lot of senior office workers who have lived for a long time, there was a potential need of retirement residential care services for those who have anxiety toward their independent lives and wish to maintain residential environment and
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social networks. There are more than 10 residents on housing’s waiting list as on the
interview date resulting from developing right services to satisfy local area’s senior customer group’s demands.
5.2.2 Value Propositions
Chesbrough & Rosenbloom (2003) defined the value propositions’ business model aspect as “what is the need that the product or service fulfills?”, and this can be said “which form of company’s product or service can solve a customer’s problem” from a customer’s perspective. Cocofump Hiyoshi’s value proposition can be defined as “provision of a secure and safe retirement life environment with dignity and multi-generational interaction
opportunities in a local area for an affordable living expenses for most middle-income class aged-person.”
In order to fully support elderly resident’s life and reduce the risk of age-related issues in daily living, Cocofump Hiyoshi housing provides a variety of living assistance services and secured residential environments, which includes in-house meal service, emergency call service, living consultation service, terminal care service, 24 hours’ security service, possession of partner clinic and hospital, hair salon, and recreation rooms for variety of social activities including KTV inside the residential building. Residents of this housing can receive lifelong residential care services regardless of changes in their physical
conditions and keep their privacy and dignity as a human instead of being treated to be patient or socially vulnerable, and it also can get rid of both psychological and physical costs of aged-person resulting from transferring to other long-term care facility.
Housing’s multi-generation exchange environment may be also attractive for people prefer to interact with different generations, especially with children. There are several multigenerational social events with the external parties on a regular basis, and it might
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potentially energize elderly residents as well as make them acknowledge they are a member of society, not a socially unnecessary person.
Besides the residential service, company’s pricing model for assisted living and bedridden residents are also valued. Since the housing can receive public compensation for healthcare and nursing care services provided for those handicapped residents, their monthly residential service fees are designed to be less expensive than the ones of independent living residents. As a result, residents can use the in-house care services at a low cost with public healthcare insurance. On the other hand, company is compensated by government for the provision of those care services. This pricing strategy is mutually beneficial for both housing and residents.
Housing’s twenty-four hours a day living-support and consultation services can potentially prevents the problems of aged-person’s daily living, such as fraud, solitary death, and aggravation of certain symptoms. Those services can also make resident’s family be freed from psychological pressures to concern about older parents.
Level of credit and recognition of operating company is also one of the value creation factors to customer segments since residential contract is long-term and there had been numerous mistreatment cases in elderly care facilities in Japan. Parent company of Cocofump is relatively large-scale business institute with a high corporate capital (over 18 billion JPY as of September, 2016), therefore it should have few business’s default risk which result in losing resident’s retirement residential environment. In addition, the company has engaged in elderly people’s health care business longer than 10 years in the industry, therefore its managerial expertise and credit should be high and appreciated by some customer groups.
In addition to the value propositions as stated above, housing location might be an important factor to use the services for local elderly citizens who wish to maintain their social network and residential environment. Since the housing was constructed in an area of
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composite dwelling housing area, it is geographically convenient for family or friends to visit and residents are not required to rebuild their social networks with strangers in an unfamiliar environment that may give psychological burdens especially to elderly people.
5.2.3 Channels
Cocofump conducts both direct selling and indirect selling in order to approach its target customer. Company’s direct selling methods include, website marketing, distribution of leaflet to individual elderly household, paper advertisement, facility tour, and information session for local citizens. On the other hand, company’s indirect selling methods include outsourcing marketing jobs to agencies, direct sales to the facilities that elderly citizens frequently visit such as welfare facilities, medical institutions, healthcare organizations, and social community facilities for the elderly. Once a customer started to acquire company’s residential service, he can acquire other supportive living services by contacting to the office desk of the housing.
Based on the interview result, about 62% of contracted residents were introduced by welfare facilities and medicare institutions. Online advertisement and leaflet distribution, however, had a small influence on residents’ contract making decisions (9% and 3%
respectively). This result may be because neither residents nor their family are not familiar with surfing the internet and they do not pay serious attention to the leaflets advertisements that they receive a lot on a daily basis.
Moreover, there is large scale housing complexes nearby the Cocofump Hiyohsi which owns 909 rooms in total, and some of the elderly residents transfered to the company’s elderly housing because of convenient access to the housing and needless to change
residential environment. Since this elderly housing was developed through the cooperation with a local semipublic independent administrative institution for housings, and the
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Cocofump could acquire abundant local market’s information, the company could successfully link with its target customer segment.
Company’s channel activities are taken place based on the five distinct phrases;
awareness, evaluation, purchase, delivery, and after sales, as Osterwalder & Pigneur proposed. In order to increase customer’s awareness toward the housing, Cocofump conducted door-to-door marketing at 300 local elderly-related facilities, such as hospital, social worker center, nursing care center, and old people’s social club, about four months before opening the house. Then, company held information sessions four-times a month to improve target customers’ understanding and evaluation toward the company’s residential services. Company has attempted to provide the consistent content and quality of the products and services that were proposed during the customer’s pre-purchase stage in order to avoid the risk of disputes in post-purchase stage which is the time target customers actually started to use company’s residential services. Deterioration of corporate image may result in losing credit of partner channels who help company get access to its prospective customers.
Based on the interview, it is found that using partner channels to acquire target customer is an effective marketing method, however, it also may result in losing revenue streams which can be earned from in-house care services. Since some customers are
accustomed to use the third party’s health care or nursing care services, they are more willing to use those third party’s services even after they transferred to the company’s elderly
housing.
5.2.4 Customer relationships
The industry of elderly housing with supportive services is rapidly growing and industry competition gets more competitive ever than before. Developing a sustainable customer relationship through providing appropriate services for target customer segment is one of the key methods to acquire success in the industry. Cocofump Hiyoshi ‘s customer
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relationship can be categorized to be personal assistance and it develops a good relationship with its customers through solving the individual resident’s unique problems with a good manner and respect at an affordable cost for the middle-income class elderly household.
All of residential services of Cocofump Hiyoshi are provided inside the residential building and its customers can voluntarily use its services on a request basis. Although the residents can acquire the third party’s services, they are willing to use company’s supportive services due to its convenience and quality. In addition, housing’s hospitality management, which a customer is treated as customer instead of patient or socially vulnerable, is highly appreciated by its customers which may make them retain and use more company’s services.
Some of Cocofump group housings have unit pricing model which provide unlimited uses of living assistance and care services paid on a monthly basis. This pricing method is attractive for people who need dedicated living assistances services, and it also helps company to retain its customers and upsell its services to them.
Besides, Cocofump has customer service center and the housing has an opinion box to gather customer’s real voice in order to increase its service quality and prevent
mistreatments of customers. Providing the services from customer’s perspectives would be a factor to improve good customer relationship.
5.2.5 Revenue Stream
Magretta (2002) considers entrepreneur of a vendor should think how to make money since making revenue is a major business activity to keep operating a company. As described on the table below, Cocofump Hiyoshi has five main types of revenues: fixed revenues of monthly rent for residential service, monthly basic service fee, rent paid by other businesses, and variable revenues gained from meal service, nursing care services, and other optional supportive services for daily living. Among those services, revenue gained from nursing care services is most profitable and it is earned easily since those service fees are
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covered by public healthcare insurance and residents’ financial burden is very low to use the services and the public healthcare compensation is high.
Company’s meal service is unique and less costly since each meal is cooked at corporate group’s food factory and get frozen in order to save cooking-related expenses, including employment fee for chef and space for cooking, of each housing of Cocofump group. Company’s frozen foods are delivered to some medical institutions.
Table 5.2: Revenue Streams of Cocofump Hiyoshi
Fixed revenues Variable revenues
Rent revenue (for residential service) - Rent fee varied based on room size and type
Meal services
- Fee is charged based on customer actually had Basic service
- Charged for residents’ emergency response service, security services, 24 hours a day-safety confirmation, and consultation services
- Regular medical checkups, record health condition
Nursing care services
- Fee is charged based on customer actually used
- Receive public compensation - Corporate home-visit care services - Rehabilitation
Rent income (for business uses)
- paid by clinic and pharmacy inside residential building
Optional supportive services
- cleaning, laundry, shopping, transportation, changing diaper, hair salon, administrative document application, personal financial management, etc
Source: Housing’s brochure and interview results
Cocofump announced the company is planning to increase its annual revenue to 50 billion yen by 2020 with 2.5% industry market share from the annual revenue of 10 billion yen in 2014. The company also plans to expand its business to overseas markets to seize overseas investment opportunity. There are corporate branch offices in mainland China, Singapore, and Malaysia.
88 5.2.6 Key Resources
According to Osterwalder & Pigneur (2010), organization’s key resources can be physical resources, intellectual resources, human resources, and financial resources. In case of Cocofump Hiyoshi, company’s “managerial know-how,” “recognition”, and “partnerships”
would be the most important assets required to make its business model works.
Based on the interview result, company’s 12 years’ managerial know-how with over 100 corporate housings for the elderly would largely contribute to company’s continuous development and help the company reach its target customer segment and key partners easily.
Since Cocofump obtains long-term managerial experience, know-how of operating an elderly housing, and high level of corporate recognition in the industry, it can develop an effective marketing strategy to reach its target customer groups and key partners in local areas.
Company also possesses real-estate consultation firm for the aged-citizens, Syscare Co. Ltd.
and S.P.A Co Ltd, that acquired in 2014 for further development of its elderly housing business.
Company’s high recognition in the industry also helps company to develop
partnership with local businesses as well as convince target customer segment to choose the company’s residential service more easily. Since customers of elderly housing tend to highly concern about credit of operating company in order to avoid default risk of business during the residential term or mistreatment of elderly customers, company with good corporate recognition has competitive advantage over its competitors and acquire customers more easily. High corporate recognition also improves company’s indirect customer acquisition process through outsourcing marketing jobs to the local entities more easily, and it also helps company to develop partnership with local medical institutions and other service
organizations, which take important roles of company’s lifelong residential services.
89 5.2.7 Key Activities
Based on Osterwalder & Pingeur (2010)’s definition of an organizational key activities, Cocofump Hiyoshi’s key activities can be characterized to be problem solving and provision of platform in which customer can interact with both internal and external
communities.
One of the most important business activity of Cocofump Hiyoshii is solving elderly customer group’s age-related problems on daily living. Since the customer of the company potentially has age-related health problems and other issues that may require assistances, they should have high level of anxiety toward independent living alone at their home, especially for urgent situation which may result in danger of their lives happening at home. Therefore, the housing’s life consultation services, safety check services, and other supportive services can eliminate those mental strain or suspense of their daily living. Those services also potentially prevent criminal cases against elderly people.
Housing’s lifelong residential care service with cooperating with local medical institutions also get rid of psychological burdens of the resident’s family and the customer’s mental anxiety toward future retirement living resulting from changes in their physical conditions. Since CocofumpHiyoshi provides both rooms for independent living and bedridden living, residents are not required to transferred to other care facilities or losing residential environment regardless of their physical conditions. The housing residents also can easily access to the services for rehabilitation care services and other living supportive services., therefore residents can live in residential setting until the last day.
The housing also provides platforms which are used to interact with other housing’s residents and external communities from different generations. Those social activity
platforms can potentially revitalize residents and acknowledge they are a member of society since they can prevent resident’s social isolation problem and sorrowful through loss or deprivation resulting from losing aim of existence, which often result in solitary death.
90 5.2.8 Key Partnerships
Forging partnerships has several reasons and it often strengthens organizational business model and leads to success as a result of business optimization, risk reduction, or resource acquisition. Cocofump Hiyoshi also forges partnerships with both competitors and non-competitors in order to optimize and reduce the risk of asset management and nursing care businesses. In addition, the company acquired food company as a joint venture for its business expansion and cost reduction for both external as well as internal sales. Company
Forging partnerships has several reasons and it often strengthens organizational business model and leads to success as a result of business optimization, risk reduction, or resource acquisition. Cocofump Hiyoshi also forges partnerships with both competitors and non-competitors in order to optimize and reduce the risk of asset management and nursing care businesses. In addition, the company acquired food company as a joint venture for its business expansion and cost reduction for both external as well as internal sales. Company