Southern Health Systems (SHS), a fictional organization, established a satellite hospital in a growing suburban area ten years ago. Since then, the hospital has become relatively successful. It has attracted adequate medical staff and gradually increased its occupancy rate. At the time it opened, SHS was not authorized to offer labor and delivery services. Now, however, a significant market for maternity services has emerged, as the population has reached a critical mass and many young families have moved into the community.

In 2019, the SHS marketing staff was instructed to assess the situation and determine the current and future potential for maternity services in the market area. Because the state requires a certificate of need to add any service, the organization needed data to make a case for adding obstetrics beds. The SHS market analysts recognized the need to identify the potential for maternity services but also to specify the effective demand.

As in any marketing research project, the analysts began by delineating the service area likely to be served by the proposed obstetrics program. Once they were satisfied that a defensible service area had been specified, the analysts profiled its population. They determined the size and characteristics of the current population and developed projections that reflected anticipated changes in size and demographic characteristics. According to the data available, the service area had approximately 42,000 residents. Estimates purchased from a demographic data vendor projected a population of 50,000 in ten years. The SHS analysts thought this figure represented the maximum population capacity of the area because virtually all available residential land would be built up by that time. The current demographic characteristics of the population were determined and projected ten years forward. The analysts focused on data on the population’s age structure (especially the number of women in their childbearing years), marital status (unmarried suburban residents typically do not have children), and racial and ethnic composition. This last attribute was considered important given the disparities in birth rates among racial and ethnic groups in the area. The psychographic (or lifestyle) characteristics of the population were also analyzed on the grounds that people in different lifestyle clusters exhibit different attitudes toward childbearing.

The analysts also researched the insurance coverage situation of the market area. Because this information was not readily available, they had to conduct primary research. A sample survey of the area’s households revealed that 75 percent of the population was covered by some form of commercial insurance. Small portions were covered by Medicare, Medicaid, or military insurance, and a negligible number of residents were uninsured. The high level of insurance coverage was a positive finding.

Question:

1. Why did the market analysts have to assess the size of the market before going forward with the development of a new obstetrics service?

2. Why could the analysts not simply use the total population as the basis for determining the demand for obstetrics services?

3. To what extent might the lifestyle orientation of women in the market area influence their attitudes toward childbearing?

4. How important are the presence of other obstetrics service providers and the existing relationships between market area women and OB/ GYNs in determining the effective demand for obstetrics services?

5. What challenges do marketers face in introducing a new service to a market area, particularly a service as personal as obstetrics care?