One of the major benefits of AI-enabled healthcare solutions is that they provide a higher degree of personalization. As such, they could be a wise choice in the emerging direct-to-consumer health market.
Companies are selling products that are meant to address basic health and wellness issues by providing personalized nutrition, personalized exercise programs, home screening for diseases like skin or colon cancer and more. In these situations, rather than selling to providers or payers, companies market and sell directly to consumers. In recent years, we’ve seen companies like RO, HIMS and ThirdyMadison engage in the direct-to-consumer health market. Some of the products are touted to be personalized based on consumers’ genetics, skin types and other factors.
Some of the key benefits to the direct-to-consumer model include that it allows companies to market to people before they enter the healthcare system, build a brand with the consumers, identify lower acuity needs and provide a personalized service. There’s a notoriously slow sales cycle for enterprise customers in the healthcare industry, and so direct-to-consumer affords a much shorter sales cycle and ramping up revenues faster. Therefore, D2C can offer direct access to consumers, quicker transactions and fewer barriers.
This all combines to make it an appealing model for startups that are entering the market. However, in spite of all of these benefits, it’s proven to be a tough business model for digital health companies. That’s because many people believe that since they pay their insurance premiums, any health-related products should be paid for by their insurance company. Also, customer acquisition costs can be quite high in a D2C business model. That’s why the recovery of those costs isn’t guaranteed, since many people don’t continue to use digital health products like wearables or apps long-term.
In a report about the subject, Rock Health indicated that D2C business models aren’t always conducive to achieving the scale and widespread impact that healthcare innovation can offer due to high customer acquisition costs.16 One big issue is that the burden of payment often falls at the feet of consumers. This has historically spelled doom for healthcare companies as people want their insurance to pay for health products.
That’s why some digital health companies are adopting a dual approach in which they compete in both the D2C and B2B markets. This allows them to engage those users directly, to raise awareness and to bring in some revenue while they take on the slow enterprise sales process.
If the solutions that are offered to people actually work and there’s solid evidence for it— especially in the health, wellness and preventive space—then I’d take that approach every time. In areas such as nutrition and fitness, where the consumer already shoulders the burden of payment, it’s likely that they’ll be open to solutions that help them to make better choices and receive personalized health benefits.
The major advantage is that you can bypass the long and complex enterprise sales process. However, with higher customer acquisition costs and the need for standing out in the crowd, you’ll need to be well-funded to bear the costs of sales and marketing and to roll up your sleeves and generate the evidence that allows you to differentiate and to get endorsement from the medical community.
