Dentaltown July 2020 - 30

Dr. Howard Farran: What would you say the median cost is for other sensors?
RH: Between the three primary players-Dexis, Schick and Carestream-the median
is about $8,500. When we were doing cost analysis and market mapping before getting
into this new business, it was crazy to see how close they had all hovered around that
protected price.
HF: Those three companies probably make up 80% of the U.S. X-ray market. Where
did you get the cojones to compete with the biggest 400-pound gorillas in all of dentistry?
RH: The vast majority of the dental market-85%-uses digital X-rays of some
shape or form. They paid $20,000-$30,000 to get their system installed, then they paid
for warranties for several years that were $1,500-$2,500 a year, but they didn't need
replacements, they didn't get software updates and they never called support, so they asked
themselves, "Why am I paying all this money?" Then the sensor fails after they've dropped
the warranty, and they realize why they paid the money-because now they're looking at
another $8,000-$10,000 bill. This model is prevalent throughout the market, so they're
frustrated by the money they're spending. They know that the parts to this sensor cost
$1,000, not $10, and the markup may be exorbitant.
We know how to make sensors and we don't have to ship out all that work-we do it
all in-house in San Jose, California-so we knew we could construct a model that didn't
have those layers of cost. ... We don't have huge operating and overhead expenses, which
gives us the ability to price down.
The idea behind the subscription is that the idea of sensor ownership is an illusion. I'll
get into this discussion often with doctors who want to talk about whether this arrangement
is a lease. I tell them, "I get it, I like to buy my cars-the difference is, when I'm done
paying for my car and my extended warranties come to an end, if something fails with the
car, I can have someone get it fi xed for a relatively inexpensive price." That's not the case
with digital X-ray sensors: Once they're dead, they're dead.
Across the industry, dental offices are starting to realize, "I'd much prefer a low
investment and I never have to worry about sensors again." It's kind of like when you
bought film: You didn't know how much you bought, but you knew it had to have it, and
it was a consumable with a per-patient kind of cost.
Now, instead of your capital expenditure dollars going toward sensors, why not spend
them on real capital expense items and let us handle your sensors? We plug right into
every major software-we know dental offices don't want to change their software-so
you could literally call us up, give us $1,999 and we send you the sensor, the key software,
we log in, we do all the installation and calibration so you maximize your image quality.
We make this kind of a no-brainer: Why would you spend $10,000 when you could
spend $2,000, and if you've got to pay for a warranty anyway, why not just have it on a
subscription and not worry about it?
HF: Wall Street is just in love with subscription models. I mean, they were valuing
Netflix the same as Disney just because it had that guaranteed monthly subscription; now
Amazon does it yearly. So, there's a $1,999 one-time setup fee-then how much a month?
RH: It's $139 a month. During that term, they get phone support, updates, and sensors
replaced if they fail. There's no deductible or additional warranty fee, because they're on

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Dentaltown July 2020

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