How do we price a digital health product?

How do you price a new digital health product? We're not exactly sure, but it's probably not free.

Show Notes

Pricing a new product is hard to do and requires that you step outside your comfort zone. We talk about freemium and why we don't want to build a free product. How we might figure out a good price. And the 4 Ps of marketing.

Warning. We say "pee" and "poop".

Fact Check

We discuss the"P's of Marketing", despite both having an MBA we cannot remember which they are. The term we are discussing is Marketing Mix, which is the 4 P's of marketing: Product, Price, Place, and Promotion. Developed by E. Jerome McCarthy in the 1960's, and has been a staple of any University Marketing class.

The term "Freemium" is used a lot in this episode, a good introductory read on the topic done by the Harvard Business Review. It is a concept introduced in the 1980's but gained popularity around 2010. Clinnect briefly considered this route with the product until we realized the product was too valuable with the minimum feature set to be a free product.

In this episode we delve into definitions around patient referral intakes, such as central intake vs pooled referrals vs directories, etc. The Canadian Medical Association uses a policy statement to define the use, however it does not take into account the use of algorithms, which Clinnect has now introduced this into landscape.

The pricing strategy exercise that we discuss at the end is the Van Westendorp Pricing Model. The exercise includes surveying potential customers to see where the "sweet spot" for pricing is, the questions are worded well to incite the right responses, yet you have the flexibility to tailor to your product. The final results are in as of the time this episode airs, but you will have to wait a couple episodes to find out!

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Credits

Produced by Jonathan Bowers and Angela Hapke
Music by Andrew Codeman (CC BY 3.0)

Transcript

[00:00:00] Jonathan: So I'm wearing, um, Hokas. I don't know if you're familiar with the brand of shoe.
[00:00:05] Angela: Nope, but they look very nice Jonathan.
[00:00:07] Jonathan: They have, they have these really thick, thick sole, I just don't wear them running very much. So they're just kind of sitting around and I thought, Oh, these shoes are good. Like they're good shoes.
[00:00:17] Angela: are good podcasting shoes.
[00:00:18] Jonathan: Yeah. So they're my podcasting shoes, I put them on before we record a podcast in case I need to stand. Hi, my name is Jonathan Bowers. I am the CEO of Two Story Robot, a software development company, helping Angela and CRS built a product. And my son just pooped in a potty for the first time.
[00:00:37] Angela: That's amazing.
[00:00:40] Jonathan: willingly. Well, so not willingly.
[00:00:43] He. Just before bath uh bath time is like my routine with him. So we go in the tub and he's bathing and he's kind of squatting in the tub playing around and he's pooped in the tub, three or four times. And I try not to make a big deal out of it, but when I do, I often like just kind of yell and it scares them a bit. So I tried not to do that when he started to grunt, as he was squatting down in the toilet, like, Oh, okay, let's get out, do a quick, dry off.
[00:01:10] And then we put him, put him on the potty and he sits there and plays with his toes and plays with the handle and and out comes, a poop.
[00:01:17] Angela: And Jonathan, how old is Zack?
[00:01:19] Jonathan: He's 17 months old now.
[00:01:22]it's pretty fun.
[00:01:22] Angela: so happy for you.
[00:01:27] I am.
[00:01:27]Hi, I'm Angela Hapke and I am the CEO of Central Referral Solutions. The company that has launched Clinnect and I cleaned poop out of my almost three year olds pants, five times in the last few days.
[00:01:46] Jonathan: Oh my goodness. Is this a regression? Is this some kind of anxiety induced thing because of some change in school or is it
[00:01:55] Angela: yeah, you don't, you don't know my daughter is pure, "I don't give an F. I am way too busy. Digging for worms and playing and in the sandbox to worry about the poop I've just had in my pants. " But then she's upset with herself afterwards. So we do have progress. The shame is there. Oh yeah. So we just want her to not feel that and just go poo on the potty
[00:02:31] Jonathan: So tell me, tell me, uh, how can I, how can I segue
[00:02:36] Angela: are we segueing from peeing
[00:02:38] Jonathan: and pooing pants?
[00:02:40] Into pricing. the three P's pee, poo, and pricing.
[00:02:45] Angela: I'm very sure I learned that in my MBA.
[00:02:47]Jonathan:  I think it's product, um, product pricing and position no, position pricing and p-p-p-p . So tell me about pricing. So you originally originally Clinnect, maybe not originally, but one of the ideas was that Clinnect was going to, there was going to be some free aspect of, of Clinnect

[00:03:09]Pricing

[00:03:09] Angela: Definitely! We were about, um, just over a year ago. We were discussing this. And at that time, the whole freemium idea was, um, I don't want to say it was hot because it was a little bit old by then, but it was definitely something that was well understood and well used in the, in the, in the tech industry was the whole freemium idea.
[00:03:35] So we wanted to take that idea and shifted over to, um, healthcare software, which isn't really done except in more like the, the consumer, um, models.
[00:03:46]Then I had a few conversations with a few people about this. And while, you know, we had floated it by the, the users, the future potential users and they were all for it. but I had like a conversation with a, a bit of a mentor of mine and he had very strong opinions about freemium products and, um, he kind of just said to me, Angela, Why would you ever give anything away for free?
[00:04:13] Like, could you at least just charge 30 bucks a month for it? Why would you ever just give it away for free? I just think that model's so ridiculous. I kind of hit me a little hard because I was like, wow. Geez, everybody's doing it. That's what I thought we would do too. But it got me thinking in and about the users that I, that I have. And, um, it did make a lot of sense. I was like, yeah, honestly, to my customers, what is 20 bucks a month to them? You know, it's a few Starbucks coffees.
[00:04:46] Jonathan: Well, and I think, I think also if they're not, if they don't see the value in it enough to give up the 20 bucks. Or 30 bucks or whatever it is, then either the value isn't enough or, you know, maybe it's, you know, maybe the customers are just not great customers
[00:05:03] for us. and
[00:05:04] we don't, you know, we don't want those.
[00:05:06] We don't want the people that don't recognize that it's valuable.
[00:05:09] Angela: exactly. Exactly. And, and it was. I don't want to say it was a bit insulting to our customer to give it away for free, and then just give them like the bare, bare, bare minimum. Um, but I felt like it kind of was because we do have a bit of a sophisticated customer. So, uh, so that's when I decided that I would launch with a free trial period.
[00:05:37] And especially for our first users, because they're just there, they're our beta customers that were there working with us and figuring a lot of this out.
[00:05:45] Jonathan: The value in that first, those first few customers is heavily slanted towards us and less so towards them
[00:05:52] because we're
[00:05:52] Angela: why, that's why the original groups are getting along free trial period with us. And then, um, that'll shorten as we get, uh, kind of just different tweaks and things smoothed out. so I figured when we launched, we would go with a, like a, a low cost model basic model first and then have premium, uh, features that we would add on for an additional premium price.
[00:06:18] And so that's actually how I went out and sold it to groups is I said, I said to them, we're going to give you, , like six months a free. Free for you guys to use for six months. , and then, you know, right away through like, well, how much is it going to cost us when the free trial is over?
[00:06:36] And I haven't never given, a stuck price on it. I haven't given a firm price on it at all. I've said it'll be anywhere between kind of that 10 to $25 a month, which nobody has batted an eye at. 10 to $25 a month for the basic product.
[00:06:54]
[00:06:54] Jonathan: The market size for this at the moment doesn't appear to be super huge. So, you know, to have, uh, Even a hundred dollars a month as the base plan. That's not that doesn't, that doesn't make a very sustainable business.
[00:07:08] Angela: No, I mean, it's one, it's one product and it's um, yeah, it's not going to make us millions and millions of dollars, I think that's when it gets interesting as to, yeah, it might, it might, it might anchor us to low. I'm willing to take that risk at this point right now, given, the forward momentum by a lot of companies to do the type of thing that we're doing.

[00:07:37]Central Intake

[00:07:37] Everybody's running towards central intakes, but not really knowing how to do them or how to create a sustainable model around them. What we're doing is central intake in a really easy to use fashion. Um, While others are trying to figure out how to be, how to do it, how to do a central intake and how to be sustainable.
[00:08:01] Jonathan: Who were you talking about as the others? Like, do you mean like competitors or,
[00:08:05] Angela: some competitors. So like some EMRs are looking at to creating what they call a central intake. But when you do a deep dive into what they're calling a central intake, it's not really a central intake and it certainly isn't a pooled referral.
[00:08:21] Jonathan: Right. Yeah. what would be the differentiator between Clinnect and some of these other attempts at central intake? So you mentioned, you mentioned like, um, pooled referral. Yes. But like in what other ways are they not really central intake?
[00:08:37] Angela: Okay, so let's back up and we'll talk about define these. So central, what is the central intake? It's one place for patient referrals to a particular specialty to go.
[00:08:50]If you need to send your patient for a knee like a knee consult, you would send it to a central intake would be considered one fax number that all the ortho surgeons use to get all their, um, referrals in one spot. That's a central intake.
[00:09:11] So that's handy-ish for a lot of groups. Who are just trying to track some wait time data, understand what the referral demand is, blah, blah, blah.
[00:09:22] A pooled referral is typically paired with a central intake. So it's kind of like central intake's, like baseline and pooled referral's like the next step that you take. And that's where I, as a primary care provider want to send him my patient referral for a knee. I can send it in on typically a standardized form.
[00:09:44] That has like a choose for me button or box that I check off where I don't have to choose the surgeon. I don't have to know all the surgeons in the region. And it goes into a pooled referral of which somebody assigns, um, a surgeon to that referral. So Clinnects differentiator, is it as both a central intake, a pooled referral.
[00:10:11] But we do not rely on someone and their potential biases and things like that to assign it, or even just like kind of a picking like next, next, next. But we have a specific algorithm that runs in the background that can be, um, controlled by like tweaks of the dial to ensure that that referral goes to the right surgeon.
[00:10:42] And has a way to balance or purposefully imbalance those referrals to each surgeon. The the other, the other one is the confirmation that the primary care provider receives. Some competitors or are starting to do that a little bit, that kind of that back and forth.
[00:11:00] Um, but with ours, it's central intake, pooled referrals, and confirmations back. And then plus hopefully a whole set of other features in the future.
[00:11:12]Jonathan: So the, on the topic of pricing though,
[00:11:14] Angela: The basic plan includes the ability to send a referral to a specialist in a pooled way. So you have a choose for me option. So you don't have to know who's who So we're doing a Clinnect is sending referrals in, um, a far more secure way than we've seen in the past.
[00:11:36] Um, certainly over fax machines, but even more so over some, um, the way that, uh, some competitors are using it. so it's a secure way to send a referral. You don't have to choose a specific surgeon and you receive a confirmation back with the surgeon's name or a specialist's name.
[00:11:55]and then on the specialists end they have the ability actually, sorry, on both ends, you have the ability to historically track those referrals as to when it was sent, who it was sent to. And all that data is incredibly important when you're looking at wait times and things like that, because it captures that go date and that go time.
[00:12:16] And then on the surgeon is, um, specialist's end you have a dashboard that shows you all your referrals that you have received. They're categorized their urgency coded. Um, and in our basic product, we are allowing the ability to re categorize and re urgency code or switch urgency codes on those referrals to ensure once again, because we have an algorithm running in the background that everything is copacetic on the, on, on the backend too.
[00:12:52]Meaning if a a primary care provider sent through a whole bunch of hernias and only like two of them were hernias, they're going to initially get allocated as hernias in a balanced way. Um, but they weren't hernias. So when we recategorized, then it can, can change that.
[00:13:10] Jonathan: And that I know, I know we try not to use the word triage, but is, is that what you would have considered triage, where they're coming in and, and you're sort of re categorizing things that were mistakenly categorized and, and adjusting the urgency.

[00:13:27]It's not Triage

[00:13:27] Angela: So , we are careful with using the word triage because triage assumes that there's been medical eyes on it. So meaning that the, the surgeon has taken a look at it, or the specialist has taken a look at it and actually done their categorization and their urgency. So we don't know for sure that that's being done so we don't call it triaging. We call it categorization.
[00:13:46] Um, so the baseline product includes your, um, your login to our secure system that has dashboards with historical referral tracking an algorithm that runs in the background and ability to choose a surgeon or have the, the, um, system choose for you. And on the specialist end the ability to accept or reject that referral. So, that's huge because in the past, Uh, in kind of like old workflows is that acceptance or rejection of referrals was a long antiquated process of either getting something, on your computer or your fax machine.
[00:14:29] And you're looking at it and you're like, Oh, this doesn't apply to us. We need to send it back and having a phone call and that re faxing and yada, yada, yada. So
[00:14:39]Jonathan: So what's the plan for some of the things that we know will be in the premium? Cause I think, I think a lot of the premium features are yet to be discovered because people aren't using a system like this yet, which is exciting.
[00:14:50] Right. We get to, we get to be at the front of this and see, you know, you know, moving to a more digital process. Um, A more secure process and a lot of, you know, a lot more efficient process. We get to understand what some of the, some of the new pains that, uh, MOAs and specialists will start to encounter and primary care providers.
[00:15:10] But what are some of the things that we know are going to be part of that more premium

[00:15:17] Premium Feature Set

Angela: I think number one is, is, um, a communication method or a messaging system back and forth because of the, the reason that I just exp or the example that I just gave to you about, maybe you receive a referral. And it's inappropriate or it's missing pieces, or it's not a complete referral and you're, you're trying to put it together and you just need to do a quick message back to the primary care provider.
[00:15:43] So instead of picking up the phone wasting, you know, maybe a few more minutes of your time interrupting the very busy person on the other end of the line, you can just send a quick message within the system back and forth. And, uh, potentially allowing attachments with that messaging system. We haven't talked about that as to whether that'll be included in this, in the next premium release or not, but doing something along that line.
[00:16:12] Um, and then, so that's a big one. That's huge. That would be, um, I think something that people would find incredibly valuable
[00:16:22]Jonathan: and at one point we were talking about the, pooled referral and being able to be deliberate in balancing or imbalancing, those referrals is that and giving the specialists the ability to tweak the dial, so to speak.
[00:16:36]Angela: And that's the one that I'm waiting to hear feedback from the specialists on after using our product for a little bit is what does that exactly look like? So I can think of lots of examples where you'd want to tweak the dials. Um, I'm going to go off on mat leave. I am, slowing down my practice. I'm on the verge of retirement. we have, we have a specialist right now that goes away for a few months, um, per year on, he does like doctors without borders for.
[00:17:07] I think it's three months, every year. And so he wants to turn off all urgents and then turn them back on. Um, there's just a whole bunch of examples. And then, and then once we get into being able to tweak the dials, then we get into some interesting conversations around wait times and how groups can work together.
[00:17:30] To start balancing their wait times based on the categories that they've already defined. And those referrals are already coming in at. So they have that tracked data and they know their demand for each category of referrals and starting to get some balance around wait times they can't do that right now because number one, it's, um, referrals don't come in categorized. When a referral comes into a specialist office, it's not given a category,
[00:18:00]Jonathan: the category comes in with the referral. That's something that the primary care provider needs to specify
[00:18:06] Angela: correct. There would be, um, a reason for referral.
[00:18:13]So a lot of EMRs, would kind of autofill a, um, an initial diagnosis for them. But EMRs, are different. Doctors are different and sometimes you wouldn't put the same wording in as your counterpart.
[00:18:31]And so it's kind of all over the map. It helps the specialists because they, they understand it, they see it and they go, Oh, okay. Then, you know, that looks like it's urgent, we should get them in right away. Or, ah, you know, I think that's a bit of something that could wait a few weeks and, and whatnot, but there was no standardized categories for referrals.
[00:18:52] This is, what's what we're starting.
[00:18:55] Jonathan: So we've got a standardized list that the primary care provider picks from, but it's still, it's still on them to make that initial categorization, which they could get wrong.
[00:19:04] Angela: Oh yeah. That's why this is why it's important for us to have the feature in for the specialist to re category something, categorize something. So something comes in. this, um, kind of all encompassing category that because they're not really a hundred percent sure. So they're going to put it as, you know, abdominal pain. Um, whereas, you know, specialist's going to look at it and be able to even quickly look at what's happening in the history and go, Oh, that's, we're specifically this, um, which is important because then that helps define their journey and.
[00:19:42] You know, helps us get better with, predictions and wait times down the road. it's actually something that I kind of, I guess, now that you've, you've brought it to light, I kind of took it for granted that we were doing this referral categorization.
[00:19:57] Jonathan: I just assumed that was happening. Like the way, the way we built it, I assumed that was just mimicking an existing practice,
[00:20:04] Angela: No. The first beta users that we have coming on from specialty groups are building their own.

[00:20:11]There are Two Customer Groups

[00:20:11]Jonathan:  Um, I want to, so one of the things that we've talked about, which I think might be important to highlight is, is we have two customer groups on, in this product. And so there's the, there's the specialists where that premium feature set makes sense for right. We're charging the specialists to have access to these features.
[00:20:33] there's another user. There's the primary care providers who are primarily sending, sending referrals to the specialists. How does it work for them?
[00:20:42]do they pay for it?
[00:20:43] Angela: Yup. Um, and this is why I've been wavering on what the price is and that's kind of why I've given it a range. Is it, may, it may happen. Likely happened that the primary care providers are a different cost than the specialist. So if you look at it from a primary care provider perspective, they get great value right off the get go.
[00:21:09] They don't have to know all the surgeons in town and who's who they just have that choose for me option. They know that their, their patient referrals getting through it's confirmed. Yay. It's kind of done after that. From a referral perspective, which is the piece that we're focused on. Specialists get a little bit longer term value from that, the ability to look back at the historical, um, the algorithm that we talked extensively about, the category, the urgency, the, just the ability to almost wait list manager referral , is a longer term value. So there might be a higher cost for the, uh, specialists versus the primary care providers. We'll see. I haven't figured that out yet.
[00:22:00]Jonathan: Yeah, it will be. I'm excited to, I'm excited to gather some feedback from both sides of that from both sides of that exchange. And just see, you know, see how valuable it is to have that list just there. So you don't have to think about it or look it up. Yeah. I'm hoping that there's some value in it being easier as well.
[00:22:25] And it's not, I mean, I think sending a fax is probably pretty easy
[00:22:29]and the confirmation, the confirmation is, that feels like an obvious value,
[00:22:33] Angela: Exactly. The way that fax machines work typically with EMR right now is a lot of it is e-faxing. So there isn't a ton of, you know, the physical paper paper shuffling around and it is, they have you EMRs have made it very easy to fax it. Let's really just kind of hit the fax button.
[00:22:54]I think, and that's why from a primary care provider perspective, it is very patient centric because yes, it's maybe easy to send to the general surgeon that you send to every single time, every single patient and hope that they do all the things that you're sending them, because you don't, you have built a relationship with them and you don't really know who else is in town.
[00:23:18]But that could mean a very long wait list. Whereas this takes away all that guessing
[00:23:26] and all that, um, kind of pigeonholing and, and things that have happened in the past around that. So it is very patient centric from the primary care provider perspective. Uh, the confirmation back is huge because then that's like time not wasted. In the future so that there is, there is the value proposition there for them.
[00:23:50] Jonathan: We talked a lot about pricing.
[00:23:51] Angela: we talked a lot about pricing.
[00:23:53]Jonathan:  I'm excited that you have decided to not do a freemium model.
[00:23:58] Uh, I just, I think it's, I think your mentor friend is correct.
[00:24:04] Is it Steve? Okay. I think this is more valuable than to just give it away. We can give other stuff away. We can give away the podcast we can give away, you know, things that, that are valuable, but the day to day value that you would get out of using the software is significant.
[00:24:25] And so that. You know why we need to be able to keep the lights on . We need to be able to be motivated, to continue to provide that value and to innovate on innovate even more on the value that's being provided.
[00:24:41] If it's free, then what's the reason like. What's the reason to keep it's just a cost. Like it's not, it's not, it's maybe free to them, but it's not free to us.
[00:24:48] Angela: Exactly. What's the motivation for us to make it better.
[00:24:51] Jonathan: Yeah. It's just costing time and money or time and resources to continue. Mmm. To continue supporting free users. So I'm, I'm excited by that. I think, I think that's a much more sustainable way of building a business. I mean, there's, I think, I think one of the, one of the interesting things to come out of COVID is a bit of a rejection of that old way of doing things, which is growth at all costs
[00:25:19] Angela: Oh, are we seeing that? Isn't that interesting? The shift in forget about unicorns
[00:25:27] Jonathan: yeah,
[00:25:28] Angela: enough. Yeah.
[00:25:31]
[00:25:31] And so then when we did finally launch and I was doing, you know, demos, one of the first thing people ask is how much is it going to be? And to be honest, we haven't priced it yet. So come up with a guesstimate at the moment. Not that I hadn't thought about it before, because they certainly had, but I hadn't come up with anything firm.

[00:25:56] Pricing Exercise

Jonathan: So there's this, there's this pricing exercise that I really like
[00:26:00] Angela: I don't think I like anything with a word exercise in it, but
[00:26:03] Jonathan: it's not an exercise, it's just like a method.
[00:26:06] Angela: You're just rebranding it.
[00:26:09]Jonathan: I don't know how to pronounce this person's name, Van Westendorp's price sensitivity meter.
[00:26:15] And it's it's, um, four questions that you can ask that kind of help you gauge what the price might be. So you ask at what price would you consider the product to be so expensive that you would not consider buying it? So that's the, that's the high side. That's too expensive. At what price would you consider the product to be so low that you would feel the quality could not be very good. So that's the too cheap price. and then at what price would you consider the product starting to get expensive so that it's not out of the question, but you'd have to give it some thought before buying it.
[00:26:54] And that's the, uh, on the expensive for the high side. And then at what price would you consider to be the product, to be a bargain, a great buy for the money? And that's the, the sort of cheaper or the good, the good value, the good value side. And I think if you ask those questions and we've done it, we've done it on a couple of, uh, on a couple of projects and have been surprised by the results in a good way.
[00:27:17] Like surprised that the, the pricing that we had maybe come up with in our minds was a little low.
[00:27:25]Angela: should I try it? Should I like try a few customers and then report back?
[00:27:30] Jonathan: I would love to hear that
[00:27:31] Angela: okay. I'll report back.

[00:27:34]3 Ps

Jonathan: wait, just wait. I'm going to look up the three Ps. Is it three Ps,
[00:27:38]Angela: I'm going to go product placement and price.
[00:27:40] Jonathan: you think product placement and price?
[00:27:41] I think. I don't know. Uh, it is, uh, product place, price and promotion. There's four Ps. So the four Ps pee and poo was not one of the four Ps of marketing, so, Oh, MBA.
[00:28:00] Sorry.
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