It’s not the best economic environment for consumer-driven digital health businesses.
This has caused some organizations to accelerate a shift toward a business-to-business (B2B) strategy, experts say. In its second quarter earnings call, executives at New York City-based digital health company DarioHealth said they were lessening the focus on its legacy direct-to-consumer business.
“The B2B opportunity is bigger, the margins are better and the cost of acquisition is lower,” said Richard Anderson, president of DarioHealth, in an interview with Digital Health Business & Technology.
Anderson said the macroeconomic market went from a growth mentality to one stressing profitability. For DarioHealth, this has meant reducing spending on the business-to-consumer (B2C) side and trying to get it to break-even, while still using it to roll out new products and try new features. The money saved in the bottom line, Anderson said, will be reinvested in the B2B business.
“The market is the market. You can like it or dislike it, but it’s still the reality,” Anderson said. “If you’re B2C, there’s less interest in spending money. If you’re B2B and your value proposition is that you can make a company’s members healthier and, therefore, you’ll spend less money on them, this resonates even more in economic downturn.”
Aike Ho, partner at the San Francisco-based venture capital firm ACME Capital, said that direct-to-consumer is hard to pull off in healthcare.
“To offer a value proposition that is appealing enough for consumers in the direct-to-consumer space, you have to appeal to them in a way where they’re motivated to take action,” Ho said. “The reality is that most people are not motivated to take action.”
Five years ago, nobody would have gone directly to consumers first, Anderson said. However, with some direct-to-consumer companies taking off during the pandemic, more have gone this route. As a result, advertising costs have gone up.
This was one reason, Teladoc Health CEO Jason Gorevic told Digital Health Business & Technology, that it was cutting spending on advertising, even though he said the company was pleased with its direct-to-consumer offering.