Making the direct-to-consumer model work for AT [New blog series: AT, Entrepreneurship & Finance - from Assistive Tech Impact Fund]
This blog series was authored by Dr Rhys Williams, with insights from our UK aid funded AT2030 programme - Assistive Tech Impact Fund. Part of GDI Hub innovation arm: GDI Hub Accelerate
For people with disabilities to have access to high-quality assistive technology, we need a thriving entrepreneurial ecosystem that can bring innovative Assistive Technology (AT) to market. For every business to become financially sustainable, a scalable customer base is essential. Many AT companies have focussed on B2B, or B2G customers, however slow and involved sales processes and constrained government budgets with competing interests are pushing many companies to explore direct to consumer (DTC) business models.
In lower-middle-income countries, DTC models are often much more challenging than in higher-income countries, simply because potential customers have limited funds to buy AT. For example, 85% of Africans live on less than $5.50 per day (World Bank). In the context of disability, many persons with disabilities in LMICs do not have the AT they need and have often been excluded from education systems. Their limited education has the knock-on effect of making it difficult to find quality work. Even if someone has been able to participate fully in education, finding work can be difficult as employers can have false preconceptions about a disabled person working ability, or be unwilling to provide necessary adaptions to make the job possible for someone with a disability. When in work, if someone doesn’t have AT, getting to and from their job and performing their role effectively is not easy, making it difficult to flourish at work. Therefore, without access to work, disabled customers can often experience poverty at higher rates compared to the general population, placing AT further out of reach. For these reasons, selling to lower-income customers using direct to consumer AT (DTC-AT) models is a real challenge.
Just as people with disabilities experience stigma when trying to find work, stigma also plays a role in finding and reaching customers. In some communities, people with disabilities are kept hidden and excluded from society. One AT entrepreneur who creates AT for people with hearing impairment shared that:
“There are lots of beliefs that if you’ve got hearing loss, you must be cursed, or something must have happened to your baby”
Another AT entrepreneur in a different AT sector shared similar experiences:
“They are just not willing to face it and to deal with it, and very scared of being rejected in their families and in their community. They would rather hide it and not get any help”
This means that finding a customer base isn’t just dependent on digital advertising spend as it does in high-income countries as AT companies may also need to account for and overcome cultural misconceptions and beliefs of disability.
Cost reduction limitations
To accommodate financially limited customers, AT companies need to keep the cost of their AT as low as possible. However, this is not always possible, especially if the type of AT requires clinical validation, certification, and compliance with regulations. Whilst these are a necessary guarantee of safety and quality, they limit how cheaply AT can be produced.
Unintended charitable consequences
To entirely overcome the cost barrier, assistive technology has often been distributed for free by charities and non-government organisations. On the face of it, this appears to be a good approach because the most financially restricted citizens receive the AT they need. However, AT distribution that depends on charitable and philanthropic funding are highly vulnerable to financial cuts and changes in priorities. What’s more, AT distribution cannot be a one-off event like a vaccination camp. Distributed AT must be maintained, adapted and changed as the needs of the user change. Few charitable models are able to accommodate such a model- over time, people can be left with AT that is no longer fit for purpose, and disillusioned as to its value.
When we have spoken to AT entrepreneurs who are trying to responsibly sell AT to communities that have been given AT for free, the charity model has other undesirable consequences. Entrepreneurs are finding that people who received AT for free often see it as something which should always be free; even if there isn’t a charity to fund it. Therefore, AT companies trying to use the DTC-AT face a triple challenge: people have extremely limited funds and will struggle to buy AT, and if they can buy it, they may expect it to be free, or not see AT as valuable due to past experiences with unsupported AT that become unfit for purpose.
Approaches to help:
There are multiple challenges that can make the DTC-AT model difficult to scale, but there are ways to overcome them. To find out exactly how companies have begun to tackle them, we spoke with AT entrepreneurs to understand how their organisation is beginning to adapt to make DTC-AT a success. A number of approaches stand out.
Innovative subsidised revenue models
Although payment models such as subscription models may help to lower the initial affordability hurdle of AT, for people below the poverty line it may not be enough. This is where AT companies can make use of subsidy models to keep the overall cost of subscriptions from being too burdensome. For example, AT companies such as our ATIF portfolio company MiracleFeet are exploring cross-subsidy models where sales to middle-class customers or customers from high-income countries subsidise AT for people with extremely limited income. Companies such as HearX and Amparo are instead operating dual-structure organisations; with for-profit arms putting their technology and some of their profits towards non-profit initiatives that provide AT at price points that are accessible to end-users.
Lean-in to lifetime value
The reason why a subscription model works well is that it considers the systems needed to support AT long-term. Smartphone subscriptions bundle the phone and the telecom service in a monthly fee and once the phone is paid off, the customer can choose to keep their existing phone or upgrade to a new one. AT can similarly be a life-long product, with subscriptions becoming more like a utility. As one CEO of an AT company phrased it:
“It’s a life journey, it’s not buying a product once. People will have that disability for the rest of their lives. It’s helping them think about incorporating it into their personal budget”
An ‘assistive product’ mindset sees a product like a wheelchair distributed, paid for upfront, and then forgotten about, only to break and become unsuited to a person as their life changes. An AT subscription model sees the product appropriately prescribed, used, maintained, and replaced, acting as an end-to-end service. For AT companies, whilst the model introduces some complexity, organisations can reach sustainability by maximising the ‘lifetime value’ of a customer by creating the systems to keep people engaged and paying for the AT they need month-in-month-out.
One AT company shared that to make the DTC-AT model work in African contexts, they’ve stopped thinking about the customer as one user of the product, and started to consider customers as ‘family units’. They’ve found that if they take a household approach where they demonstrate the value of AT to the end-user and everyone else in the house, the family unit will pull together to pay for it. Considering the potential stigma which households may have towards AT and the disability that their family member lives with is also important to make the DTC-AT model work. Therefore, there’s a degree of education and normalisation of AT before AT companies can get ‘into’ households before the value of AT can be demonstrated. The more holistic customer approach makes it more feasible to find customers that can cover the cost of AT, supported and endorsed by their households.
Value from first use
With limited financial resources, AT companies need to demonstrate almost immediately the value that their product can provide. This approach can counteract disillusionment stemming from low-quality or unsupported AT, but companies need to design their product sales and marketing experience so that people can see the value it can bring to their quality of life, relationships, and vocations. HearX overcomes this challenge by using its hearing aids to diagnose hearing impairments, rather than traditional diagnostic equipment. From the first moment a customer comes into contact with the hearing aid, they experience what life with this AT can be like, showing the value immediately. Overall, with the value immediately shown, the sales process becomes easier.
For everyone to get the AT they need, we need companies employing a B2B entrepreneurial approach and DTC-AT. However, the DTC-AT model is challenging because of the limited finances of disabled customers, stigma, limits to cost reductions for AT producers, and unintended consequences of ‘free’ AT. To overcome these barriers and to make DTC-AT a success, AT companies are making use of sensible subsidies, embracing subscriptions and a lifetime customer value mindset, and considering households as customers. There are bound to be many ways to also make DTC-AT models work, and many examples of AT companies around the world who are flourishing using it. If you know any companies that provide ‘direct-to-consumer’ assistive technology that’s affordable, we’d love to hear about it and uncover even more ways to get AT to everyone who needs it.