Is there a fortune at the bottom of the medical tourism pyramid?

Constantine Constantinides from healthCare cybernetics, a health tourism think and do tank, believes , too many medical tourism industry players are barking up the wrong tree by addressing the “cost sensitive market”.

Why do so many medical tourism industry players pursue the “cost sensitive” market? Is it because they perceive this as the easiest and the least demanding market to tap into? And where are those who have made millions exclusively from this market? A better approach is to address the mass affluent health tourism market which is not, primarily, “cost sensitive”. It seems that some out there are listening and taking note.

The four consumer tiers

According to Professor C.K. Prahalad (who wrote the book “The Fortune at the Bottom of the Pyramid”), in practical terms, there are four consumer tiers:

• At the very top of the world economic pyramid are (around the world), 75 to 100 million affluent Tier 1 consumers. This is a cosmopolitan group composed of middle- and upper-income people in developed countries and the few rich elites in the developing world.
• In the middle of the pyramid, in Tiers 2 and 3, are poor individuals in developed nations and the rising middle classes in developing countries.
• It is estimated that there are 4 billion people in Tier 4, at the bottom of the pyramid. Their annual per capita income — based on purchasing power parity in U.S. dollars — is less than $1,500, the minimum considered necessary to sustain a decent life.

According to this, anyone below Tier 1 is “poor” or “almost poor”.

Who would you want to target when touting your medical tourism offerings?

The conventional medical tourism game

The conventional medical tourism game is driven by:

• Low cost (high cost at home)
• No waiting (long waiting lists at home)
• Availability (services unavailable at home)

This means that, for the most part, the services are paid for “out of pocket”.

And one assumes, then, that conventional medical tourism, for the most part, is dependent on disposable Income.

Disposable income is the amount of money that households have available for spending (including on medical tourism) after income taxes have been accounted for. If we look at the USA, in 2005, the average disposable personal income dipped into negative territory for the first time since 1933. This means that in 2005, Americans were spending their entire DPI and then tapping into debt for further spending.

This situation did not change much after 2005.

Tapping into debt to finance medical tourism?

It is assumed that conventional medical tourism addresses the “average” consumer. This, in many cases, means addressing those with no disposable income.

Yes, we have seen providers and their agents offering to help consumers finance their medical tourism with borrowed money.

Why are many still looking… at the middle, if not the bottom

If one looks at the medical tourism “pitches” from around the world, the emphasis is on “low prices”.

Why is it so?

Some medical tourism industry players have invested in and continue to bet on the “cost sensitive” market. Obviously, they presume that this is the easiest – the least demanding – market to tap into.

But as I repeatedly ask: where are those who have made millions exclusively from this market?

The contemporary medical tourism game

My understanding is that:

• Conventional medical tourism is about “being obliged to go” (mainly due to financial circumstances).
• Conventional medical tourism is about “wanting to go” (when “cost” is not the primary consideration)

Those in the latter category are more likely to have some disposable and discretionary income.

If I were a medical services provider, this is the category I would focus on.

The ascendancy of “Health Tourism Lux”

…and why the “mass affluent health tourism market” is the one to now address.

Starting in 2011, contrary to the predictions and forecasts of many, my analysis indicated that the “cost sensitive” (i.e. conventional) medical tourism market had limited growth prospects.

My impression was that the majority of industry players were barking up the wrong tree, in addition to barking in the wrong way.

Of course, even well before 2011, there were the few who, like me, believed that the real money lay elsewhere, and were already addressing the mass affluent market.

And of course, we even have the few medical tourism facilitators who were focusing exclusively on this market, as far back as 2006). One of these spoke at a conference I had co-organized in 2014.

Aiming to promote awareness of this “other market” I started talking about Health Tourism Lux at conferences. My message was: start addressing the mass affluent health tourism market which is not, primarily, “cost sensitive”.

As expected, the buy-in to this message is slow, but my impression is that some out there are listening and taking note.

For example, in 2015 we read that: “Azerbaijan organized promotion of luxury health tourism”.

The $7.5 trillion mass affluent market

“Mass affluent” refers to the high end of the mass market. In practical terms, it is about individuals with an annual household income over US$75,000.

According to Harland Clarke (a firm which provides marketing services and payment solutions), as a collective group, Mass Affluents in the USA control more than $7.5 trillion in investable assets (presumably meaning disposable income). In the United States, alone, there are roughly 33 million mass affluent households, and they own roughly 37% of America’s liquid financial assets.

Isn’t this a market that the medical tourism industry should be “preferentially” pursuing?

Related articles and features

• A fortune in medical tourism?
• Update: medical tourism from Russia
• Competitor analysis in medical tourism
• Dialysis away from home: is this medical tourism?
• Reflections Going Forward: The IMTJ Medical Travel Summit 2015

Previous comments on this article

Constantine,

You are right! Absolutely.

What about the role of governments, over marketing efforts(!) and exaggerated figures that leads many follow the crowd without understanding of MT business and, on the contrary, diminishing the concept of MT?

When you take the crowd out, the rest is dying to do the right in MT.

Hence, governments should be cautious on who is eligible to perform in MT field and carefully plan marketing efforts as a country *where to focus and how to tap into the needs.

We should discus the underlying reason why MT goes into wrong direction or pulled into the opposite and by whom!

Best,

Ahmet

Ahmet Genc (23/06/2015 11:07:51)

Thank you, Constantine! Your contributions always make for refreshing reading in a stagnating pool of ideas and thought. I do not mean to sound cynical or negative, but we have indeed been barking up the wrong tree, in the wrong manner and had a lame dog doing it!
This ‘Lux’ brand of health tourism has, in fact, “dynamics to market” that make it a breed apart from the traditional medical tourism model. May I suggest that you are addressing the wrong kennel!

Zahid Hamid (13/06/2015 15:56:11)

…typo error correction
The contemporary medical tourism game
My understanding is that:
– Conventional Medical Tourism is about “being obliged to go” (mainly due to financial circumstances)
Contemporary Medical Tourism is about “wanting to go” (when “cost” is not the primary consideration)

Constantine Constantinides (13/06/2015 08:47:01)

Constantine
The problem with most medical tourism businesses is that they are new and the easiest way for a new business to launch is to concentrate on cost and undercut competitors.

This is also the fastest way of going out of business as unless volume can be achieved then costs always exceed income.

MT makes the mistake of thinking it is special – it is not – it is just another service business.

Korea- one of the success stories- recently admitted that in 2014 it had more medical tourists but revenue fell.

If you look at the travel business, the bucket shop costcutters go out of business unless they can get huge numbers.

Volume is simply not available to most MT businesses, and that applies to agencies, clinics and most countries.

Most countries have counted MT in terms of numbers of people, and only a few are now counting revenue.

What they should be doing is counting profit-that is the sole reason for being in business.

Luxury tourism and specialist tourism where people pay quite high prices for experiences , is in a boom, and that is where agencies make money. The same is true of car sales.

If you sell a new car, you would not target pensioners or cyclists, but those who can afford a new car.

Most MT is elective, not major surgery, so those who can afford that overseas or at home are the middle class and above.

Mt is often doing the equivalent of targeting the Chinese peasant, African farmer or European blue collar/ lower clerical class.

It is like trying to sell fur coats to shop girlls- i better stop before the PC brigade takes way my computer.

MT should target those who will make it the most profit —- simples.

Ian
Ian Youngman (12/06/2015 13:20:13)