Thinking of a master plan...
Opinion piece on consumer health & wellness GTM strategies and product designs.
Hey there! I’m Jordan Pascasio, Investor at Next Ventures.
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A question that I often think about is whether the “master plan” go-to-market (GTM) strategy is better suited for some industries (e.g., consumer tech & durables) than others (e.g., consumer health & wellness).
The GTM strategy that underlies the master plan nomenclature has been around forever. It involves manufacturing products in a downward scale of cost and upwards scale in volume. Start by targeting consumers with higher household incomes and eventually, pending consumer adoption, economies of scale will drive greater accessibility across socioeconomic classes.
This concept recently garnered public awareness when Elon Musk famously applied it to Tesla’s GTM strategy in 2006, stating:
Build sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options
The last point is what gives the master plan its namesake. Musk made a pedestrian GTM strategy sexy by leveraging it to drive a greater societal good - mitigating climate change-driven existential risk in this case.
I believe that the master plan strategy is best suited for retail-based verticals like consumer tech & durables in which consumer purchasing behavior is rooted in envy. A study that analyzed the key role of envy in the purchasing decision defines it as a painful feeling which appears when people covet superior possessions of others or their good fortunes. This is not to be confused with jealousy which is predicated upon our own possessions.
Despite being cost prohibitive initially, upmarket consumer tech products like a Tesla or an iPhone will always be desirable to middle and working class consumers - especially given the high level of visibility said products garner in a social-media dominated society in which users are algorithmically manipulated to post clout-based content. In other words, the master plan motion in retail relies on envy to drive trickle-down demand through our socioeconomic hierarchy.
Recently, we’ve seen products emerge in the consumer health & wellness space that aim to leverage a similar playbook - build for the health optimizers (i.e., biohackers) first and benefit from the trickle-down effect to less health conscious consumers once economies of scale and consumer awareness take hold.
In theory, this is a great way to activate the ~80% of sedentary Americans or the ~90% of Americans who are not metabolically healthy. Quite a benevolent master plan in its own right.
And yet, I see massive headwinds to this GTM strategy that stem from a fundamental difference in foundational human needs. I would argue that consumer purchase behavior for consumer health & wellness is not driven by envy like it is for consumer tech & durables. Rather, it’s driven by self-actualization, which most people don’t achieve until they’re older/wiser or are forced to by an acute or chronic condition.
Maslow’s hierarchy of needs provides a helpful heuristic to quantify the differences between the two purchasing psychologies.
It’s important to note that health care as a reactive safety net (i.e., health insurance) lives within the Safety layer where consumer willingness to pay is high. Among commercially-insured employees, who isn’t willing to dedicate a part of their paycheck to health care coverage? That said, I view proactive consumer health & wellness products/services as part of the Self-actualization layer, which is objectively less powerful from a needs point-of-view than the Esteem layer that powers envy and subsequent consumer tech & durables demand.
But why wouldn’t a consumer want to spend money on something that potentially could mitigate chronic disease, excess OOP spend and suffering down the road? Humans are notoriously bad at long-range planning. Researchers have found that humans consistently will tend to opt for immediate rewards instead of rewards down the road, even if the later rewards are greater. This is know as hyperbolic discounting, which presents another angle (time-to-value) for consideration as it relates to disparities in consumer purchasing behavior within the two sectors at question.
The time-to-value of a consumer tech & durables purchase is extremely low given the product is tangible. For example, buy a Tesla, story it and immediately feel a sense of moving up in the world (crude, but you get the point). It’s important to reiterate that the value in this purchase example is rooted in social status, distinction or belonging, but not utility (i.e., getting from point A to point B). Otherwise, everyone would just buy the cheapest mode of transportation.
In contrast, it’s more difficult to realize the value of purchasing consumer health & wellness products/services like CGMs or at-home diagnostic devices because the value proposition of potentially mitigating chronic disease 10 or 20 years out is not immediately tangible and thus discounted by the human brain. The fact that humans could discount the value of a future reward that could prevent early death is a bit mental to think about.
This framework around human needs and time-to-value leads me to question the effectiveness of copy and pasting retail-based master plans into the consumer health & wellness space.
Within retail, it’s safe to assume that low- and middle-income consumers have a strong desire to one day purchase a Tesla, iPhone or any other emerging tech device as they make their way up in the world. And yet, I’d argue that the strength of the desire by the couch potato or the normal, but non-health conscious individual to want to continuously track their own biomarkers or to receive precision fitness coaching is not even remotely close to being at parity with the aspiring Tesla or iPhone purchaser.
So how does a company effectively circumvent consumer psychology to help drive greater health consciousness beyond the 20% of Americans that are active or that own a smartwatch or fitness tracker?
While I don’t have a silver bullet solution, I also don’t want to be that person that points out a glaring issue without offering any potential remedies. Here are a few high-level, non-exhaustive considerations around driving broader health consciousness and demand through embedded designs:
🏥 Embedding health & wellness within care models
Horizontal services expansion across care models is an effective way to create contextually-relevant cross-sell opportunities and to drive awareness and education. Market precedents in the clinical realm include Teladoc acquiring Livongo’s suite of chronic care solutions to complement its Primary360 service or Carbon Health’s newly rolled out diabetes management program to complement its primary care offering. The greater the holistic perspective on a patient, the better, putting primary care providers in prime position to land and expand their services. While the aforementioned providers represent downstream cross-sell precedents, we’ve started to see upstream health & wellness services being cross-sold or offered within care models as well.
One example is The Lanby, which offers concierge-like primary care inclusive of a PCP, care concierge and a wellness advisor. Including a wellness advisor as a part of the core care team helps to unite formative upstream care (fitness, wellness, diet) and clinical upstream care (primary care) under one umbrella. If The Lanby’s care model is able to prove that an integrated wellness advisor can drive broader fitness/wellness penetration and deliver causal benefits to downstream care utilization, it could serve as validation and inspiration for broader primary care practices to include wellness advisors into care plans.
Fullscript offers another example, but from the B2B perspective. The company seamlessly embeds custom supplement dispensing into a care provider’s virtual or in-office workflows, including ongoing support for refills and adherence tools.
I will note that primary care, which is the most preventative type of clinical care, suffers from the same adoption and utilization issues as consumer health & wellness products/services in the US. I’m hopeful that novel, digitally-enabled primary care models can help reverse this trend by offering more delightful patient experiences and greater care accessibility beyond the 1% of commercial patient populations that companies like One Medical serve. More to come from us on this theme soon 👀
One of the largest benefits of embedding within care models is the educational consultancy administered by the providers that would cross-sell the upstream products/services. Adherence to fitness & wellness programs or properly understanding how to interpret real-time biomarkers is overwhelming for most consumers. As such, having dedicated third-party assistance from a healthcare professional can function as an education- or accountability-as-a-service layer and potentially reduce adoption friction.
👾 Embedding health & wellness within gaming experiences
Previously, I’ve written about the significant market opportunity to leverage compelling game loops and blockchain-enabled monetization as a new gateway to a healthier future.
Introducing a ‘game-first’ fitness & wellness experience can greatly augment health consciousness by using the power of gaming to activate a nascent (yet massive) audience who previously may have not have been interested in maintaining their health.
Moreover, we believe that incentivizing players to stay fit while making it fun and socially rewarding to do so can help to improve historically poor consumer adherence to upstream health goals. Incentivization can come in many forms such as fiat currency, community or scarce in-game items.
Using scarce in-game items as an example, a study from Stanford University and Microsoft Research concluded that Pokémon Go led to significant increases in physical activity over a period of 30 days, with particularly engaged users (i.e., those making multiple search queries for details about game usage) increasing their activity by 1,473 steps a day on average, a more than 25% increase compared with their prior activity level.
Gaming is the preferred chassis for content consumption and social interactivity amongst emerging generations globally and we’re starting to see companies moving to meet these consumers where they are. StepN and Genopets (Next Ventures portfolio company) are leading the way in mobile move-to-earn game designs with the former focusing on lifestyle players and the latter on gaming-endemic players via a true RPG game loop.
As emerging generations age up and as global smartphone adoption nears 90%, novel mobile game designs with embedded health & wellness features can drive a grassroots movement that benefits health consciousness and accessibility in the future.
Final Thoughts
Driving self-actualized health consciousness is an extremely difficult problem to solve, requiring new innovation far beyond my embedded design musings. Consumer psychology is just the tip of the iceberg. More complex aspects such as income disparity and accessibility are huge sources of downward pressure on activity rates and the state of metabolic health in the US.
It’s no surprise that individuals with higher incomes are more likely to participate in any type of physical activity than those with lower incomes. And that’s just physical activity. Behaviors such as proactive biomarker tracking are undoubtedly filled with more consumer adoption friction given the extended time-to-value, lack of education around what metrics may even infer and cost.
Even after organizing my thoughts, I’m left with more questions than prospective solutions. What is required within consumer health & wellness GTM strategy and product design to appeal to consumers who aren’t optimizer or improver personas? Is the answer that consumer health & wellness is objectively a captive market (i.e., winner-takes-all) due to fickle consumer adherence? How do we effectively cross-sell or embed proactive health consciousness within lower-income communities? Do product designs need to be re-imagined from the ground up by more empathetic PMs who aren’t type A optimizers?
Thinking more cynically, perhaps we just have to be patient as emerging generations age up. Gen Z and Millenials are increasingly more health conscious, allocating significantly more share of wallet than previous generations on both health & wellness products and natural remedies. Additionally, as digital natives, Gen Z and Millennials represent a target population that is highly vulnerable to cultural transmission in the internet age. Partnerships like OBJ <> Oura Ring and Lebron <> Calm or concepts like #fitness on Tik Tok (186B views!) can help to seed health consciousness across emerging generations and societal classes.
Feel free to make this an open discussion in the comments section or on socials. For those involved or interested in the space, I’d love to hear thoughts that address how to break the mold of building consumer health & wellness products that only appeal to a captive audience.
If you are building or investing in the health & wellness space, I’d love to chat! Please reach out to jordan@nextventures.com, or I can be found here.
Great article.
Consumer health only appeals to the tail ends of the bell curve, the sickest and the healthiest.
Solving for administrative tasks is the entry point to the sedentary middle class
https://healthapiguy.substack.com/p/indiana-jones-and-the-personal-health?s=w
We discovered a similar tension at my company Caliber. We started as a remote fitness & nutrition coaching program, and quickly learned that there's a limited number of people in-market for 1-on-1 coaching at any point in time. The approach we've taken is to borrow from the B2B SaaS GTM playbook and take our app completely free, allowing us to reach a much larger addressable market (we estimate 410MM English-speaking consumers in-market for a workout and nutrition tracking app) and then use the app as a lead-gen vehicle to win people to coaching over time. It's working.
And the added benefit is that a large footprint of engaged app users opens up a world of monetization opportunities beyond coaching. Most heartening is that we're helping people who never pay us anything get started with and sustain a fitness routine over time (our average free app user completes 12 workouts a month, retains at 3x the category average in fitness, and achieves a 20% improvement in their measured strength by Week 12).