Happily, for many of us, the 2020-2021 winter cold and flu season was mild due to the social distancing measures implemented by governments and businesses in response to COVID-19. While a less severe cold and flu season is good for public health, consumer healthcare businesses experienced reduced demand, impacting many companies’ bottom lines.
For many brands in the cold-and-flu sector, last year’s downturn highlights the importance of agility and adapting business models for over the counter (OTC) products and services. While much of the innovation in OTC medications is focused on effectiveness – improving congestion relief or pain reduction, for example – product innovation is often difficult, time-intensive, and expensive.
In recent years, consumer purchasing habits and healthcare data has become more easily accessible to brands, while digital technology costs have come down significantly. These trends point to a new opportunity for OTC brands, leveraging their products to sell outcomes and customer support, as well as engagement-as-a-service to consumers, which is termed servitization. We have seen businesses across sectors generate new value for their consumers by focusing on overall user experience, rather than delivering “only” high-performing products. By adding to the consumer value proposition with new tools, services, guidance and insights, brands can increase consumer loyalty, stand out among the competition, and gather data to enhance their marketing and product development efforts. We have identified three key attributes of a service-driven, digital model that OTC brands can develop and implement to drive new value.
A service-led value proposition in OTC consumer health does not (necessarily) mean that you’ll be sending healthcare providers to a consumer’s home to teach them how to use your cold medicine. It does, however, incorporate the mindset that the product value goes beyond the medication itself.
The broadening use and acceptance of telehealth services offers significant innovation opportunities for an OTC cold medicine brand. Brands could partner with telehealth companies whereby a healthcare provider could recommend medication during a virtual visit, to address any treatment needs they have identified. Further, the provider could order the medication to be delivered to the patient's home on the same day. Additionally, the medication itself could be accompanied by access to a mobile application with telehealth integration, or a web application that can be accessed through digital packaging innovation like a QR code. As the consumer is preparing to use the medication, they could speak with a healthcare provider to ensure they use the product appropriately, identify any potential adverse reactions, and guide them on next steps as they use the product.
We’ve seen dietary supplement brands integrate this approach in a direct-to-consumer business model. Hum Nutrition, for example, allows consumers to get advice from certified Registered Dieticians.
For this service-driven value proposition to be effective, the user experience and integration must be seamless, with limited effort required from the consumer to access the healthcare services. Making the service delivery highly experiential and familiar is particularly crucial, which is why adopting technologies like mobile applications may improve outcomes.
The broadening access to customer data through transaction information, social media, and online behaviour has bolstered many brands’ marketing strategies, resulting in highly precise and targeted campaigns. While this approach can be successful across sectors, we see a particularly compelling opportunity for brands in the consumer health space to use predictive analytics to support product discovery.
The cold-and-flu season is relatively predictable at a regional level. Cold-and-flu brands are already referencing public health data on the spread of illness, cross-checking their own data on purchase trends, and analysing online data points such as search trends and social media posts to yield a robust picture of when consumers in certain zip codes are likeliest to suffer a cold and need to purchase cold medicine. These insights allow brands to send targeted ads to consumers, offering discounts or same-day delivery on demand.
Going a step further, brands can combine this data-driven approach with the servitization model discussed above. They could offer consumers an as-needed subscription model, automatically sending a package of cold medicine and other cold-and-flu essentials periodically throughout the cold-and-flu season, according to the consumer’s preferences, taking a personalized approach. This model offers compelling opportunities to partner across brands or companies, share data, improve consumer loyalty and earn recurring revenues.
Servitization and subscription business models are attractive for brands thanks to recurring revenues that reduce the customer acquisition cost and tend to increase lifetime value. However, subscription models run the risk of appearing purely transactional to consumers. Brands can combat that perception and provide further value by adding non-transactional elements to their service-driven models, like educational content, examples of how brands have shared values with their consumers, or special subscriber-only benefits. Going beyond the core attributes of the product can increase brand loyalty among consumers.
For example, consumers are demanding that brands demonstrate their commitment to environmental sustainability. While the healthcare sector has been somewhat slower to adopt sustainability thinking, medical device, pharmaceutical and consumer health companies are beginning to incorporate sustainable packaging and supply chain transparency into their products. These non-transactional, service-driven attributes can demonstrate to consumers that brands are aligned with their values. Brands can use digital experiences or digital packaging to educate consumers and engage them in sustainability initiatives.
OTC consumer health brands can enhance consumer loyalty, augment their data assets and capabilities, and diversify their partnership strategies by implementing service-driven, digital innovation. Focusing on the shared values between brands and consumers can be an effective starting place to determine the right combination of service attributes to begin adding value for consumers as quickly as possible.