Case Study: How GoodRx's Understanding of the Customer Helped First-Time Coupon Use
GoodRX (NYSE:GDRX), if you haven't heard of it, is a company that solves a problem facing an enormous number of Americans: prohibitively high prescription drug costs. "As a user, I would like to easily and conveniently fill my prescription at the lowest price possible." is the base user story. To do this, the user simply has to go to GoodRx.com, type in a drug name, dosage and quantity, and they receive the prices for that drug at their local pharmacies. Select the pharmacy you like and you receive a coupon, which you can then take into the pharmacy and receive that price, regardless of whether or not you are insured. Often, the price is lower than what you would pay with insurance Co-Pay. It is an amazing service.
So How Does It Work?
The site works by harnessing the complex relationships between Drug Manufacturers, Insurers, Pharmacies and something called a PBM, or Pharmacy Benefit Manager. PBMs negotiate pricing between Drug Manufactures and Insurers at essentially bulk rates, and the more folks that utilize that negotiated pricing, the greater the volume, benefiting all involved. By creating a coupon with the same adjudication as the PBM pricing, the consumer is able to access the same negotiated price. PBMs want volume so badly, they are willing to pay an affiliate revenue fee to whomever can provide sales through their adjudication. In this way, the third party, GoodRX, is paid for every fulfillment using their coupons. It is a remarkable business.
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From a product perspective, the "funnel" is fascinating because it transitions from a digital transaction to a physical one. The user visits the site, searches for and receives a coupon, and then must go to the pharmacy to use that coupon to pay for their prescription. This requires a Product Team to move beyond the digital component to understand the holistic experience. In other words, it requires really understanding the consumer and their psychology. And consumer psychology at a specific point in the funnel was exactly what was preventing higher conversion.
The Consumer Psychology of a Prescription Drug Coupon
Because PBM adjudication works via affiliate revenue model, GoodRx is not without its competitors. The moat is shallow. Google "Atorvastatin prescription" and SEO brings up a huge swath of coupon sites. Because so many coupons are available, Brand Awareness is a critical component to the business. Fundamentally, because there are so many choices on the market, the consumer did not have confidence their coupon would be accepted.
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This was the core issue preventing higher conversion. Certainly, the digital funnel was thoroughly optimized for incremental lift at each stage of receiving a coupon, but it was really the offline, physical component of the transaction that was the true problem to solve (and therefore a great opportunity).
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The good news was that GoodRx has excellent relationships with PBMs and virtually all national and regional pharmacy chains. How could the company instill confidence in the customer that walks into a pharmacy to pay for their prescription?
Let's pause for a second and think about that individual. They are on a budget. They need a prescription. They are likely underinsured, or not insured at all. They have found a coupon online, but they are not sure it is going to work. So unsure they may not even use it. Will the pharmacist accept the coupon? The addition of a third party coupon adds complexity to a transaction that is already anxiety producing.
The Solution(s)
From a product perspective, the problem was solved in a multitude of ways:
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Pharmacist Training - Because of great relationships with national pharmacies, GoodRx was able to meet with pharmacists and understand their pain points. Sometimes a pharmacist was reluctant to take a GoodRx coupon because it required them manually typing in a long adjudication number. The solution? Simplify that process for the pharmacist.
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Price Accuracy - GoodRx had very accurate pricing, but from a consumer perspective, it didn't seem that way. This is because PBM pricing changes daily. The consumer may have printed out a coupon and a few weeks later taken it into the pharmacy. By then the price had change, but from the perspective of the consumer it was simply wrong, not dated. The solution here was to build APIs between GoodRx and the various PBMs, drive consumers to digital coupons vs. printed coupons, and implement dynamic coupons whose adjudication always applied to the most recent price.
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Brand Awareness - GoodRx invested heavily in advertising campaigns to increase brand awareness and trust in the product over other competitors. This creates differentiation between GoodRx and other solutions less able to build brand equity.
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Other Trust Signals - Throughout the funnel, the consumer problem (anxiety about whether or not their coupon would be accepted) was constantly addressed. The consumer was reassured every step of the way their coupon would be accepted, the process was simple and easy, and they had nothing to worry about.
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The result of these various initiatives substantially increased first-time coupon use, conversion, and revenue. On my resume there are specific, data-driven wins listed that pertain to the components I was most directly involved in. The point of this article is to illustrate a Product Management Principle near and dear to my heart: only through comprehensively understanding the customer journey could we deduce where their pain points were and determine how to solve them. Taking relentlessly good care of the customer is indeed what has differentiated GoodRx from its competition in a niche that otherwise has a very shallow moat.