How the smart digital health marketers are thinking about patient acquisition

Paid marketing used to be a lot less expensive. Many of the previous generation of digital health companies could run a fairly slick operation using venture capital dollars to fuel ad campaigns on social media sites, all with a goal of recruiting providers and patients. That could lead to some dizzying top-line revenue numbers within a matter of a few years, and sometimes even months. Depending on the business model, the goal for many of these companies was to bring down the cost over time - and many did so successfully.

That has all changed - and I rarely see direct-to-consumer health companies rely so heavily on paid marketing without investing in other channels. Investors I speak to regularly are also increasingly skeptical when they dig into the financials, and they see that a company has built a user base by relying heavily on targeted ads via Facebook and other platforms. It can be an inefficient way to acquire customers, and it only makes sense if the patient tends to stick around through multiple episodes of care — or if the intervention is high-priced enough to warrant it.

It’s not just that companies are bidding on limited ad inventory. It’s that privacy-first policies, like third-party cookie depreciation, as well as the Apple iOS software update in 2020, have decimated attribution fidelity, notes Georgina McMillan, a consumer health investor at Headline. “The result is that customer acquisition costs go up because attribution windows are shorter, cross-device tracking is harder, and retargeting is weaker,” she explained, when we spoke on the topic last week. In other words, it’s really hard to know these days if a paid ad has reached its target audience, and therefore been successful. This has created a lot of challenges for health apps, and more broadly in the consumer-tech space.

So at a time when there’s more competition than ever before to acquire patients, how are companies successfully doing it? Making things more complex, AI has made personalized emails a commodity. Every possible sales target within an organization finds themselves filtering out a massive amount of unwanted emails.

I’m fascinated by these questions, so I've been asking companies in my network for their playbooks. And I figured I’d share a few! Note: This post is intended to provide tactical advice for companies that are marketing to consumers directly. That includes both D2C and B2B2C. As long as there’s a “C” somewhere — it’s not purely “B2B” — this post will offer wisdom.

The power of referrals

The first rule of building a business that is successful with provider referrals? This may sound obvious, but it’s a mistake I see companies make all the time. Don’t start a business model that involves directly competing with the provider - and then expect them to fall in line with a referral, or even support their patients in using an online provider where they don’t have any reason to trust them.

To put it more bluntly: If the provider believes that they already adequately provide the care that a digital health clinic offers, then it’s unlikely that they will suggest their patients leave their practice.

For example, I've met with plenty of behavioral health companies that target primary care physicians to provide a steady stream of referrals. I’ve seen that strategy result in mixed outcomes. Some primary care physicians do take on a major role when it comes to managing behavioral health, and plan to continue doing so. Almost half of all behavioral health-related scripts, for instance, are written by family doctors. But, as these companies might point out in their pitch decks, that isn't always the case. Many PCPs lack the time and resources to care for their patients’ behavioral health needs, particularly the higher acuity cases.

The key is for a business development team to find ways to target the right practices and pitch them appropriately. It shouldn’t feel like a sale. The companies I’ve seen having the best success will often leverage their own clinical experts to build these bridges. Likewise, it doesn’t hurt if the companies can take on aspects of these providers’ daily tasks that they would prefer to offload. That might include anything related to calling insurance companies and dealing with insurance, in addition to types of care where they lack the expertise or time to support the patient.

What else works? Well, the digital health company won't get referrals if providers don't think they're providing high-quality, evidence-based care. There's no way around that, and it will impact retention. I have seen it in the financials. A patient uses a digital health company once or twice, gets a prescription, and then their own PCP takes them off of it. Quality is everything. That’s also why it’s so important for companies to build credibility and trust, as well as to speak the same language as the industry, notes Catherine Anderson, a communications consultant who has previously worked at Anthropic, Apple, and Cityblock Health. That might include SOC 2 certifications on software, or CHiME and KLAS credentialing that companies share in public forums, including their websites.

One of digital health’s foremost experts on this is Christina LaMontagne from Clarity Pediatrics, whose company focuses on treating children with ADHD. Pediatricians are happy to refer to Clarity in states like California -- where they are already doing so in large numbers -- because ADHD requires a multifaceted set of interventions and it can be very challenging for families to find the right set of specialists. Many of these specialists also require that families pay out-of-pocket, and not everyone can afford to. Because of that, pediatricians have responded enthusiastically to Clarity -- it offers an in-network alternative that is highly specialized to kids with ADHD. (It’s worth noting, per McMillan from Headline that providers in this scenario aren’t just a referral source - they’re a retention loop. If the provider feels the company complements their care, they’re more likely to not only continue referring — but also stick around as advocates. “That’s a deeper moat than many companies get credit for, and they should,” she said).

I’m not against paid ads to support this strategy. One marketing executive I spoke with, Anthony Modano, told me that he’s often seen success with this combo. Imagine a company hires a business development team to build relationships that result in a constant flow of referrals - check. But then the marketing department also doubles down with paid advertising. Double check! “What I have consistently seen is that even if a person is referred by a non competing provider, that person still searches online,” he said. If the digital health company doesn’t show up via that search, a competitor may be able to swoop in and “steal” the referral, he warned. And this is particularly true for companies that have a lot of competitors. Smart communicators might also layer on earned media here, which can exponentially increase reach by driving organic traffic to then re-target with paid (or vice versa).

Paid ads might also come into play for companies in a later part of their lifecycle, after they’ve figured out LTV and successfully nailed down retention.

Modano also said that for profitable companies that are scaled, the combo of BD and paid can be successful in ensuring growth does not stagnate. That’s particularly true for “high intent” segments, where the need is strong amongst consumers, notes McMillan. When companies solve an access or friction problem — long waitlists, stigma — customer acquisition cost (CAC) can stay efficient even in paid. It’s not that the ads are cheap, McMillan explained, it’s that conversion rates are stronger because of this underserved demand.

For other target audiences, such as Medicaid, out of home paid ad campaigns can do a lot to reach people during their day-to-day commute. That might include placements like ads on the side of buses or transit stations, billboards, street furniture, including branded trash cans. This tactic is valuable for launching into a new city or market. In rural areas, it’s important that companies take the time to understand what serves as the local “Main Street” - either literally or figuratively. To offer an example, one of the smartest strategies I’ve seen in the market involves a company - Fabric Health - that helps low-income individuals, mainly women, enroll or renew in Medicaid by connecting with them at the local laundromat.

Go organic

What’s the difference between organic and paid marketing? Well, organic builds up brand presence and loyalty whereas paid aims to convert via a sale from a specific ad-based campaign. Many of the best marketers I know prefer organic strategies in the long-term, because they’re usually more sustainable and less expensive over time. But that doesn't mean no paid -- usually, I see a combination of the two. I basically never see companies anymore that only do paid advertising - most recognize that organic/SEO marketing is an evergreen complement to the other advertising strategies that improve their margins. Organic can also be higher value for a company because it more often results in a longer relationship, and not just a one-time conversation.

Within the organic umbrella, there's huge value in content strategies that answer common questions where a patient might be Googling/searching for answers (more to come on this topic in the next few weeks!). Tone is everything. The pieces should be written by a trusted individual, potentially even a clinician, and they should feel relatable and packed with helpful information. There’s also campaigns with influencers that authentically value the product or service; YouTube videos, Reddit posts, and plenty more that companies can try out to reach their target customer, typically the patient or the provider.

Where I’ve seen organic really work is in cases where there’s a huge, glaring unmet need. Many of the companies I’ve spent time with in the menopause space have discovered that, because there’s an enormous number of women every day searching for information about their menopause-related symptoms. I’ve also seen it in oncology (it’s a harrowing moment to be diagnosed with cancer), sexual health (for obvious reasons), behavioral health (patients still face challenges accessing care, particularly those that are severely mentally ill), and pediatrics (parents will do anything for their kids), amongst other areas.

Where I've also seen companies leverage both organic and paid successfully is where the condition is highly stigmatized, like Hims and Ro. These businesses were built off of the fact that men were afraid to admit to their family practitioners that they had erectile dysfunction. That makes it more likely that a person is searching for care online, versus talking to their doctor. And if there's a problem related to underdiagnosis. If the person is searching for symptoms, but unsure about what the root cause might be, there may be an opportunity to direct them to a medical team for potential diagnosis and treatment. Companies that spring to mind here: NOCD in the OCD space, or Equip in eating disorder treatment.

Bottom line: As long as there continues to be a backlog of individuals who need care and aren’t receiving it, then organic marketing will do well in the long-term.

IRL is back

I’m a firm believer in hybrid strategies for work and life. I have full days of Zoom calls, like most people do, but there are moments where in-person time does matter. Some companies can perform extremely well with virtual strategies, both in how they conduct their operations and in their marketing efforts. I'm less convinced of that in healthcare. Healthcare may be a big market, but it operates like a bunch of small ones and many of the decision-makers know each other. It's a very close knit network where relationships matter.

VCs wouldn’t put IRL into its own category of marketing, but I believe it’ll be a fuel for virtually any campaign. I’ve recently seen the rise of highly curated events, and Second Opinion has been involved in quite a few of late. If a company can find ways to get a group of individuals in a room, whether that's customers, influencers, providers or another key stakeholder, there may be a more natural opportunity to connect that feels like it’s less of an ad or sales pitch. The key is to invest in building goodwill. If the event feels enjoyable or useful to a subset of people, they will tend to remain loyal and think back to that business at the moment of a purchasing decision. IRL is also a way to build lifetime value, because patients are reminded that the company is there to help them, and those events can be supported via CRM campaigns, paid advertising, and other marketing channels.

In-person touch points can accelerate trust. In healthcare — especially in segments like mental health, fertility or oncology — trust is what matters most, not just awareness. IRL events create authentic connections and brand loyalty in ways that digital-alone cannot, especially for categories where there’s a lot of stigma and where there’s a certain intimacy involved in the connection between a patient and provider.

All of this effort comes down to a formula that investors care about the most. And that’s LTV: CAC. What does that mean in layman’s terms? It's a ratio that fundamentally explores this set of questions: How expensive was it to acquire that individual, and how long did they stick around? What is also important in that equation is the expense associated with the intervention. Companies that charge hundreds of dollars a month for their products or services can obviously spend more to acquire them. Those that offer a one-time service, like an inexpensive standalone test, will need to be far more judicious with their marketing spend.

Many consumer health investors believe that the LTV: CAC works best where intent is built in and the alternative is high-friction or low-trust. Where I see product market fit here is for the companies that address the patient’s need and work within the existing system to innovate and improve the experience, versus develop a solution in a vacuum.

Just Be Good

My last piece of advice relates to quality, which is often overlooked. I’ve seen companies that have massive success in building up their base of patients and providers due to good old-fashioned word of mouth. Clinicians want to work for companies that pay well and prioritize high-quality care. Likewise, if patients feel validated and empathized with, they’ll tell their friends about it (the trick here is that sometimes doing the right thing clinically can mean not meeting expectations, but there's ways to level with a patient on that).

Marketing is not a fix for a bad product. I can’t tell you how many times I’ve witnessed a company with a better care model and higher-quality providers leapfrog a competing business. I’m truly convinced that the first mover advantage in health care is less of a thing relative to other industries. What matters more is not cutting corners in the quest for growth. If you want a case study, just look at Cerebral. There's plenty of competitors that may have started later that are thriving because the problem was the right one, but the approach missed the mark.

That’s it for this week’s edition. If you have any examples to share with me from your own business, I’d love to hear them! Reach out at Christina@secondopinion.media.