According to a survey report published by Rock Health, by the year 2020, healthcare spending in the U.S will be 20 percent ahead of its GDP. At first glance, this number appears to be a good one. Unfortunately, more than half of that spending is without value, which indicates a lack of efficiency in services and a waste of resources. This has resulted in a shift in the business policies of some involved with the healthcare industry. Digital health entrepreneurs are now looking at a new model of business – from B2B to B2C – in hopes of generating more revenue.
Consumers in search of healthcare services have had a difficult time. Thirty-two percent of the consumers from the above survey said they have had to fill out information forms several times, and 11 percent of them pointed out that they were guided to attend a program or buy a product that didn’t meet their requirements. These are just two grievances on a list of many. As a result customers have begun to express an interest in buying the latest health technology directly from manufacturers.
In fact, more than half of the entrepreneurs in the field feel they will earn more by selling directly to consumers instead of going through another channel. At the last Health Innovation Summit, key topics for discussion included the challenges of implementing this new business model, along with how to address the issues industry leaders may face. As it turns out, providing value to users should be a primary goal, along with an aim to create quality products and distribution programs to support it. In other words, invest in the product rather than spend on advertising and promotion.
There are several statistics to support this view. According to the same report by Rock Health, analysts have predicted that consumers are willing to spend as much as $14 billion per year on digital health apps that successfully meet their needs. However, to tap into this potential market, a focus on customer engagement and subsequent growth, not monetization, is required.
Though both the B2B and B2C models have their pros and cons, digital health entrepreneurs are already focusing on the B2C model due to its quicker product iterations and shorter sales cycle. The competition is fierce, though. There are a number of players funded by deep pocketed investors, and there is a risk involved with dealing directly with consumers, especially when healthcare is involved. However, it has been observed that if a product is designed well and delivered in the right way, consumers are more than willing to buy it and influence their peers to also purchase it. A revenue model, built before designing the service, needs to be established. A keen understanding of consumer demand and an adequate price point, as well as the research required to truly be sure of what the consumer needs, will work better than simply throwing scads of money at designing a high tech – and high cost – health app and hoping for the best.
In a B2C business model there is immense opportunity for advancement, but the way up is not without its obstacles. If entrepreneurs can find their way around them, they will definitely reap the benefits of this brand new business model in the healthcare industry. Leveraging the customer by engaging them and making them a part of their own healthcare monitoring, and overall health and wellness, is the key to success for a B2C digital health entrepreneur.
Can you think of other B2C pros or cons? Do you prefer a B2B or B2C business model? We would love to hear your thoughts on how healthcare can use both to their advantage.