102: Smile Direct Club — Is It Good or Bad for the Industry? with Host Emmet Scott

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All right, hello everyone, and welcome to another episode of DSO Secrets. I'm your fearless host, Emmett Scott, and today I've got Dr. Riti Gangoli, senior Director of Professional Education and Marketing, here with me from SmileDirectClub. And Chris Thompson, VP of Sales. I have been so excited to have you on this podcast today and we've been talking about what this might look like and I'm going ahead for those in our DSO Secrets Facebook page. We are broadcasting this live. So if you have questions for our two guests here, I'm happy to answer those as well. Or at least ask them. I won't answer them. So first of all, welcome both of you. When I think about SmileDirectClub, I have so many things that go through my head, as does everyone who's listening to this. And you guys aren't ignorant to know that some of them are really negative and some of them are really exciting and positive. So that's the kind of guest too, I'd love to have on the show. Those two are entrepreneurial and also humble and self aware. So I'm just going to start with some of the most difficult questions, if you will, or let's say the most direct ones that everybody's wondering. And we're just going to get those out of the way. And then I want to talk about how you all are working with dentists. Now, I know people will be interested in this, but number one is doctors not involved in any somile direct club treatment. That this is something where I don't know. There's just a bunch of people who are deciding how the orthodontist should work when it comes to this care. Dr. Reedy, maybe I'll start with you in saying, is that how it works?

Thanks for the question, Emmett. And nope, that is actually not how it works at all. Let's just get that out of the way. So, you know, to set the record straight on that There's a lot of misinformation out there. And SmileDirectClub works with dentists all along. Even before our doctor directed channel came along, we have doctors who are treating, plan, treatment planning, the doctors who are directing the plan and managing the plan. All through the smile journey for our customers, we work with more than 250 state licensed doctors and orthodontists. These doctors and orthodontist, they are the ones who set up all the plans.

They.

They are the one who monitor the treatment. They make sure that the right kind of cases and only the mild to moderate cases get into treatment. So we have a big fleet of doctors who work with us, and they're licensed in each and every state that SmileDirectClub provides treatment.

All right, so you said something about determining which cases. The general feeling is, though, that SmileDirectClub isn't really vetting their cases, that they're accepting everything and sometimes there's terrible periodontal issues or whatnot. Can you kind of speak to that? And how is that vetted to ensure that you're not making things worse?

Sure, yeah. So we don't accept all of our cases. Every day we have thousands of cases that we reject. And, you know, rejection could be due to several things. It could be first, because the case is super complex, it's not something that FDC can treat because we only deal with mild to moderate cases. It could also be rejected because the patient either has not got consent from a doctor, they've not visited the dentist in the past six months, which they have to attest in our medical dental detail history form, or they have some sort of periodontal conditions that is easily observed, or they have got this in a periodontal condition in the past. So all of these cases are the reasons why we reject them. So we don't accept all cases. But now that we have the partner network, and we'll go into that a little bit, I hope, later we have a place for these doctors for these patients to go into. So if they're rejected by us, that doesn't mean they cannot do STC ever in their lives. They just have a few things to take care of before, after which they can happily go into treatment. So now we have a place for them to go to as well and get a dental home.

All right, so tell us a little bit. I skipped over this in the beginning. Tell us a little bit about your background, Doctor, before you were at SmileDirectClub.

Sure. So I was a dentist before I was at FDC I have worked with several other dental vendors. I've been with glidewell Laborator, I've been with Strauman. I've worked my way through different parts of dentistry, from being a researcher to clinical affairs, through marketing and education, and now with ftc. All of that amazing things have come together and here I am.

Okay, awesome. Chris, I guess the question for you, since you're not a doctor, is what about manufacturing side? You know, I've heard some things like you guys aren't making your own aligners. I don't know really what the issue is. Maybe not being a clinician, I'm not. But what's the issue? Why do people care whether you make your own aligners or not? And then what's the truth around it?

Yeah, well, first, Emmett, thanks for having us on. I'm a huge fan of yours and it's really hard to follow Reedy's degrees and everything, so. But. But I think, you know, what I've loved about your podcast is just discussions around expansion and innovation, and I think that's really what we're doing to the clear aligner market. So thanks for having us. One, two, to get back to your question, really cool part about our process is it's completely vertically integrated. So we make all of our own aligners right outside of Nashville in Tennessee. Made in the USA. We are the largest 3D printing hub or company in all of North America. So everything from treatment planning to our robust teledentistry platform, to our materials to our liner production is all done within Smile Direct Club's sphere of influence. So, you know, that allows us to control everything. And I think the crown jewel is our printing, but also our treatment planning. And then you look at our teledentistry platform that as I'm sure we'll talk about later. Just with COVID the teledentistry rising to the forefront of the American minds and just discussion and trust is really where I think we're leading the way. But completely vertically integrated on the aligner side.

So one of the things I thought was interesting talking with you all one I like disruptors. You know, not that every disruption is good, but I like trying to dig in and then letting our listeners and audience decide, is this good for the industry or is this poor? But clearly one of the things I feel like we have not done a good job in dentistry is really be able to compete on the marketing side to not with other dentists, but with everything else people have to spend their time and money on. And so one of the things that I try to look at and steal from SmileDirectClub is you guys got massive marketing that's happening direct to consumer. So no matter what you might say about the product. And again, not being a clinician, I'm not going to speak as much to that. But when I look as far as awareness for the industry, awareness for people to say, hey, so dental has those components, right? Oh, I should maybe prioritize that over this cart stereo system or this other investment I want to make. Maybe I want to do something around my health care. It seems like that's been the place. You guys have really been front and center. I'm curious, when you look at the marketplace as a whole, do you look at it as, okay, it's a saturated marketplace, everybody's already getting aligners and so forth and we're just trying to take our share from other competitors. That would be one market, right. That's kind of where cell phones are 120% penetration rate. So you know, I'm either, I just switched my carrier, right. But it wasn't like I just got cell phones for the first time. When you look at the orthodontia market or the line of market or however you break this out, what's the penetration rate, what's the potential? How do you think about this?

It's huge across the board. I mean, even as much as clear liners are growing in the market, Ortho in general, it's still kind of a model of scarcity. Two to three million people go into ortho every single year and there's 300 plus people within North America. So there's just a huge amount of demand and opportunity out there. And you know that that's.

So I'm just doing quick math here. So you're saying we've got a 1% penetration rate. Okay, so 300 million people. Let's do some quick math. We could get somebody smarter than me who's an actuary. But some percentage of them aren't adults. They're figuring this out on vaccines right now. Wait, not everyone needed it. But anyway, so, so it's like, okay, let's say there was 200 million that are adults and then some percentage of them that, that need ortho. Like how do you all think about that? I mean, what's the lowest I could get that number down to 150 million?

Yeah, I mean you see a lot of numbers out there around the percentage of population that has some type of malocclusion. You know, call it 70 to 85% is typically the range. I see. So out of those 300 million, let's go with 75% of people have some type of correction that they want. And that's really why Smile DirectClub was founded to begin with, was you had this huge. Millions upon millions of people who we know have some type of malocclusion, but also don't want to go into metal braces and want to convene an affordable option. And that's how we started was you think about kind of what you mentioned, around the bucket. I like, is really consumerism in health care. Right. Consumerism has infiltrated every part of our lives, whether you're a millennial or not a millennial, and that's made its way to health care. So we could have probably a whole podcast on this. But when you think about things like online scheduling, how quick do you see people, how, you know, how you make that.

Yeah, I mean, Amazon screwed us up, right? I mean, it created this cognitive dissonance where we're all entitled. And then this global pandemic comes and we were like, you know, it'd be really nice if just everything came to my door. I never had to leave my cell phone to do anything. So that's where you start thinking about, okay, dental has to compete with that mindset, right? This isn't a dentist to dentist competition. This is dentist as a industry versus I just play Candy Crush or I'll just buy this on Amazon because that's easier than filling out all this piece of paper, et cetera. So, but, Chris, I want to go back. If we're at 75%, okay, we're not at 1% penetration. It's like 3 or 4% penetration. Right? So. So we're off by like 96% that have the need versus, you know, my cell phone comparison, 120% of utilization probably won't get to 120% where people are, like wearing multiple of them. But if we could get to, I don't know, 10%, then we tripled the entire industry of ortho. Is that what we're talking about? Okay, so that's what gets me interested in this. You know, what I've seen from studies, when a DSO goes in and really markets when smiledirect, any of these groups go in and market, the reality is the consumer doesn't always say, oh, I'm going to buy that product. They say things like, man, I really do need to get my dental care done, or oh, yeah, this tooth is hurt. So it kind of lifts the entire Industry. I'm curious what you're seeing as far as the number of people who reach out to you versus those who then say, yeah, but Chris, Doc, I want to go inside and visit a clinic. I want to have that like trusted advisor relationship versus I love the telehealth, but I kind of want to know that there's someone local too. Right. We're very entitled people, let's be honest. So what are you seeing in some of your numbers around that?

Yeah, a lot of folks ask us why. Typically we've had our retail stores and we've had where customers can do impression kits out of the comfort of their own home. And what we said from the beginning is we always want to meet the customer where they want to be met. So a couple things led us in going to this Dr. Channel. First to your question, Emmett, is We see roughly 60 million unique website visitors to our site every single year. Meaning they came to our website and gave our email. We estimate through our surveys, ignoring our customer, that 40 to 50% of those people in some way, shape or form want to talk to a doctor before they get started. So to your point, they love the convenience.

So I'm going to do some quick math. 60 million, 24 million to 30 million. Want you to have a relationship with the doctor.

I should have brought my calculator for

this today, but that accounting side of me, I have to like pull in like reality here. Right. These aren't just. I mean, these are like 24 to 30 million people. I don't know. This just kind of excites me that you've done all of the marketing work creating and they're like, hey, love you guys. So anyway, do you have someone local that we could go visit with? Right.

Yeah. And that's really what I like about this partner network. Working with doctors is with COVID it clearly works. But even without Covid, you have the doctor visit, doctor gets to see the patient first, and then STC kind of handles the rest. The way it works is we basically need a scan or impression from the doctor's office. That person or the doctor or hygienist talks about SmileDirectClub. They come into our system, Dr. Does what they do best, and then we do what we do best, which is you think about insurance billing, low monthly payments, $89 a month, excellent treatment plan, CRM outreach. That is all the benefit of working with SmileDirectClub. And to your point, for that customer, they now get the convenience and affordability of SmileDirectClub. But they also get that check in with the doctor and then you know, for the doctor. Obviously there's some benefits for incremental, you know, clear aligner starts. But what we think is a huge benefit, whether it's leads from us or just quite frankly, they're all owned patients. You know, now you're attracting new patients in, you've got another, another service you can offer. But you know, when you think about the leads from us, which we can go into, those are all opportunities to get people into a new dental home, which is really important in today's market.

Okay, I have a couple of questions on that. But doc, I want to ask you, like, how does this actually work within the doctor's office? Right. From a doctor's perspective. Okay, thanks Chris. Appreciate the marketing. Thanks for sending them over. I still want my clinical judgment intact. Right. So walk me through. Like if I were to partner with you, am I like beholden now to the Smile Direct club king? And I can only now send that patient through that even if I think it's bad clinical judgment?

Absolutely not. So you know, there's two ways to get started, right? One is the patients that you have in your own clinic and that needs some sort of a mild to moderate treatment. FDC is positioned at a very nice price point. It's a very attractive price point. It's affordable, convenience. And the patients who were never gone for like you know, the orthodontics or the classical treatment that you have, or the clear aligner therapies, those are patients that easily like and actually gravitate towards stc. We have the doctor use their vetting, use their judgment for everything. If the doctor feels that this is not something that FDC can handle, it's up to the doctor. If the doctor feels this is a case that requires orthodontia, the doctor can easily refer it out to their in house orthodontist. So we do not dictate anything, but we are seeing that a lot of the patients that are there within these doctors offices do want an affordable, convenient price point and then they can be sent over into fdc. And when I say sent over, it still does not mean that STC is the king of it all. We still keep the doctor completely informed on, you know, what's going on, where they are in the, in the treatment plan, how is it going, what's the status. And the good part is that once this is done, we also give a warm handoff back to the doctor's office. We follow up with the patient. So all the CRM and imagine all this headache that the doctor's office would have to do all the time when your patient did not come back for tracking, all the time the patient did not wear their aligners, all of that headache, we take it on ourselves because we have already have the back end system set up for that. We have our check ins with the patient. They are through teledentistry. We have a robust platform. They can do video calls, et cetera. We're available 24 7. Our entire dental team can take care of anything, whether it is something as small as a I have a billing issue or something as large as I'm not sure if I'm tracking correctly, do I need to get a scan, all of that, we can all take care of it on our teledentistry platform. That's hours of time and honestly inconvenience that's saved to the admin and all the office managers inside the dental office. We handle that. Once the treatment is done, we send all these messages to the patient to say, hey, go back to your doctor. Because now that you have a good smile, that's not enough. You have to maintain because it's oral care, it's not dental, it's not teeth straightening, it's oral care and aesthetic.

You're like the best specialist I've would ever refer to.

Right?

You actually tell me what's going on with my patient and send them back so that I send you that ideal. Right. But is that how I should think about this? Because you know, there's a lot of different, I guess, aligner therapy capabilities I could have in my office. Right. So there's definitely different products out there where I'm managing the case, right. I'm helping determine the treatment plan, etc. Could I have those in parallel with this being an option? Because obviously those are going to be a higher cost product. But oftentimes can also take on more complex situations too. Right? So you can do both. So I can, I can have this as like two parts in my tool belt. One I'm referring out, I just want to make sure I got the details. I'm basically referring it to a telehealth relationship.

I wouldn't call it like referring. It's more, it's more the fact that, you know, we are your partners and you and we're, we're basically a dso. So FTC functions like the DSO and there's no referral system. It's more to say that we are now going to help you take care of this patient and you get compensated for the time and the energy you put in to diagnose the case, because we're not doing the diagnosis now, you are. So we compensate you for the time you've put in and then the case goes into stc. So once the case is into stc, the doctor is completely indemnified. There's nothing that happens to the doctors. It goes into the FDC as a case within ourselves, or once it's done, then the patient comes back. And the fact that, you know, the doctor can see exactly where the patient is in their tracking, there's a lot of peace of mind to know that we're doing the right thing. Because the doctor can see, oh, the patient has, you know, they did a telehealth check in. They are on their fifth aligner, they're on the last to spinal or their retainers. They get all of these check ins back.

Okay, so a couple like technical things that I'm sure some of the listeners are wondering would be do I pay the lab bill or how does that part work in this relationship? So a little bit on the financial piece. How does that whole part work? If you can just talk about it and you don't have to give numbers on this, you can talk with each doc. But how does the process work?

The beauty of this model is like Rudy said, the docs are paid for their services rendered, but there's no lab fee. Right. So you're always cash flow positive for these cases. So, you know, if anyone's interested, obviously let me know, we can talk about numbers. But yeah, so the beauty is there's no lab fee. Right. When you give us that patient, patient comes into our system, right? And we close the case. Doctors paid for their services and, and that just basically we pay that at the end of the month. So there's, you know, there's no cost, there's no cost for the aligners, there's no cost for training, there's no cost to be certified. You know, if docs are interested, they could sign up tomorrow and start producing cases, you know, five minutes later. So it's. There's no cost in any of it, including it.

I do like business models where I have zero cost, zero management, and you just send me the profit. So if you could build more of those kind of business models out there, that's great. What I like what you said, doc, that I think will be interesting to a lot of our listeners is to the extent that they can control and this can just be another tool in their tool belt that they can decide, hey, I've got an in house orthodontist I want to send that to or hey, I'm doing aligners, I'm going to use it for that. But then those cases where they're like, they don't really fit either of these and this is really a better solution. Great, I have it. If I don't want to use it, I don't want to use it.

And we can also get into a little bit, you know, to understand like all the, all the chair time that you save on these like mild cases. I think a lot of doctors should consider is it actually worth their chair time. These big cases, the ones that are complex, the ones that are complicated, that go into the orthodontic chair, you have to go back and forth every day. These are cases that are usually charged at a higher price point because they are complicated. But when you look at these simple cases, every time the patient comes back to your chair, you are wasting that time. And that time could then be spent instead for a hygiene appointment. A 30 minutes in your dental office chair is a lot of revenue that you're looking at. It's just for a patient to come in and pop an aligner in and out. So what can you do with that time? That's where that forward thinking mentality of a more progressive doctor comes in. Because there is so much things you can do with that 30 minutes chair time. So much you can do with your assistance. Chair time. Now imagine if those both chairs are filled up with a patient coming in just for an aligner check. You're losing that revenue. So it's not just a revenue that you gain from all of these treatments. You also have to think of it as what is your final profit as a practitioner? And are some of these cases that are small, mild, moderate, that do not require big intervention, are they actually, what do you want to do in your practice?

Well, here's the things I like just kind of closing some of this out. I like business models where they do all the marketing for me, generate somewhere around 30 million different opportunities and then send them out and then they take all the cost on and send me the profit. So that part I really like. And then my doctors retain all the autonomy. So I'm just going to reduce it down to that. Here's what I like when I think of this broadly. I like getting awareness out for dental care. Again, I'll go back to what I said at the beginning. We've got a lot of work to do to catch up. We all know that frankly, up until the 80s, it was illegal in a lot of states to even do marketing. And, and that put us very flat footed as this little thing called the Internet and iPhone 2007, which I just got the iPhone 12. Love it by the way. As these things came out though, like we were not prepared. We're all catching up with that. And I love how you're thinking and I love having you, and I love maybe at some point, maybe having one of your marketing directors on as well to kind of talk about, about what they're seeing with the patients. What, what they're seeing really appeals to patients because frankly, this is DSO secrets and we want the secrets on how could we better attract more patients. So anyway, we should do that as a. Another podcast. I know that you're innovating a lot of this, Chris, with some DSOs right now, working with their clinical teams. Can you tell me a little bit about how that's going to, you know, what you're working through those kind of things?

Yeah. Overall, I mean, the success of the program has far exceeded our expectations. So we have a lot of DSOs we work with now. We have a lot of private practitioners too. And I'd say really two things. One, when we first started, we really wanted to see how this would work in office. As you know, there are a lot of DSOs that have general dentists, which this program's typically designed for. But a lot of DSOs are adding orthos to the mix. So the thought to some of your early questions is how do we, how do we make it as an offering in their practice without pulling from what they do and hopefully adding incremental aligner conversion? So that's one.

And then one of the things orthodontists complain about all the time when they're part of groups is like, how do I get these general dentists to actually refer to me and think they're actually having to do a lot of heavy lifting. They don't just think about, hey, how can I send some more opportunity over to my orthodontist team member here?

Right?

They'd be like, how do I deal with this and this and treatment coordination so forth. So it seems like this would be something on the general side that could help with that referral over to the ortho side even that's been a huge pleasant surprise.

We kind of thought this would happen, but we're proving it now. Now that the general dentists have an option they can talk about to everyone. They know it's easy. They're not going to get stuck on the really hard, complex cases or non profitable cases. And it's easy, right? So what we're finding is we're getting a lot of incremental fits into SmileDirectClub. But as a result of that, you know, if you do a lot of metal brackets, metal brackets are growing. If you do other more complex cases, everything's growing in that office. Because now it's kind of that total office concept where everyone's talking about clear aligners. So, you know, I, a lot of the orthos are now happy when they're a little bit more hesitant to work with us in the beginning.

All right, doc, what's the new innovation? What's coming down the pipe? Anything, Anything else that we should be aware of?

Lots of fun things you must have, might have heard on our, I think on our announcements A few weeks ago, we just launched our comfort sense technology and our second generation aligners. With the comfort sense and our new aligner manufacturing capabilities, these will be more comfortable for the patient in general. They're going to be more predictable with their tooth movements. And thanks to the innovation on our manufacturing side, which includes laser technologies for precision cuts, all of our margins are going to be much more comfortable. And all in all, what this translates to is a better, more enhanced customer experience, higher quality aligners and an improved fit. So overall, we have a better experience and just better things for our club members that are coming in. And in the process of making them smile, we also make sure that they're not as uncomfortable that clear aligners have mythically always told to be.

Well, you know, I always have in my mind the picture of, I think it was in 1972, 76, Kodak comes out with this huge thing called the digital camera. Terrible pictures and everything, right? And they're like, yeah, this ain't going anywhere. Because, you know, cameras were even then much smaller. They just weren't integrated in. And then year by year, things get better and pretty soon. Did I mention I got this awesome iPhone 12 now? Anyway, you got like incredible pictures, right? And video that you can take. And when I look at some of this technology, it's easy oftentimes to be like, yeah, but it's not as good. Yeah, but this. But then incrementally it just gets better. And so it's interesting to watch. You know, I think this aligner thing's here to stay. That's one thing I will like make a prediction on. So it'll be fun to watch how this ultimately all plays out. You know, I'll end with this if anyone wanted more information, wanted to understand what was going on here, whether they said yeah, I don't like it or this is brilliant, I want to integrate in what's the best way for them to reach out to you?

So I'll put it out there. Easiest way is just email me chris thompsonmiledirectclub.com the other option if you want to learn more is just our website, go to SmileDirectClub.com partner network. But my email is probably the easiest way. We're, we're looking to sign up partners right now across the country. I say Emmett, we barely scratched the surface on some of the cool marketing things we're doing. I think that's obviously a huge benefit that a lot of DSOs have already reaped the rewards on. So there's a whole nother bucket we can talk about there. But shoot me an email. We'd love to get you set up.

Yeah. So you guys are like not just doing this external marketing but when we have the marketing podcast, which I've now decided we're going to do and we're going to take all of your secrets around marketing. You guys are doing like on site marketing for these docs too, like direct, like for your partners.

This is the part I'm probably most excited about is one. Yeah, in office marketing we mentioned earlier things like online scheduling. We're partnering with a company called Next Health. And then a lot of what we're doing with our partners now is driving that 20 to 30 million people every single year that want to talk to a doctor. So we have roughly 12 lead sources right now which obviously get people in for SmileDirectClub. But there's examples like if you look at the city you're in, we typically have tens of thousands of people who have completed treatment. This doesn't really help out stc, but what we do is we say, hey, great news, you've completed treatment. We know you want to keep your smile looking nice. Go see Dr. Thompson in Dallas, Texas to get a hygiene or to find a dental home. So a lot of our leads, which the DSOs have really loved in particular, they're dental home leads, not just STC leads. So that's been a huge focus. To your point where we're working on tweaking that, looking at different ways to put it on our website. Google search extensions. One plug I have to give which has probably been the most pleasant surprise of anything we've done, is these pop up events. So basically what we do is we Dr. Dr. Emmett if you know, if you had two or three operatories, we do a store in store where we basically bring in our staff, we bring in our scanners, we treat it like one of our corporate shops. We are in your office for, call it a Thursday, Friday, Saturday, three days. We do what we do normally, but the whole time we try to get them over to your practice. So we've done eight or nine of these. Our average number of patients that we schedule for the weekend to become new patients is right around 32 right now. So the doctor or that office comes out of that weekend. We try to push same day appointments. By the way, it's Monday morning. Oh my God. I just got 32 new patients from the weekend. So it's a huge push for us. A lot of DSOs have really loved that play because it's low effort and it's free patients. The other thing I would add there, not to really pump up pop ups too much, but the beauty is they've met the doctor, they've met the manager, and they've been to the office. So we think our show rate is a lot better than just a cold lead coming in. So definitely the marketing side, I think we, we should do another podcast because we could probably spend two hours talking about the things we're doing for DSOs on the marketing side.

Yeah, I love that. And again, I really like free marketing. I just have to be honest with you. I really like free marketing, especially if it drives a bunch of patients in to get better oral health care. When we're talking about 4 or 5% of the market and we got to get this at least to 10. If not, I keep saying 70% overall. So anyway, thank you both for being on today. For those of you who are listening to this on the podcast, come join us over on the Facebook site at DSO Secrets. You can see that I'm trying to be like, Chris, I'm growing a beard. You know, I'm doing everything I can to be innovative. So appreciate again you all being on. And until next time, keep smiling.

Thanks Emmett. Thanks everyone.

Thanks Emmett. Thanks a lot.

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