Q&A: SmileDirectClub unveils new technology, premium service – The Business Journals

Nashville-based SmileDirectClub is at an inflection point.
Facing declining demand for its clear aligners and a cratered stock price, the company says it’s switching from a “marketing-led” business to one focused on technology and innovation.
The key components of that switch are a new technology platform that allows users to scan their own teeth and see what their new smile would look like in a matter of minutes, shortening SmileDirectClub’s sale cycle, and a new premium service aimed at higher-income households.
We recently spoke with SmileDirectClub Chief Marketing Officer John Sheldon to learn how he expects these services to impact business and why some customers are telling the company they want to see an in-person doctor.
The following interview has been edited for length and clarity.
The company has told me that several of the headwinds SmileDirectClub has faced in the past are turning into tailwinds, can you give us some examples of how those hurdles have flipped into advantages for the company? When I started with the company, being a telehealth platform was certainly a challenge. People weren’t comfortable executing health care in a remote fashion using two-way technology and connecting with people virtually.
Obviously, we’ve all had a little taste of that in the last three years and that’s helped the business. … [B]efore the pandemic, about 90% of our customers started by going into one of our SmileShops, but now, in the United States, that number is about 50/50 — 50% of people start with the compression kit that we mail to their homes and 50% start by going to the SmileShops.
That has balanced out as people have gotten more comfortable with, what I call the consumerization of health care, which is this ability for people to take control of the situation themselves and not feel like they have to get in a car and look a person in the eye in order to begin some elective health care. 
CEO David Katzman said in the second quarter earnings call that the company is switching from a marketing-led company to one focused on technology and innovation, what exactly does that mean and will it result in a decline in marketing spend? It’s funny, I’m the marketing guy and I’m the most excited person about this transition. Moving from being a marketing-led company to an innovation-led company allows us to put new customer benefiting innovations in front of them and help us differentiate from our competitors. … The vision all along for the business was to say, “Hey, we have this incredibly powerful super computer in our pockets, how can that completely change what the customer experience for this orthodontic treatment?”
We’ve been making investments in [artificial intelligence] and they’ve basically come to fruition. … This piece we’ve been investing in for a very long time became the focus of our company, because it allows us to transition what is today a lengthy go-to-market strategy … to one that gives them that answer in just a couple minutes, as opposed to several weeks.
How far away are you from being able to make aligners from images taken by someone’s phone? There are two steps. First is giving people a high-fidelity view of what their smile is going to look like. However, step one doesn’t have quite the fidelity required for us to directly make aligners. …To go to aligner manufacturing, which is highly precise, we still are going to need a high-definition imprint of your teeth, a kit or a scan. … That second piece that you’re asking about we call the ‘Holy Grail’. … Pull out your phone, make a scan and literally manufacture aligners based on that [scan].
Do you have a timeline for when that second piece will be ready? Not at this point.
Are you going to market the new platform as aggressively as you have services in the past? I would say this is going to become our primary messaging, because the ability for us to have a call to action that is: “See what your smile can look like in just a couple minutes. Download our app today,” or some version of that, is an incredibly powerful call to action.
What does your new premium service, SDC+, entail? Our core customer — the $65,000 to $75,000 household income — we’ve opened up [the aligner] market to them in a way that never existed before. But along the way of building out this capability, what we’ve come to realize is we’re right for 85% to 90% of the total orthodontic market, too. The higher household income people and parents of teens, who make up the overwhelming majority of the purchase decisions around orthodontics, they have specific things that they’re looking for in orthodontic providers. …SDC+ is basically us addressing that set of needs.
The No. 1 thing that they’ve told us over and over again is, “I want somebody to look me in the eye and I want a person I know I can go to if there’s a problem, that’s local.” It’s only for backstop but it’s really important to them, for themselves or for their teens. … The aligners are the same piece of plastic but the service model is different.
The analogy I use internally is, “Both of us are going to get to Denver on this plane at the same time, but one of us might have three to four inches of extra leg room.” … Your treatment plan is going to be handled remotely by a [SmileDirectClub] doctor but he or she will be working directly with your local dentist who will take responsibility for your general oral health. 
In the recent earnings call, Katzman said research has shown people like the telehealth platform but also want to see an in-person doctor, is that a knock to your original direct-to-consumer, virtual model? I don’t think it’s a knock to the original model. I just think it’s a desired service level for this new segment. Higher household income that’s looking for a little higher touch, people who are doing this for their teens.
I have two teens and you’d do anything for your kids, right? You just want to have this higher level of confidence. If you look at the orthodontic market today, 75% of the case starts are teens. It’s not a big part of our business, today, because of that specific need for those parents is for that higher-level of confidence that comes from somebody that they can look at in the eye. SDC+ hits on that directly. 
A year from now, how do you expect these two new platforms will have impacted SmileDirectClub’s business? I think each of these is going to impact the business in different ways. Our custom smile plan, working off the SmileMaker platform, is going have an almost near instant impact when we roll it out in the United States. … We’re hoping to see major changes in our [customer] conversion [rate] moments after we launch this in each country.
SDC+ is going to be a little different, because it’s going to require us to build a network, train doctors … it’s going to grow more linearly. I don’t think it’s going to take more than a year, year-and-a-half for us to have full nationwide coverage.
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