01 Sep 2016
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Case Study: Alumni Advice for a Health Care Startup

How should Wellthy sell its solution?
Re: Rob Rosenberg (MBA 1992); Larry Howe (MBA 1976); Steve Roth (MBA 1976); Richard Ventura (GMP 20); John Carreker (MBA 1991); Teg Rood (MBA 1976); Kate Stohlman (MBA 1984)

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Illustration by Chris Gash

The New York City–based startup Wellthy began with a personal challenge. Lindsay Jurist-Rosner (MBA 2009) has helped arrange care for her mother, who suffers from a progressive form of multiple sclerosis, for 26 years. After realizing that she was operating as a kind of project manager for her mom—and that she was one of 66 million Americans taking care of an ill, aging, or disabled loved one—she began to build a more modern solution to care management.

Wellthy provides loved ones with access to its care coordinators (typically social workers), who work as virtual health care assistants, handling everything from long-term care arrangements to transportation. Wellthy’s digital platform is designed as a consumer- friendly project management tool, and allows for communication and planning with care coordinators as well as multiple family members and stakeholders.

Wellthy launched nationwide in September 2015 as a private-pay, direct-to-consumer subscription service, with plans ranging in price from $100 a week for those who need help with finite projects to $200 a month for six-month packages for people with ongoing needs.

Wellthy has also begun helping employers meet their workers’ complex care issues by offering an upgrade from existing solutions such as elder care services or employee assistance programs (EAP), the latter of which essentially provide access to a call center connecting employees to available resources. As a caregiver, Jurist-Rosner found both to be grossly insufficient and outdated.

The Question:

Early results of working with employers have been positive—with increased employee productivity, decreased absenteeism, and reduced costs. But as the company rolls out Wellthy@Work beyond the pilot group, how should it price and position its offering? Current eldercare/EAP solutions use a standard per-employee, per-month pricing structure (usually $0.30 or less). Should Wellthy use this standard pricing structure and sell itself as a modern alternative? Or should it completely differentiate the value proposition and pricing because the Wellthy solution is so much more robust?

The Answers:

Like many startups, Wellthy is trying to change the conversation and the basis of competition in its market—with its product, its positioning, and its core value proposition. To underscore (and not undermine) this mission, Wellthy should also change the basis of competition with its pricing model. Fortunately for Wellthy, C-suite decision makers are of the right demographic to personally appreciate the problem Wellthy solves. Pricing per capita makes most sense when trying to spread risk across a population like an insurance product. Wellthy is trying to solve a painful problem for employees and employers, not spread the risk of that problem. I suggest charging a fee for service only to active users, and asking employers to subsidize the fees as an employee benefit.
—Rob Rosenberg (MBA 1992)

Many businesses are switching their benefit packages to establish a selection of coverage and benefits. The model of every person contributing to the cost of a benefit that few need is diminishing. I favor direct-to-C-suite sales as a differentiated benefit offered by very high-salary businesses such as legal firms. Then I would consider the kind of bundled options one might find in “gold-plated” health care policies.
—Kate Stohlman (MBA 1984)

If customer results can differentiate your product(s) for the employer, your pricing should reflect it. Offering a premium product at plain-vanilla pricing might make the employer wonder whether your product(s) will in fact do a better job.
—Teg Rood (MBA 1976)

I would recommend building some detailed customer use cases to solidify your value proposition. If you can establish some new variables on the strategy canvas, you can begin to build a solid story around value pricing versus current competitor pricing models. Use some of your large beta customers to tell your story. Those customers willing to invest time in a beta often want to be seen as innovative and can be powerful from a credibility standpoint for an early-stage company.
—John Carreker (MBA 1991)

Many employers offer voluntary benefits such as accident insurance, critical illness, and legal plan services. Employees pay for these benefits through paycheck deductions. Wellthy@Work could be a voluntary benefit offering available to employees via open enrollment twice a year. You might be pleasantly surprised at how much employees would be willing to pay for access to the service.
—Richard Ventura (GMP 20, 2016)

One needs to be careful since this is one of many different benefits available to employees, and the process always involves many layers of selling. If the model works, then it is most likely for very large companies that do their own benefits, are still on the mostly employer-paid benefits platform, and make enough money to feel able to add to their menu. Focus on a coterie of these targets to get started, and don’t let pricing issues get in the way of volume.
—Steven Roth (MBA 1976)

It depends on how the decision makers choose their service providers. From long experience working in the early cable industry, new programming companies would price their services for pennies on the guarantee of full distribution. If a competing provider is already in place, requiring the decision maker to dump the service for you, that challenge should be minimized. Wide, early distribution of a good/better service in a business where a new decision is a risk factor—especially for a higher price—requires much harder work and cost. Get in fast and wide, prove greater value once you’re there, and raise prices as needed over time. A 100 percent distribution in an existing operation is very hard to unseat—you want to be there fast.
—Larry Howe (MBA 1976)

Got a case? To take part in a future “Case Study,” send an outline of your company’s challenge to bulletin@hbs.edu

From Baker Library:

Understand more about the needs and demographics of the aging population of the United States, and explore the costs associated with long term care. Have a pricing/selling challenge similar to Wellthy’s? Read HBS Cases on precision pricing and value-based pricing (available via Harvard Business Publishing). Learn more about how Baker Library can help you with your information needs.

 
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