On February 13, Smile Direct Club announced the launch of its new premium aligner treatment, CarePlus. Patients can choose this treatment at select Partner Network dentist locations and receive a combination of in-person and virtual care. The firm promises concierge-level care from SDCs network of licensed dentists, orthodontists, hygienists and dental assistants. The cost is $3,900 in full or $115 monthly extended payment plan. On this week's quarterly earnings call, the leadership team was all-in on this hybrid level of care.
Combined with SmileMaker technology, a mobile scanning app for 3D treatment planning which has been beta tested in Australia and will be rolled out in the US by the end of Q2, the firm is working both ends of the new patient generation machine seriously hard. SDC will drive prospective new patients to a smartphone scan and 3D simulation of their teeth. Then, the firm's long-stated goal is to convert more of these leads into in-office scans at a partner dental office.
According to the press release, "The CarePlus premium services include access to a 24/7 dedicated concierge team including a licensed dental assistant for basic treatment-related questions, and remote or in-person check-ins with their Partner Network dentist. Upon completing their aligner treatment, CarePlus customers receive two years’ worth of retainers and the Company’s Lifetime Smile Guarantee to keep their teeth straight and healthy."
I wrote an in-depth assessment on direct-to-consumer firms several years ago for private clients and Harvard Business School published an excellent case study on Smile Direct Club back in March 2020. The tendency is for these disruptive firms to burn cash and land in a market segment they were totally unaware they might land in before setting about disrupting an entrenched industry.
SDC inadvertently painted themselves into a corner of younger consumers with insufficient disposable income. They could have just as easily gone after affluent consumers (e.g., suburban soccer moms) seeking re-treatment but unwilling to spend $6k on their smile. These parents will spend whatever it takes to receive specialty care for their kids, but I can't tell you how many times I've heard in quality assurance monitoring through our member doctors, "It's just a few lower front teeth that are crowded. So, no thanks, I'll just ask my general dentist if they can do it for a little bit cheaper when I go in for my next cleaning.” They will love this $3,900 option.
Initially, SDC led with price and disrupted via sensationalism. "Straight teeth for 60% less," or something to that effect. Like many direct to consumer (DTC) brands, they painted themselves into a corner by disrupting an industry before taking the time to identify their avatar client or customer. They are now coming full circle, charging $3,900 for CarePlus, which is basically traditional clear aligner treatment through a doctor, plus a few smart add-on features.
I wonder how many clear aligner "brands" started years ago by orthodontists in response to SDC will follow the D2C company back out of the rabbit hole I warned them never to enter? Write this down: when your competition has a bigger pile of cash to burn in pursuit of market share, it's really dangerous (and expensive) to chase them down rabbit holes. The fiscally undisciplined or those with too little dry powder will be unable to blaze a new path. Too often, they fail to realize the first rule when one finds himself in a hole: stop digging.
Hybrid treatment, consumer first service models, Lifetime Smile Guarantees, removal of risk, flexible financing and lowering the initial barriers to treatment are all good ideas. They are new ways to blow out of the hole they disliked (i.e., $1,800 aligner therapy). FWIW: I'm a longtime shareholder in SDC. Their innovation, promotion and advertising in the orthodontic specialty is a good thing. Competition is a good thing. Yes, some patients have been harmed by direct-to-consumer aligners, but patients have been harmed by doctors too. The path cuts both ways.
"As investors of time, energy, attention and money, it’s critically important that we identify which path we are on, so that we don't find ourselves completing the most expensive trip (i.e., the round trip)."— Dustin S. Burleson, DDS, MBA
Smile Direct has paid the price in terms of shareholder value destruction over the last handful of years and luckily they've had enough cash to finance such a painful trip. Unless you have $600 million stashed under the mattress that you're willing to burn, you are not so lucky. Far easier to learn what you can from people brave enough to attempt disruption. There's nothing wrong with choosing your most-effective and enjoyable lane of traffic and staying in it. Otherwise, you might find yourself driving around in circles.
Listen to The Burleson Box Podcast now with Julia Galef and learn more about direct-to-consumer aligners and why orthodontists may not be seeing it clearly.