IIBD

International Case Competition 2019

Theme: Feeding the World
Case Analysis Report

DayTwo: Going to Market with Gut

Microbiome
 INTRODUCTION

Company Overview

DayTwo, a startup co-founded by CEO Lihi Segal based in Israel, is a medicine

company that analyzes the microbiome ecosystem in our digestive tracts through the use of
scientific research by Prof. Eran Segal and Prof. Eran Elinav. The output of their algorithm
supplied DayTwo with the necessary information to deliver personalized nutritional
recommendations via their software application to help minimize blood sugar spikes after
meals for its users. The app’s performance is fined tuned further based on the consumers’ logs
of their foods, medicine consumption, physical activity, and even sleep. DayTwo’s
personalized content is not the only thing CEO Lihi Segal has tried to improve, as she has
continually strived to help users better understand the results of their app. Initially grading
food from A+ to C-, in 2018, DayTwo has opted instead to use numbers ranging from 1.0 to
9.9 - 9.9 indicating that food is unlikely to increase glycemic response and 1.0 the contrary.

The DayTwo app has undoubtedly provided ease for their consumers, and to an
extent, satisfy their current needs. Consumers of the DayTwo app are able to obtain new
unexpected insights, like that experienced by consumers Talya Markovich or prominent
athletes such as Avi Kowalski and Omri Casspi. This provides DayTwo marketers to reap on
positive press and subsequently new opportunities. New insights were not, however, only
obtained by consumers. Results from the DayTwo app has also helped pave a new direction
for the company to explore in the near future, for instance, by personalizing a content suited
for Irritable Bowel Syndrome (IBS) patients.

The positive performance that DayTwo exhibits are still not a guarantee that they are
the pioneer of their field. As DayTwo had decided to serve the diabetic as their market niche,
the company had also made plans to try to expand into the U.S market. However, their
expansion was not without new issues. Amongst others, includes three main problems such as
distribution channels, attempts at differentiating from its up and rising competitors, and the
U.S barrier and culture difference from Israel. DayTwo had also faced subsidiaries problems,
amongst which includes complaints from users in terms of their graphical user interface, lack
of caloric information in their analysis, entire-day menu recommendations and non-barcode
scanning feature.

The nascency of the DayTwo brand making it vital for Lihi Segal to carefully evaluate
their existing strategy and adjust it to better fit the dynamic environment of their company.
Given the combination of alternatives available for DayTwo based on the extract, our paper
will seek to try and recommend the most suitable strategy based on DayTwo’s current
predicament. However, it is first important to try and elaborate in greater detail the problems
faced.
 Segmentation-Targeting-Positioning Strategy

1. Segmentation

Type of Segmentation DayTwo’s Target Segment

Segmentation Criteria

Geographic Region Domestic and International

Country Israel, United States

Age 21 above (Adult)

Gender Male and Female

Demographic Lifestyle Health-conscious individuals

Personality Sophisticated and techno-savvy

Social class Middle-high social class

Benefit sought Keep in track with health, high-quality, friendly-

Psychographic app to provide medical advice on how to maintain a
healthy blood sugar level

Degree of Loyal users, switchers

Loyalty

2. Targeting
DayTwo focuses on three primary subgroups of the mass market. People with
diabetes, overweight people, and wellness enthusiasts.

 Diabetics
According to the International Diabetes Foundation in 2015, an estimated 415 million
people were diabetic, and diabetes is the third highest risk of premature death, just after
hypertension and smoking. In 2017, diabetes in the U.S. costs US$237 billion each year in
direct medical expenses alone and US$90 billion in reduced productivity, and each person
with diabetes on average spend US$9,600 on treatment each year.

 Overweight
The people who fall into the overweight category is another target market for
DayTwo. Obesity is often attributed to high blood sugar, excessive food intake, lack of
physical activity, and genetic factors. Obesity is linked with premature death by the increased
risk of hypertension, high cholesterol, type 2 diabetes, coronary heart disease, etc.

 Professionals in fitness
Professional athletes and fitness enthusiasts fit as another target market for DayTwo.
As professional athletes are often seeking to maximize their health and physical performance,
biometrics and consistent surveillance of intakes to the body is necessary.
3. Positioning
DayTwo positioning themselves in a mostly new section. With the availability of
microbiome analysis, DayTwo opens up a new subsection in the market and places itself as
innovators. It is combining nutrition and health system with an app which personalized its
users with advice features and easy to be used.

Only DayTwo that provided users with personalized recommendations to affect and
control those levels based on their food intake. It provides a tailored solution, medical
advances, and simplify it through a technological-based app precisely

SWOT Analysis

Strength Opportunity

 Implementation of state-of-the-  A lot of people need DayTwo regarding

art science with the soon-to-be-
patented computer algorithm.
 Does not have direct competitors
(Unique and no rivals)
 Provides complete sequence gut
biome DNA with its guidance
and nutrition plans
a large number of diabetic patients (415
million people worldwide)
 Because they have no rivals,
monopolistic and have large opportunity
to hold the market.
 U.S. sports team relied on nutritional
recommendations based on blood test
results which would spend their money
on this app
 Healthy and fitness enthusiasts who
would use this app for their physical
enhancement

Weakness
 Needs a long time for the result
to be out (around 6 weeks)
 Not many people feel the need
to keep on track with daily health
basis, sometimes a one-time
check is enough
 The app is not user-friendly (new
users often get confused)
Threat
 Negative perception could handicap the
company’s prospects because of ethical
and privacy issues
 Entry barriers and law regulation
(GDPR) which needs a lot of money
investment

Marketing Mix (4Ps)

1. Product
Firstly, the product. DayTwo offers a single service which is the DNA profiling of a
consumer, and also offers an application on iOS and Android devices for personalized
nutrition recommendations based on consumer’s microbiome results. The application’s
performance is then continuously calibrates based on consumer’s sleep behavior and logs of
their food and medicine consumption. DayTwo products are measuring and monitoring blood
sugar levels were abundant, only DayTwo provided users with personalized
recommendations to affect and control those levels based on their food intake.

2. Price
Initial prices of DayTwo started at US$500 in early 2017 Israel and reducing to
US$349 and down to US$329 in the mid-2017 during its beta-testing.

3. Place
Starting off in Israel, 2015. DayTwo expanded its outreach to the U.S. But since
Israel’s Weizmann Institute is not a well-known medical brand in the U.S. DayTwo has
therefore relied on the much better-known Mayo Clinic to give DayTwo the credibility it
needs, second to the therapeutic approval by the FDA.

4. Promotion
Stated in the extract, in relation to distributions in business to business consumer, it is
realized that it is imperative to achieve the more inventive suppliers among influencers. So,
as to draw in these and different influencers, DayTwo agents would need to go to meetings,
public exhibitions, instruct and train by means of workshops and online courses, and
publicize in devoted diaries and magazines.

Competitor Analysis

Competitors at this stage are still very minimal. DayTwo offers a technological leap in
science ahead of its time, taking a huge step advancement in commercial DNA testing. In
comparison with other services regarding DNA testing, such as MyHeritage DNA and
23andMe which links consumers with genetic information such as ancestry and health risks,
DayTwo offers an insight where no other services can provide at its time. The obstacle for
DayTwo is how the target market perceives DayTwo, and trying to explain that DayTwo
offers a service that no other company can offer yet. Offering a science-based algorithm that
has shown great results in clinical trials at some of the most prestigious scientific institutions.
DayTwo ‘competitors’ are not doing what DayTwo is doing, but on average, customers can’t
always tell the difference. DayTwo is more expensive compared to their indirect competitors,
MyHeritage DNA as an example. It cost $79 dollar for its kit in retail, $20 cheaper than
23andMe, Ancestry DNA, etc. Although DayTwo cost $329, much more expensive than its
competitor, however, it has much more features and utility which the competitors cannot
provide. Among its high-priced product, DayTwo is more valuable because it makes the
glycemic control easily to predict glucose response after consuming food with personalized-
based, nutrition graph, and evidence as a solution to diabetic people. Its competitor does not
have those benefits, the competitors only give blood test without how to maintain the impact
and being healthy.

Problem Identification

1. Distribution
 Although DayTwo had launched a Direct to Consumer (DTC) distribution in Israel,
the size and importance of the U.S. market has required them to think more broadly for their
distribution channel. DayTwo must face three possible broad approaches: DTC approach,
Business to Business (B2B), and Business to Business to Consumer (B2B2C).

 Direct to Consumer (DTC)

DayTwo’s DTC marketing primarily capitalizes on the impact of their public relations
(PR) campaign. DayTwo would appear on TVs, be endorsed by celebrities, and generate buzz
from the public over their brand. This method can easily be carried to the U.S market during
expansion, as DTC marketing is conducted primarily through advertising campaigns.
DayTwo is likely to prioritize a television and digital advertising as a platform.
Unfortunately, a DTC of this kind has issued several problems for DayTwo. Firstly, DayTwo
feels that their high niche market of the diabetic may not be efficiently and effectively
reached through TV advertising, making digital advertising and micro-targeting a more
appropriate option. Secondly, the average cost of $90 million in DTC media exposure
annually is not definitely not approachable for DayTwo.

 Business to Business (B2B)

DayTwo’s business to business approach offers two alternatives: working together
with Health Insurance companies or Insurance-Providing Employers in the U.S., or,
Partnering with Weight Loss or Fitness firms.

 Health Insurance Companies or Insurance-Providing Employers

DayTwo realizes the prevalence of firms that are responsible for the cost of the employee’s
health insurance and the insurance company. It has been stated that employer-provided health
insurance is covering 151 million U.S workers, and even their spouses and children. Thus, in
order to minimize the payouts to policyholders, they become likely to partner with DayTwo.
This opportunity provides problems however, as firms will only partner with DayTwo once it
has demonstrated a degree of efficiency in helping its users remain healthy and physically fit.

 Partnerships with Weight Loss or Fitness Firms

Another distribution avenue available for DayTwo is the partnership with weight loss and
fitness firms and apps with personalized nutritional advice. DayTwo believes that by
partnering with such parties, they will be able to truly offer users personalized nutritional
options. Take WeightWatchers as an example, by partnering with DayTwo, it will be able to
optimize blood sugar levels, whilst also maintaining weight loss goals, vitamin D needs,
Paleo diet preferences and even a vegan nutrition base. Partnering with DayTwo is also
believed to be able to bring the older, struggling Weight loss brands back to its momentum.
However, one concern that DayTwo must face is that it will need to white-label its offerings,
when integrating with its possible partners, losing the visibility of their brand.

 Business to Business to Consumer (B2B2C)

On the basis of their experience with Israel, DayTwo realized the potential value of
partnering with its users’ physician. As DayTwo lacks the staff, it has noted that partnering
with dietitians or doctors is a success; as they would adopt DayTwo and roll it out to their
clients along with nutritional. Marketing to 320,000 primary care in the U.S is one way to
obtain visibility and credibility in the medical industry.
But, replicating this success with dietitians in the U.S. may be more challenging and capital-
intensive. DayTwo must demonstrate to healthcare providers that they are a trustworthy
brand, and would have to amongst which attend conferences, trade shows, workshops to do
so. These costly activities would reach $2,000,000 in the first year, and requires DayTwo to
add at least 16 salespeople. In addition, DayTwo must also decide how best to distribute its
services to healthcare providers.

2. Promotional Strategies - Differentiation

Rising and upcoming competitors that have taken interest in the microbiome testing
and services requires DayTwo to differentiate and position itself as a distinct brand. DayTwo
has repetitively dismissed their competitors, claiming that the scientific basis for their
services is unique and far beyond their competitors. As their competitors are focused on
finding supplements for certain conditions, DayTwo served a specific market niche of
diabetes and glucose management by using a scientific approach. The prospect from
DayTwo’s value differentiation was unfortunately handicapped by the negative perception it
would receive from the U.S public.

DayTwo must face skepticisms from prominent figures like the Director of the Human
Microbiome Project at New York University and a co-founder of the American Gut Project,
who have expressed concern on the reliability of results from microbiome testing. DayTwo
must also be concerned with ethical privacy issues. As consumer DNA and personal data on
lifestyle and behavior are not protected under the Health Insurance Portability and
Accountability (HIPAA), it is not a surprise to claim that they had also grown to avoid
DayTwo out of fear that their personal data will be misused. Finally, these challenges are
combined with the notion that DayTwo is struggling to explain to average consumers how
they differentiate themselves from other microbiome companies. Alas, potential consumers
often assume that DayTwo has no striking qualities that other competitors cannot offer.

3. U.S Barriers and Culture

A concern that DayTwo must face is that Israel’s Weizmann Institute is not a well-
known medical brand in the U.S. DayTwo has therefore relied on the much better-known
Mayo Clinic to give DayTwo the credibility it needs, second to the therapeutic approval by
the FDA. The latter they are avoiding by functioning as a wellness service and not a
therapeutic product. The absence of an FDA approval makes generating a wide approval from
the public for the DayTwo brand a more challenging thing to do. However, Stevens has
stated that down the road, they will initiate an FDA process to become the standard care for
diabetes.

Another barrier faced by DayTwo is culture. DayTwo had taken note that foods from
the U.S. are unlike food in Israel. DayTwo must, therefore, develop an offering that reflects
the culture of the local market, adding to their cost and time taken. Not to mention, the cost of
building an additional sequencing lab, hiring of staff teams of one senior expert scientist and
two assistants, intensive 6 months training program, machinery operations and electricity
cost.

4. Subsidiary Issues
Although DayTwo’s customers value their services, some users have also found that
the app’s non-user friendly view has become a source of inconvenience. Furthermore, some
complaints were raised due to the app’s lack of daily summary of caloric information, and
others have asked for an entire-day menu recommendation and barcode scanner to evaluate
supermarket offerings.

From the set of problems that have been identified above, we have come to the
conclusion that there are three main and pressing problems which should become a priority in
the recommendation section. The first, being the distribution channel. Second, their struggle
in conveying their differentiation and position. Lastly, the U.S. barriers and cultures that is
hampering the growth of DayTwo.

Recommendation

Currently, based on the existing evidence laid earlier in this case analysis, it is not yet
a feasible idea for DayTwo to expand their market to all the three countries as it would be
better for them to focus on one country with the most expenditure in diabetes, which is the
U.S. Moreover, the reason why we recommend DayTwo to focus on the diabetes market in
the U.S. first rather than also spending their effort on all three potential target markets at once
is because we consider diabetes as the target market which will generate the most profit for
DayTwo.
We justify our recommendation using the facts and evidence mentioned earlier. The first
reason is that people with diabetes spent an average of $9,600 on diabetes treatment each
year. Furthermore, due to the sometimes chronic complications from the disease, people with
diabetes spend 2.3 times more on overall health care than they would have in its absence.
The second reason is that because DayTwo did not find any commercial laboratory that could
perform full shotgun microbiome sequencing. Meaning that if they want to expand their
market on another country, they first have to make sure that they have all the necessary
equipment, trained staff, and the availability of sequencing lab.

It is given that the cost to build an additional sequencing lab, including servers and
machinery, was $5 million. Staff teams of one senior expert scientist and two assistants who
worked together in eight-hour shifts cost $350,000 per year per team. Each such team
required an intensive six-month training program before being able to analyze samples.
Machinery operated around the clock, allowing teams to sequence and analyze about 100,000
units per year. Electricity cost roughly $10,000 per month.

Suppose there are three staff teams recruited and the electricity is for one year. Then,
in total, these will amount to about $6,170,000 ($5,000,000+$1,050,000+$120,000). As we
can see, this will need a huge investment of money and time, therefore, currently, DayTwo
should really consider focusing on just one potential target market which will be willing to
spend most of their money on the product so that it may result in more efficiency of cost and
time for DayTwo.

Another main issue for DayTwo is distribution and U.S barriers. Later on, in the
following passages, we will also include recommendations for the subsidiary issues; as the
different potential target market will impact on how DayTwo decides to promote their
product. As mentioned in the previous pages, DayTwo has three possible broad approaches:
DTC approach, Business to Business (B2B), and Business to Business to Consumer
(B2B2C). Keep in mind that we recommend DayTwo to focus their target market to people
with diabetes. Next, for the distribution, we recommend that DayTwo implements three
phases which are as follows:
Phase 1
In this phase, we recommend that DayTwo focus first on B2B2C. This is one of the
paths in order to gain visibility and credibility among overweight and obese Americans by
marketing to the 320,000 primary care physicians in the U.S. Moreover, access to the 7,000
endocrinologists was a way to reach those diagnosed with diabetes (DayTwo’s focused target
market). Therefore, relationships with the 68,000 U.S. nutritionists and dietitians was a way
to reach both groups.
Because not only this path could ensure that DayTwo can establish engagement with its
focused target market in the fastest time, a positive recommendation from physicians and
dieticians would result in a step closer to building DayTwo’s credibility and over time this
will greatly help position the company’s perceived value in the customers’ mind.

Phase 2
After DayTwo successfully establishes a strong foothold in Phase 1, we recommend
that the next step for DayTwo is to expand their distribution to DTC; DayTwo can start to
expand their focus on another potential target market which is wellness-enthusiasts. Because
marketing to consumers is an expensive model, especially if DayTwo wants to expand their
target market to wellness-enthusiasts market. As part of the reasons are because few healthy
people feel a reason to pay attention to their blood sugar levels. Thus, we recommend that
DayTwo should develop micro-niche targeting of health-conscious people in order for the
promotion through digital channels to be the most effective.

Another reason why we recommend DayTwo to extend their target market of health-
conscious people with DTC distribution only after DayTwo achieved success in Phase 1 is
that: through the positive recommendation from physicians and dieticians, DayTwo’s value of
credible reputation is being continuously built in the minds of the potential target market
which is wellness-enthusiasts. That is why, we also recommend that their advertising should
contain the scene where it shows that there are positive reviews and also recommendation to
use DayTwo from the physicians, dieticians, and the users.

Phase 3
Finally, in this phase, we recommend DayTwo to expand their distribution to B2B like
Health Insurance Companies or Insurance-Providing Employers, or even partnerships with
Weight Loss or Fitness Firms. We realize that DayTwo has a promising greater commercial
impact on across nearly all potential target markets through sales to businesses with an
interest in their members’ health. With employer-provided health insurance covered about
151 million U.S. workers, and often their spouses and children, far more people than any
other category of insurance coverage.

Nevertheless, we should also expect that the partner-company would want DayTwo to
receive FDA approval for its offerings, or until science and clinical results had proven
DayTwo’s efficacy in maintaining long-term normal glycemic levels. Even though Phase 3 is
the last, we believe that the sales cycle it would generate would be lengthy even without the
years of investment needed to deliver such approval.

Therefore, it is justified that our recommendation for DayTwo is while the company
has already operated on Phase 1 and Phase 2 first. Because, during Phase 1 and Phase 2,
DayTwo would have already proven enough that their company’s product has powerful
effects in long-term and would have already established stronger commercial impact, thus,
ensuring that their potential partner-company would want to choose DayTwo.

Another issue of DayTwo is albeit its customers value their services, some users have
also found that the app’s non-user friendly view has become a source of inconvenience. So,
we recommend that DayTwo should invest more in further product development. Next, we
also recommend that DayTwo should always listen to their customers’ complaints as there is
also some complaint raised due to the app’s lack of daily summary of caloric information, and
others have asked for an entire-day menu recommendation, and barcode scanner to evaluate
supermarket offerings.

We also recommend DayTwo to make a user-friendly tour-and-tutorial for their

product to new users by guiding them with cursors. At first, sometimes people skip this part
because they are want to quickly navigate through the app themselves. So, we recommend
that DayTwo should also provide product tour-and-tutorial button inside the app. So, when a
person gets confused during the first-time experience with the app, he or she can just click
that button and DayTwo’s quick tutorial comes up. Moreover, a number of people would want
the pointing-cursor which acts as the app’s tour-navigator to be more optional. Whether it will
always appear on the app, just one-time with “Click for Help” option, or not at all. Thus,
providing a clearer picture in the app’s overall holistic view will make DayTwo much better
to be understood quickly as well as giving customers great first-time user-experiences.

We also recommend that DayTwo’s app should have an Interactive Chat of “Ask Our
Dieticians!” where it enables users to be able to actively asking about their diets through the
app. The next problem is the long waiting-time of DayTwo. Because its result still takes for
about 6 weeks to be completed which is considered as a long time, DayTwo must speed up
the process, so, customers will not wait too long for getting their result and they will prefer to
choose this app.