In 2013, Frost & Sullivan conducted an economic analysis, “Smart PreventionHealth Care Cost Savings Resulting from the Targeted Use of Dietary Supplements," that assessed the link between the use of dietary supplements at preventive levels and potential health care cost savings. The research revealed notable cost savings could be realized through the targeted use of scientifically substantiated dietary supplements regimens among high-risk individuals. The supplements included omega-3s, B vitamins, phytosterols, lutein and zeaxanthin, and calcium and vitamin D, as examples.
Specifically, Frost & Sullivan developed an economic model that converted the clinical findings of a given dietary supplement’s scientific literature. This conversion is typically a change in event risk given the use of a dietary supplement between a treatment group, or those who will receive the benefit, versus the control of nonuse. This change can then be used in a model that converts the total population health benefits into a potential addressable market (PAM) measure, where PAM is the total number of people who would benefit from using the product.
For example, given complete utilization of calcium and vitamin D supplements by all U.S. women over the age of 55 diagnosed with osteoporosis at preventive daily intake levels, an average of US$1.87 billion per year and a cumulative savings of $15 billion from 2013 to 2020 in avoidable hospital utilization costs are potentially realizable. Moreover, more than $1.52 billion in net health care cost savings$12.15 billion over the next seven yearscould be realized after accounting for the cost of calcium and vitamin D supplementation.
The first term$1.87 billion per yearis the estimated monetary value of the total health benefit to society in terms of avoided hospital discharge expenditures of 100 percent of the target population. This is the same as total consumer benefit related to avoided hospital costs from using this specific dietary supplement. The second term is the net estimated monetary value of the total health benefit to society, which is in terms of avoided hospital discharge expenditures after calculating for the cost of supplying 100 percent of the population with a preventive level of calcium and vitamin D for one year. Of course, if net consumer benefit is positive, then there will be an economic reason, toobeyond the health benefitfor the individual user to adopt the given dietary supplement. The total cost of supplementation is the total expected size of the potential addressable market of users who receive a positive health benefit.
Demonstrating surplus consumer value in easy-to-understand terms will increase the likelihood of the product’s adoption and, thus, a sale (it’s hard to ignore the money). This model can easily be translated into an easy-to-use tool and collateral that can be used by sales and marketing forces to increase sales opportunities, whether it is a B2B or a B2C market. This model can also be used by executive and corporate strategy teams to determine a company’s potential addressable market size, as well as growth potential in terms of the total number of buyers that would benefit from a product.
This marketing tool is most easily applied in those instances where a given product’s attributes help a given user reduce their risk of experiencing an adverse event or increase the probability of harm avoidance. More specifically, this model is easily applied in the following markets/products where risk of an adverse event is a common theme, such as dietary supplements, food safety or sustainability. Basically, this model can be applied for any product where its environmental impact can be directly or indirectly measured.
Not only does this model help to demonstrate that significant health benefits can be realized through the use of a given dietary supplement that has scientifically-substantiated benefits, but it can be applied in any dietary supplement’s marketing and price strategy. This economic model demonstrates it is feasible to translate a given product’s benefitsin terms of a product’s ability to produce a desired result that is beneficial to the consumer or addresses a specific needinto a meaningful monetary value that the consumer, and your company, will understand. This meaningful monetary value can be communicated in terms of avoided costs associated with not using the product, and/or net benefits of using the product in terms of consumer savings (surplus consumer value).
Christopher Shanahan is the global program manager for Frost & Sullivan's Food and Agriculture research group.