People spend about $1.5 trillion a year on consumer health and wellness products and services—and they plan to spend even more in the near future. This episode of the McKinsey on Consumer and Retail podcast features three of the leaders of McKinsey’s recent research on the global wellness industry. They discuss the wellness offerings that consumers are most interested in, recent changes in consumer behavior and preferences, the power that influencers wield in the wellness space, and winning strategies for companies. Subscribe to the podcast.
How to thrive in the global wellness market
Monica Toriello: Hi, everyone. Hope you all are keeping healthy and well. Those two things, health and wellness, are precisely what we’ll be talking about on today’s episode. The global consumer health and wellness market is a $1.5 trillion market growing at 5 to 10 percent a year, and, according to a recent McKinsey survey, people around the world are increasingly interested in taking care of themselves and are planning to spend more money on wellness products and services.
But what exactly is the consumer health and wellness market? What kinds of products and offerings are we talking about? And more importantly, what do consumers mean when they say they’re interested in health and wellness? What does it all mean for companies? Our guests today will enlighten us on these topics. They are three of McKinsey’s foremost experts on consumer health, having been involved in the global survey mentioned earlier, so each of them can speak to the global findings but also to some important regional insights and nuances.
Eric He is a partner in McKinsey’s Shanghai office. Eric has worked with leading pharmaceutical companies, medical-products manufacturers, and consumer-goods players, not just in China but also Australia and across Europe.
Anna Pione is a partner in the New York office. She is a leader in McKinsey’s Consumer and Private Equity practices, and she coleads our global research on the future of wellness.
Sandra Welchering is an associate partner in the Berlin office. She, too, is a leader in McKinsey’s Consumer practice and was instrumental in publishing our research on the future of wellness. Thanks to all three of you for joining us today.
Let’s start by defining the scope of the consumer health and wellness market. What are we talking about and what are we not talking about? Lots of things can, in theory, fall under the health and wellness umbrella—from yoga mats to face cream to prescription drugs to self-help books to energy drinks and so on. Define for us the boundaries, if you will, of consumer health and wellness.
Anna Pione: We wanted to take a consumer-back view to our research. Of course, there’s a ton of healthcare-specific and pharmaceutical-specific spending, but our work focuses on what consumers choose to spend their own money on—both products and services. So if it’s likely getting reimbursed or submitted to your insurance company, that would fall outside of the scope of this work. We looked across six dimensions: health (which we’re defining as vitamins, over-the-counter products, some cleaning products, and other consumer healthcare products and services), wellness-oriented nutrition, fitness, wellness-oriented appearance (which we found is largely centered around the beauty and personal-care space), sleep, and mindfulness.
Surprising insights from the global survey
Monica Toriello: You surveyed 7,500 consumers in six countries. The main findings of that survey are summarized in an article, “Feeling good: The future of the $1.5 trillion wellness market.” We’ll talk in some detail about the main findings, but first, did the survey reveal anything that you found surprising?
Sandra Welchering: What was surprising is the big shift to personalization, which is a trend we’re seeing globally. Consumers are increasingly willing to give their personal data to get personalized treatment and service—and that holds true for all the fields and areas that Anna mentioned: fitness, mindfulness, sleep, health, and so on.
Eric He: Obviously, there are country- or region-specific characteristics; those differences are not surprising. But we did another set of analyses where we looked at the key words that people used when asked, "When you’re thinking about wellness, what comes to mind?” When we compared the results from a few countries, the differences were quite surprising to me.
For example—and I don’t know if Sandra, as a German, would agree with this—the word cloud from the German survey had words like “relaxation,” “sauna,” and “massage.” In Japan, the key words were all about exercise in moderation, not doing anything extreme—the whole Zen concept. In Brazil it was about having a peaceful mind. But in China—this is what surprised me—the key words were about sleep issues, anxiety, and even depression. Given how mental health is an underdeveloped concept in China, that was quite shocking to me.
Anna Pione: Something that really stood out to me, Monica, is this emerging concept of the importance of natural products. We asked consumers to choose between more natural or more effective products, and we saw that in a number of categories—and this was really shocking—consumers were more likely to choose natural products over effective ones. For example, in dietary supplements, 40 percent of consumers globally would prefer a more natural product over a more effective product; only 20 percent would choose more effective.
That obviously doesn’t hold for all categories. For a lot of over-the-counter medicines—cough, cold, or pain—effectiveness is still the most important criterion. But we were surprised at the categories where natural is winning out. And it does vary a little bit from country to country: for example, in the US there’s still a little bit of a bias toward effective over natural, relative to other countries. But in all of them, we saw that same pattern, where natural is winning over effective for many categories.
Personalization versus privacy?
Monica Toriello: Sandra, you brought up the personalization trend. There’s tension between consumers’ desire for greater personalization and their concerns about privacy. What advice would you give to consumer companies trying to strike that balance?
Eric He: At least among the six countries we surveyed, China is the one where people are most likely, or willing, to trade privacy for personalization. In terms of advice, especially in today’s environment where governments globally are cracking down on data sharing and on some of the internet giants, it is even more critical to think through a design-to-value concept: If we truly believe personalization will bring more efficacy, what are the must-have pieces of information? Do you really have to go the extreme of one-to-one personalization? Or would mass customization, with very simple data, already do the job?
If you’re a global company, you need to recognize the differences among countries in data regulation, in consumers’ willingness to share data, and in what’s needed to make the products effective. You have to customize your personalization strategy, respecting each market’s unique consumer needs and regulatory environment.
Anna Pione: I think that’s exactly right, Eric. We’ve seen that play out in the US as well. Based on our research, consumers aren’t necessarily demanding individualized wellness products. It’s more about mass customization. Consumers want a product that is tailored to them and that works for them, but that doesn’t mean companies can’t do that in a smart and cost-effective way. In fact, when we’ve spoken to consumers about this, the willingness to pay is generally not quite so high as to justify truly personalized manufacturing processes.
Sandra Welchering: One big thing is obviously scalability, which is related to price. We have seen personalization emerging among fast-growing start-ups but not so much among the big consumer health companies yet. It’s a question of how to scale personalization and how to strike that balance. It’s not doing it one-to-one but rather creating a categorization or clustering of subsegments of consumers—for example, women between ages 35 and 40—and then developing specific vitamin products or skincare products for them.
Innovations in wellness
Monica Toriello: Sandra, you’ve just touched on the topic of innovation. In the six subcategories of wellness—health, fitness, nutrition, appearance, sleep, and mindfulness—where do you see the most innovation happening? What are some of the most exciting new things on the horizon in the wellness arena?
Anna Pione: Some of the most interesting innovations I’ve seen are wellness products that span across a number of those categories. The product group that comes to mind, first and foremost, are wearables and fitness trackers, which combine tech with support on sleep tracking, exercise tracking, and in some cases nutrition and mindfulness as well.
I think the fitness industry has been innovative—and I’m thinking specifically of Mirror, Tonal, and Peloton—in their ability to replicate the environment of the gym in your own home. It’s just a much higher-quality experience than it used to be years ago.
Health is another one that stands out to me. That’s a super broad category, so of course there’s a lot more room for innovation there, but I’m seeing some interesting research into, for example, pain: companies are looking at therapeutic methods that are more oriented around touch or pressure points, so that consumers can treat a symptom without having to take a pill or a supplement.
Sandra Welchering: Sleep and mindfulness are two categories that had been not so top-of-mind before the COVID-19 crisis and that are coming to consumers’ attention much more. If you look at Oura, the sleep ring, it covers everything: from falling asleep quickly, staying asleep the whole night, and waking up refreshed. It tells you what you can do to have a healthy sleep rhythm. Similarly, the whole mindfulness topic—what you can do for your mental well-being—is on the horizon as well and growing significantly.
Eric He: For me—maybe this is specific to China—the most exciting innovations are in nutrition, especially in the context of personalization. For us to realize true personalization, it will require true scientific breakthrough, like in microbiome research. That’s innovative. Then, if you want to get even more precise, you need physical performance. That’s where the wearable players come into play: they get all of your exercise data, blood pressure, etcetera. If you go even further, that’s where the biologic tests and even some DNA tests come into play.
And when you have all these participants in the ecosystem with a data aggregator, that’s where a lot of the innovation is happening, especially in China, where eating healthy is probably the biggest theme among the six health and wellness themes. So nutrition, especially personalized nutrition, is probably the most innovative battlefield in China right now.
Sandra Welchering: Personalization, obviously, is only possible through digital engagement, because otherwise you just don’t have the data of the consumer. Digital engagement with consumers enables you to offer subscription models and personal advice. Our research revealed that, globally, consumers are willing to spend a significant amount on services as well as products, and you can only offer those kinds of services if you have digital engagement with consumers. That’s definitely a big trend and a very important topic for consumer health.
The growing influence of influencers
Monica Toriello: Speaking of digital engagement, I’d love to get your thoughts on influencers. Your research shows that it’s not just mega influencers with millions of followers, but even micro influencers with only tens of thousands of followers, who matter in the wellness market. What’s your advice to companies in selecting and partnering with influencers?
Anna Pione: Influencers are becoming more and more critical across categories in the wellness space. This is a new muscle that we find a lot of our clients just don’t have as much experience exercising and leveraging in a way that is cost-effective and gets them the reach that they’d like. The traditional celebrity-driven model is a lot easier for bigger companies because it is a single touchpoint, a single relationship—and it’s a little bit more straightforward. This new influencer model does require a different way of engaging in marketing and driving consumer reach, so it’s something that we’ve seen companies really focusing on and thinking about.
You do have to be very careful about defining the strategy and the way that you want to reach your consumer, and therefore the types of influencers that you want to partner with. Consumers can sniff out from a mile away an influencer who is just recommending a product because they received money from a brand to do so. We see a much more effective and mutually beneficial relationship when companies find influencers who are a natural fit with their products or services, and therefore, even if there is an economic transaction going on for that recommendation or promotion, it is still done in a way that comes across as much more genuine and authentic to consumers. It is vastly more effective from a marketing ROI perspective as well.
Eric He: Credibility matters. If you think about the traditional health and wellness categories, a lot of those are not just about direct-to-consumer engagement. A lot of the demand generation comes from the recommendations of healthcare professionals, or HCPs. If you are going for a celebrity endorsement, that person should have the credibility in order not to harm your brand equity as a health and wellness brand.
In China, and probably globally, the whole ROI angle that Anna raised is important. Marketing is getting increasingly expensive. You have to look at all the different touchpoints and ways to activate a consumer or generate demand. Celebrities, if you use them properly, will hopefully not only give you a short-term traffic boost but also enhance your brand equity. My fear is that celebrity and influencer endorsements are such a hot topic that sometimes companies hire them at the cost of longer-term damage to their brand equity as a health and wellness brand.
Anna Pione: That’s a great point, Eric. An example that jumps to mind is Sensodyne, which has done a fantastic job of not leaning solely on influencers on social media, but rather, thinking about key opinion leaders or influencers in a more expansive sense. They’ve worked with dentists, collaborating with them to help them understand the benefits of the product and having dentists bring the recommendation of that product to consumers. And at least in the US, anecdotally, many dentists recommend that you use Sensodyne. That’s driven massive sales growth for the brand. So they’ve won on this influencer strategy, but it’s not just influencers in the way that we keep hearing about—which obviously matters a lot as well—but it’s influencers from a healthcare perspective or a key opinion leader perspective.
Sandra Welchering: I think a key point here is also, how do you use the new digital-engagement channels to reach pharmacists and dentists and so forth? How do you use video conferencing or virtual sales calls for your dentist and pharmacist visits to really drive engagement there? The COVID-19 pandemic has shown that you can engage with your respective sales contacts in a digital or distanced way.
Advice for CEOs
Monica Toriello: If you could gather all the CEOs of consumer health and wellness companies in a room together and give them one piece of advice, what would that be?
Eric He: For any players getting into this segment, you have to recognize that this is a battlefield at the intersection of healthcare, consumer goods, and digital. That means you have to fundamentally think through what your winning model archetype is, because the activation engine can be very different. Is your product category more HCP-recommendation-driven, or would a celebrity endorsement be good enough? What’s your differentiated value proposition?
Also think about your channel play: Is it going to be a digital-led business? Or do you have to be a full-fledged omnichannel player to provide the experience that consumers expect? Go back to the fundamentals and think through the strategy, as opposed to just chasing the buzzwords, hiring a celebrity, and going fully digital. Go back to the business fundamentals.
Sandra Welchering: Most of what we hear a lot and talk with CEOs about is offering your wellness products and services through an ecosystem. That’s how you’ll be able to provide a holistic offering. A second piece of advice I would give is to be agile, because we see trends shaping up so quickly. You always need to foresee the next trend, but then also be agile enough to act and react quickly.
Anna Pione: For me, Monica, it’s a question of portfolio shaping. What are the ways that your consumers are engaging with your products, and where are they going next across these different wellness dimensions? Are there opportunities for you to play in both products and services in a way that’s authentic to your brand? Are there opportunities for you to play across different wellness dimensions? If you’re a fitness company, can you also play in apparel or in mindfulness? So really thinking about, “What is our offering today, and what could our offering be in the future? How should we shape our overall portfolio to better serve our consumers and serve them more holistically and expansively?”
Monica Toriello: Thank you, Anna, Eric, and Sandra for joining us. To our listeners, if you’d like to get more insights on consumer health and wellness, visit our collection page at mckinsey.com/consumerhealth.