Kaiser Permanente Marketing Plan: Strategy and Analysis

Introduction and Planning Assumptions

For nearly three-quarters of a century, Kaiser Permanente (hereinafter alternatively "Kaiser" or "the company") has provided quality health care to a growing number of customers (About us, 2018). Today, Kaiser has more than 12 million members, and its future appears bright provided the company can capitalize on its core competencies using a marketing plan that focuses on achieving its current and future organizational objectives. The purpose of Part A of this marketing plan is to provide a framework in which the company can achieve its current and future marketing objectives in an increasingly volatile and competitive marketplace, based on the assumptions listed below.

The following assumptions apply to this marketing plan:

The marketing data provided by the company and third-party analysts are accurate and complete. Current trends in changing demographics in the U.S. population will create an increased demand for geriatric health care services as the Baby Boomer generation retires in greater numbers and lives longer lives compared to just a half century ago. The company's current leadership will continue to oversee Kaiser's operations in an effective and informed fashion. There will be no significant downturns in the U.S. economy during the next 10-year period.

Founded in 1945 and currently headquartered in Oakland, California, Kaiser was originally focused on providing industrial health care programs for blue-collar workers in the construction, shipyard, and steel mill trades who were employed by the Kaiser industrial companies during the Second World War (About us, 2018). According to Raube and Upshaw (2014), the company has transformed itself from this original business model to become one of the leading non-profit health services organizations in the country today. Kaiser has consistently provided its members with high-quality, integrated health care coverage since its inception (Raube & Upshaw, 2014). The company's chairman and chief executive officer, Bernard J. Tyson, is highly rated as effective and committed to the organization's stakeholders by its employees, and the company has consistently grown under his leadership (Kaiser Permanente overview, 2018).

The company has been a leader in the health care services industry in a number of ways over the years, including being the first organization to introduce: (a) prepaid health plans that distribute costs to members to make them more affordable; (b) physician group practices that facilitate the delivery of health care services; (c) wellness programs designed to keep its members healthy and reduce corresponding medical costs; (d) an integrated delivery system that provides more efficient care at reduced costs for members; and (e) electronic medical records (Raube & Upshaw, 2014).

The company also maintains a loyal social network following, and Kaiser Permanente had nearly a third of a million "fans" on its Facebook page alone by April 2018 (Kaiser Permanente overview, 2018). The company's estimated annual revenues are currently $72.7 billion, and Kaiser has approximately 21,275 employees (Kaiser Permanente overview, 2018). The company is comprised of the following entities: Kaiser Foundation Hospitals and its subsidiaries; Kaiser Foundation Health Plan, Inc.; and the Permanente Medical Groups (Fast facts about Kaiser Permanente, 2018). These three entities form the focus for the company's marketing programs (Raube & Upshaw, 2014).

The company's operations are currently limited to the U.S. market. Current total membership in its health care plans by region is as follows: Northern California, 4,284,011; Southern California, 4,538,427; Colorado, 671,254; Georgia, 374,000; Hawaii, 255,828; Mid-Atlantic States (Virginia, Maryland, D.C.), 783,094; Northwest (Oregon/Washington), 606,511; and Washington, 711,465 (Fast facts about Kaiser Permanente, 2018).

The company's annual operating revenues have grown significantly over the past five years: $53.1 billion in 2013; $56.4 billion in 2014; $60.7 billion in 2015; $64.6 billion in 2016; and $72.7 billion in 2017 (Fast facts about Kaiser Permanente, 2018). These figures reflect a significant and sustained increase due in large part to the efficiency of the company's operations, the high quality of the health care services it delivers, and the effectiveness of its marketing initiatives, which are discussed further below.

Market Audit: PESTLE Analysis

A timely market audit can help companies identify the extent to which their marketing department is achieving its assigned activities as well as the extent to which it is contributing to the organization's overall performance (McDonald & Dunbar, 2016). A market analysis of the health services organization industry in the United States using a PESTLE (political, economic, social, technological, legal, and environmental) framework is provided below.

Political factors determine the extent to which a government may influence the economy or a particular industry, and include tax policies, fiscal policy, trade tariffs, and related measures. Although the process is expensive and frequently onerous, Blank (2015) reports that the political will to facilitate the introduction of new, more effective drugs has had a measurable impact: the FDA's Center for Drug Evaluation and Research formally approved 41 new drugs in 2014, including a number targeted at treating cancer, type 2 diabetes, hepatitis C, and other serious diseases. This accelerated approval rate reflects the political will to streamline the health care services industry.

Economic factors are determinants of an economy's performance that directly affect companies and have long-term resonating effects, including inflation rates, interest rates, foreign exchange rates, and economic growth patterns. At the time of this analysis, the unemployment rate of just 4.4% was among the lowest in years (U.S. economy, 2018), and recent trends suggested that the American economy would remain strong for the foreseeable future, unless tariffs invoked by the administration caused a global trade war resulting in a severe economic downturn. This eventuality was mitigated somewhat by legislation passed in December 2017 — the Tax Cuts and Jobs Act — which reduces individual tax burdens and eliminates the penalty imposed on taxpayers who do not obtain the minimum amount of health insurance required under the Affordable Care Act, effective 2019. The individual tax reductions are scheduled to remain in effect until 2025 (U.S. economy, 2018).

Social factors scrutinize the social environment of the market and gauge determinants such as cultural trends, demographics, and population analytics. Growing numbers of health care services organizations, including Kaiser Permanente, are integrating social media platforms into their marketing mix. Other relevant social trends include an increasingly diverse demographic population and a rapidly growing population of elderly health care consumers (U.S. people, 2018), who will undoubtedly require a disproportionately large amount of age-related health care services for the foreseeable future.

Technological factors pertain to innovations that may affect the operations of the industry and the market favorably or unfavorably, including automation, research and development, and technological awareness. Innovations in health care technologies have transformed this industry in fundamental ways over the past 20 years, and electronic medical records have substantially reduced administrative costs as a result. Cutler (2015) emphasizes that Kaiser's implementation of electronic medical records initially saved the company over half a billion dollars a year when adopted in a single region, and this amount increased to $6.6 billion after nationwide deployment. These types of technological innovations, however, are subject to the legal considerations noted below.

Legal factors have both external and internal dimensions, encompassing laws that affect the business environment in a given country as well as policies that companies maintain for themselves, including consumer laws, safety standards, and labor laws. The health care services industry is characterized by numerous legal requirements and limitations that are frequently burdensome. In this regard, Field (2008) emphasizes that "the array of regulations that govern health care can seem overwhelming to people who work in the industry. Almost every aspect of the field is overseen by one regulatory body or another, and sometimes by several" (p. 607).

Environmental factors include all those that influence or are determined by the surrounding environment, including climate, weather, geographical location, and global changes in climate. There has been a discernible trend in the health care services industry for organizations, including Kaiser Permanente, to adopt "green" practices in their business operations and building designs (Ferenc, 2015). Many organizations have found that these initiatives not only help satisfy their corporate social responsibility obligations but can also generate a major economic return on investment. As Orndorff (2013) explains, "It's financially smart from a life cycle standpoint, enhances the healing environment for patients and staff, improves the health of the communities served, demonstrates good environmental stewardship and provides structure for including sustainability in the design and construction process" (p. 8).

Marketing Strategy and Social Media Engagement

While the company uses its website to communicate with the general public as well as its membership and employees, Kaiser Permanente currently relies heavily on several social media platforms as an integral part of its marketing strategy. Like many of its competitors, the company maintains a presence on Facebook, Twitter, LinkedIn, YouTube, and Pinterest (Fast facts about Kaiser Permanente, 2018). This marketing strategy is highly congruent with actions taken by the company's major competitors. Kaiser Permanente has also communicated the importance of physician participation in online forums as a way to improve relationships with existing members while attracting new ones.

For instance, Dr. Jeffrey Benabio, a dermatologist practicing at Kaiser Permanente in San Diego, emphasizes that "social media provides a way for you to engage with your patients and the community, whether you practice in an HMO or privately. No matter what your specialty, the principles of using social media such as blogs, Facebook, and Twitter as tools for improving patient care will apply" (as cited in Moore & McGowan, 2009, p. 299).

By developing professional communities of practice on their social media platforms, Kaiser Permanente can take advantage of existing resources in ways that help the organization achieve and sustain a competitive advantage. Another Kaiser Permanente physician noted that "online patient communities are an ascendant means for patients to learn about their disease and seek advice and comfort from patients like them. Physicians can be part of this conversation and contribute to it. Who better to advise patients on how to live with pain, live with deformity, and deal with insurance companies, than physicians?" (as cited in Moore & McGowan, 2009, p. 299). Although social media platforms represent a highly cost-effective marketing strategy, they are not without costs, as discussed below.

Leveraging the company's existing social media resources to achieve its marketing objectives will require a significant investment in time and effort, but a relatively modest economic investment. Kubetin (2010) counsels that "it takes no money but lots of time to build online networks" — noting that the human resources needed to design, maintain, and respond to user feedback represent a significant cost — and makes a compelling point when he adds that "patients are going online to interact with their physicians, and we are not there. Whereas patients always had to come to us to learn about disease and health, now they get most of their information online. Our absence online perpetuates a trend of diminishing importance of our profession" (p. 58).

The company has recognized the importance of its physicians maintaining open communications with members and prospective members using social media platforms, but the costs of these activities extend well beyond basic platform maintenance. Notwithstanding these additional costs, it is becoming increasingly apparent that organizations competing in the health care services industry cannot afford not to invest in these online resources. As Kubetin (2010) concludes, "As with much in life, the secret to being effective online comes down to showing up. A physician becomes a trusted member of the community by being present. Over time, regular blog posts, Facebook updates, and Tweets allow the audience to become familiar with you" (p. 58). Given the significant investments involved in designing, administering, and responding to user feedback on social media platforms, it is vitally important to set appropriate marketing goals and objectives aligned with these resources.

The key goals and objectives identified by Raube and Upshaw (2014) are as follows: identify opportunities to capitalize on the widespread success of Kaiser's innovative Thrive healthcare marketing programs; determine how the company's marketing can become even more accountable in terms of generating tangible membership gains; develop an optimal marketing strategy moving forward, given the rise of competition mimicking its wellness approach; and determine how the company's marketing programs can best weather what would likely be a difficult transition period when the Affordable Care Act was fully implemented, beginning in 2014 (p. 1).

Given recent changes affecting the Affordable Care Act, two additional objectives are important: ensuring that the company's health care consumers are aware that the Affordable Care Act remains in effect, and ensuring that customers are also aware that the Individual Mandate has been repealed effective 2019 (Durkheimer, 2018).