A Series on Consumer Health — Part 3: What health brands need.
From the perspective of Irfan Alam, Founder & CEO of Frontrow Health, a startup whose mission is to unleash consumer health in America.
Health brands need help. That has become abundantly clear after speaking with hundreds of health brands this past year.
But why?
TL;DR:
01 | It’s hard to precisely target relevant consumers online.
02 | It’s expensive for people to pay full price for products out-of-pocket.
03 | It’s difficult to build trust with consumers through ads.
As a result of these factors, acquiring new customers is really expensive. And to do it profitably is almost impossible today (especially given updates to Apple’s privacy policies, inflationary pressure on consumers, etc.). As Rock Health reported, “for some D2C digital health startups, CAC is estimated to have rocketed from $150 in 2018 to $500-$1,000 in 2022.”
So how do we help them?
When I first got to Harvard Business School, this was the problem I was obsessed with solving. Here’s how I went about conducting hacky experiments to validate potential solutions:
01 | It’s hard to precisely target relevant consumers online.
The problem:
Take the example of a home HbA1c/diabetes test. Social media platforms don’t know which users have diabetes, so targeting users based on their age, interest in yoga, and food preferences as a proxy just doesn’t cut it.
The experiment:
What would happen if you collected self-reported health goals/issues, and then recommended health products based on their unique needs? Would likelihood to purchase increase? By how much?
I tried this. I collected people’s health goals then sent them weekly product recommendations over email based on their unique needs (i.e., “I’m a diabetic” → Here’s a home diabetes lab test to track your HbA1c levels).
The result:
People were more likely to buy, but not by much. Why?
02 | It’s expensive for people to pay full price for products out-of-pocket.
The problem:
I spoke to my pilot audience and they said that one reason they didn’t pull the trigger on this highly relevant product was that it was just too expensive to pay out-of-pocket.
The experiment:
To alleviate cost pressure, what if the commission that a health brand paid you to deliver them a customer was split as cash back with the customer? Given the high customer acquisition cost, commission rates would presumably be high, meaning there could be enough to split for meaningful cash back with the patient (think 15–30% cash back).
So I tried this too. Out of my own pocket, I Venmo’d 15–30% cash back on each purchase to see if conversion rate would increase.
The result:
People were incrementally more likely to buy than before, but it wasn’t crazy. Why not?
03 | It’s difficult to build trust with consumers through ads.
The problem:
I spoke to my pilot audience once more — it’s highly relevant to your needs and you get a ton of cash back, why haven’t you bought it?
Their unanimous answer — I’m nervous.
How do I know home lab testing really works? What if they take my DNA when I give them my blood sample? What’s a CLIA certified lab? Are those the best labs? The same labs that my doctor uses?
Without being prompted, many participants said “Before I buy this, I’d like to check with my doctor first. I see them a month from now, I’ll ask them about it then.”
That got me thinking…what if doctors could act as shopping assistants?
The experiment:
I had a board-certified doctor vet my list of products and I CC’d them on my emails to participants, letting them know that this was a product the doctor liked, and that they could ask the doctor any question they liked over email.
The result:
People were significantly more likely to buy.
Because of the confluence of these conditions (relevant to your need, cash back on every purchase, and doctor trusted), our average product click-through-rate (CTR) and average percent who purchased a product (CVR) stabilized at a whopping ~45% CTR and ~30% CVR, compared to industry average of a ~1–3% CTR and CVR.
I thought, even if at mass-scale we could achieve a fraction of our CTR and CVR, that would be significant for health brands, not to mention the value it would bring to consumers.
The conclusion:
Health brands are innovating like never before. Consumers are also hungrier for better ways to improve their health. Yet, there remains a supply and demand gap.
My experiment concluded that consumers have a hard time finding these innovative brands, they can’t afford to pay out-of-pocket at full price, and they’re ultimately not sure what to trust.
If we reduce these barriers, we can increase access to care. And as a result, these struggling brands can continue to afford innovating, which is a critical function of our healthcare ecosystem.
