How To Provide Free Membership To Your Core Members while Generating Millions In Revenue

Blog_3.pngA pipe dream?  Think again.  Sermo already does this.  Sermo is an online community of physicians that has evolved into the largest and arguable most profitable network of this kind in the world. As someone always in search of new
demand-driven models that turn current practices on their head, I LOVE
Sermo.   Sermo is known for its unique, at times controversial, and wildly successful business and membership model. In a grossly simplified version, Sermo’s formula might be summarized this way: physicians from all 50 states and 68 specialties interact with each other in real time on Sermo’s web-enabled platform. They engage in case-based discussions and debates, share insights and information and help solve 
problems hence creating, and constantly increasing, an unparalleled body of
knowledge.  Organizations from many sectors that do business with physicians—from insurance and pharmaceuticals to government—pay hefty subscription fees to “listen in” on those conversations so that they can better

Of course I wanted to understand the ingredients of Sermo’s success and the thinking behind it.  Sermo’s communications director, Greg Shenk ,  and CEO Daniel Palestrant graciously  granted me two separate interviews on October 26 2009 and January 8, 2019  respectively.   I sum up the gist of their answers to some of my questions below. For the most part, with the exception of very few individual attributes, I integrated points made by both Greg and Daniel to present more complete and multi-faceted answers.   


Anna Caraveli:   I have read a great deal about Sermo but could you highlight for me
what you think are key facts and characteristics?  

Sermo (GS):  Here are some pertinent facts.

  • Sermo, a privately held company, was founded
    in 2005 but was launched in 2006. It quickly became the largest, online
    physician community in the world.
  • There are currently 115,000 physicians in 68
    specialties in all 50 states
  • We also have many corporate members, including
    9 out of the 12 large pharmaceuticals
  • Our growth has been explosive. To get a sense
    of the demand for Sermo consider the fact that we get around 1000 to 2000 new
    members a week.

AC:  Your business model is fascinating.  It kind of challenges the assumptions that commercial and scientific interests are at odds with each other; and that there is no revenue to be made in social media.  How do you  mix all these elements?

Sermo:  We learn by doing in the process of trying to deliver the maximum value to our core clients: physicians.  Early on we determined that, to be truly valuable, the community would have to be free to physicians. This, then, meant that other sources of revenue would have to be identified. We did not want to use conventional methods for generating revenue, such as advertising or getting  corporate sponsorships and the like. Yet we did need to tap corporate resources.  How could we do both?  Well, we came up with the concept of Information Arbitrage. It went something like this: We knew that doctors’ conversations contained valuable information not only for the physicians themselves but for other sectors and stakeholders who developed products and services for them, especially in the financial and health sectors. What did organizations in these sectors need in order to create products and services  hat sold?  Surely they needed the kind of knowledge that would allow them to create products and services that met the needs of physicians so fast and precisely that it gave them a leg up their competition.  Well then Sermo would get them inside their clients’ minds and in the environments in which valuable
interactions among them occurred naturally. No multi-million-dollar research could give them what Sermo could provide:  a front row seat at physicians’ intimate conversations  as they occurred in real time; a chance to capture early insights into treatments or emerging needs that would allow them speedier and more innovative product  development.

AC: Wasn’t it risky to try to provide value to two groups with interests that could be perceived as conflicting?

Sermo (DP):  It was.  The challenge was to enable companies to derive real value from Sermo’s network without in any way jeopardizing the  trust physicians had in their community and, hence, its value to them.   The idea was to focus on commonalities, rather than differences, between them.  Doctors, after all, need the best possible products and services to provide quality care and run sound practices; and companies require precise and timely information to meet these needs.

We tried to make the value exchange as equitable as possible for all member groups. For example, we built a corporate client base with input
from the physicians. We asked what would make corporate participation valuable to them and explained that interaction with the corporate sector and government would give them a voice in policy and product development.  The ability to affect change was a strong motivation. In addition, companies have data and information that is of value to physicians. If they accessed physician conversations then physicians should have access to their data.

In practice, however, it was far more difficult to balance corporate and medical interests.  We are constantly learning and adapting.

Sermo (GS): We are careful in managing and structuring the participation of  corporate members and have a number of measures in place, for example:

  • We ask client companies to contribute to—not just take from- the
    community by sharing their new data and making an effort to present something
    interesting. They are not allowed to make marketing pitches. They have to
    participate as peers.
  • We have account managers for corporate companies, who guide &
    monitor their participation. This is not only to ensure that they add value to
    the community but also that they derive value from it and that their
    interactions are successful.  If they are successful and see results, they will renew and even pay for a higher tier of
  • Keep in mind also that physician members can participate anonymously—they have
    the option to withhold or reveal their identity– so their
    privacy is not jeopardized

AC:  How do physicians benefit from the inclusion of corporate subscribers in Sermo’s model?

Sermo:  For one thing, subscriptions allow them to participate in the Sermo network at no cost.   We talked about benefits  like access to companies’ data.  Also  members have the opportunity to earn additional income by participating in company-generated surveys or focus groups; share their insights in panels; lead  case conferences; take weekly diagnostic challenges, etc.

AC:  It is clear from what you say that member value does not automatically accrue from quality content on your site but by your ability to recognize, harvest and package it into solutions that are of high value to members.  How do you increase the value of your content for companies and generate revenue?   

Continuously and with endlessly new approaches!  Our analysts constantly monitor and study conversations, extract from them physician’s attitudes, emerging needs and market trends, and then compile a number of reports.   Account managers customize product/service mixes  that best suits their needs of each client company.

AC:  Can you give me an example of the menu of products corporate subscribers can pick from?

 Sermo:  (referring us to their website)

  •  Surveys — Gauge  clinical opinions on-demand
  • Panels — Get fast,  qualitative insight from the right physicians
  • Posts — Spark  discussions with 115,000 physicians
  • Client Center —  Access a lens into physician conversations about your drugs
  • Reports — Capture insights around news events, drugs, and disease states

But, as in the case of content, it is not the products alone.  Products alone do not generate as much revenue by themselves, without strategic support and solutions.  Managers constantly learn from the results companies have had by using their products and assemble portfolios of  best practices. In this way, they can advise company members of the right mix  of products and services for their needs.  The real value, and greatest source of revenue-generation,  is that we offer  subscribers  a unique and highly effective way for learning about their markets, and expert help in how to best mine the network for the kind of information that will most  impact their bottom line.

AC:  So all your products and services directly affect the bottom line of these companies. No wonder they are willing to pay thousands to subscribe.  Do you have one or several tiers of corporate membership/subscription?

Sermo:  We have a number of tiers at various price points each, depending on the degree of access to the physician’s network.   In ascending order of importance, for example, companies can choose one of the following tracks of participation:

  1. Observe: “listening in” without interacting.
  2. Interact with physicians in forums, usually
    across specialties. They are guided by account managers on how to best engage
    physicians and get to the information they need.
  3. Conduct specialized surveys into sub-groups of
    physicians. This also provides an opportunity for physicians to generate income
    and it is advertised as:
  4. Customized research and reports. This is a
    recent development.  We have created an
    analytics team that continuously mines data and translates them into products.

AC:  What is your advice for associations that want to launch new categories of membership and lines of business?

 Sermo:  First create the network, identify and build its value.  Then you can leverage this value, for instance, by “selling” access to it, developing products around the conversation, etc.  The most important thing is continuous innovation.   We are constantly learning, adapting and developing.

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