Executive Summary
Every category sits on a spectrum where the end user and buyer are mostly the same to being very different. When the end user and buyer are mostly the same, the customer journey is relatively straightforward, like buying a coffee at Starbucks for yourself. Categories where the end user and buyer are rarely the same have much more complexity. Categories where the end user and buyer are very different tend to have longer and more complex paths to purchase. Fortunately, there are several ways to simplify and shorten the path to purchase via three strategies. First is to identify end users who have demonstrated a proactive mindset and significant behavior change outside the category. Second is to identify specific scenarios and situations where the end user and buyer’s needs and wants temporarily align. A third strategy is to introduce a neutral third party into the equation, much like a NBA team executing a three team trade that breaks the stalemate.
Every category sits on a spectrum where the end user and buyer are mostly the same to very different.
When the end user and buyer are mostly the same, the customer journey and decisions are relatively straightforward, like buying a coffee at Starbucks for yourself. But some categories have one buyer and many end users (think of one person ordering takeout for a large group). Finally, other categories have the complexity of opposing interests, when the end user and buyer disagree on what is needed, like taking your kid to the dentist.
Simplifying and aligning users and buyers has huge profit potential via both higher growth and lower costs. Categories with high user and buyer complexity tend to have longer and more complex customer paths to purchase. Consumers delay purchases, which decreases revenue. This forces companies to spend more on marketing and sales to try to push consumers through the purchase funnel.
For companies playing in a market where users and buyers are disconnected, there are three main problems to solve. First is fully recognizing all the buyers and users. Second is effectively and efficiently coordinating across all buyers and users. Third is understanding and aligning the interests of all the buyers and users.
Fully recognizing all the buyers and users is a challenge in healthcare. Take digestive health as an example. This impacts as many as 70 million Americans and is the second highest healthcare expense in the U.S. Digestive health is heavily tied to the food and drink consumed, so it is easy to assume this is a simple situation where the end user and buyer is the same. If someone has a digestive health problem, it is their responsibility to pay for and change what they eat and drink, right? But behavior change is very hard on your own, especially when the consumer is solely responsible for the expense and effort for fixing their health.
NFP, a leading insurance broker, took a step back and saw that digestive health had multiple end users and other potential buyers. Digestive health causes individuals to miss work, so employers are an important beneficiary of improved digestive health. Digestive problems also drive health insurance costs, which are often borne by employers. By reframing digestive health as a productivity opportunity, it created an incentive for employers to intervene as the buyer. NFP brought in Vivante Health, a company with an effective gut health management program called GIThrive, to help with personalized nutrition plans, daily health challenges, and education about medication compliance. Employers who invested in this reported one third of the target population engaged successfully with the program and the company made three times ROI in one year on the cost of the program, while NFP benefited from greater client loyalty.
The education software market is another example of how users and buyers can be disconnected. Such software can have dozens of end users (the students and the teachers) and numerous potential buyers (the school districts, the teachers, or the parents). The classic way education software companies handle this is to focus on the end buyers with the biggest wallets, the district, with a massive sales force. The biggest education software companies woo key decision makers at the top, who then mandates that students use a particular product. But this can backfire. The Los Angeles school district spent $1.3 billion on new iPads and curriculum, only to find that only one teacher out of 245 classrooms was actually using them.
In this situation, the key is to flip the focus from the buyers to the most engaged users. In this case, it is a set of teachers who love to try new technology for teaching. Classkick is a startup with a software-as-a-service for teachers. Classkick lets the teacher monitor each student’s progress in real time and enables the teacher to privately interrupt the student to provide praise, encouragement, or correction. The student can privately “raise their hand” to ask the teacher or peers for help. Classkick uses a freemium pricing model to cheaply drive trial, eliminating the need for a huge sales force. Since teachers give Classkick high net promoter scores, teachers themselves advocated for Classkick to the district (who is the buyer) and other teachers. The ability to engage users, and to limit sales and marketing spending, has enabled Classkick to grow and be near break-even in a relatively short period of time.
Hearing aids is a category that spans all three challenges. A typical hearing aid can cost $5,000, and many health insurers do not cover hearing aids for adults. Of that amount, sales, marketing, and servicing costs is the biggest line item and is significantly higher than the cost of the product alone. Why is the marketing of these products so expensive? It’s partly because the purchase path is long and convoluted. Most people who are experiencing hearing loss are not motivated to seek a solution themselves. In most cases, they are goaded to do so by loved ones, who become frustrated by the difficulties of communicating with them. In this sense, the people compelling the purchase are not the end users of the product.
Eargo, a Silicon Valley-based hearing aid startup that was founded in 2010, has taken several steps to try to overcome these disconnects. (Disclosure: Eargo was a consulting client of mine during 2019.) It realized that if the purchase process was simpler and easier, consumers could buy hearing aids for half the price they pay and it could double profit pool for the industry.
Like other healthcare categories, legacy hearing aid companies do a poor job of identifying all users and buyers. Eargo dug deep to discover special situations where health care plans actually do provide some hearing aid coverage. Separating the burden of paying from the end user led to higher adoption rates. These specialty health care plans knew that hearing loss has strong co-morbidity rates with other health issues, so increasing awareness of this benefit and addressing hearing loss was a win-win outcome.
Most hearing aid purchases are made in a retail store, which is expensive for the company and inefficient for the consumer. Eargo, in contrast, sells direct-to-consumer by offering audiologists by phone, email, and chat so folks could research and shop while at home. The smaller marketing and sales expenses involved in this enables Eargo to offer hearing aids at half of industry prices.
Finally, Eargo trained its call center team in the nuances of aligning the interests of everyone involved in the purchase and use of hearing aids. Eargo’s team are trained to talk about hearing loss not as a medical problem, but rather as a relational problem. They ask questions about the person’s lifestyle and loved ones first. They ask more questions about the quality of conversations with people the person with hearing loss cares about, instead of just talking about how well their ears function. They found that consumers become far more motivated to take action when they realize they aren’t losing their hearing, they are losing their relationships. Eargo’s success is driven as much by the power of their empathy as the power of the product and prices.
Companies that want to overcome the buyer-user divide should learn from these techniques.
