What the Theranos debacle could teach us about marketing & communications

By Priyanka Neelakantan

My recent newsfeed was abuzz with Elizabeth Holmes and the company she founded, Theranos. She, along with her co-founder, was facing as many as 11 charges of defrauding the public. With the jury verdict out, they were found guilty of four of the charges (conspiracy to commit fraud against investors and three charges of wire fraud). Let us take a closer look at the case to see what lessons we can glean from it.

The phenomenal rise and ultimate downfall of Theranos

Theranos, a combination of the words "therapy" and "diagnosis", was born out of an idea to make early detection of diseases like cancer and diabetes possible with just a tiny prick of a needle.

This was highly publicized as a breakthrough in diagnostic testing. A lot of factors helped Elizabeth (then a 19-year old Stanford dropout) in building hype around Theranos:

• Many powerful supporters were on board, like former US secretary of state Henry Kissinger. Joe Biden visited her lab while he was serving as Vice President of the USA.

• The vision for the company was attached to a noble cause. It was about providing affordable diagnostic testing, easily! (The current market was driven by two major diagnostic labs who had very high bargaining power.)

• Claims of military using the company’s devices (which turned out to be false)

• FOMO (Fear Of Missing Out) on the next big thing (money-wise) if the product lived up to its claims.

Elizabeth didn’t leave any stone unturned on marketing her product.

She participated in Ted Talks and gave compelling speeches, got an academy award-winning director to create a mini movie on the product that would help reach the masses:

Link to Ad

She modelled herself after Steve Jobs, adopting his signature black turtleneck tops. She even got Apple’s advertising agency, TBWA\Chiat\Day to work on their campaigns. She was adjudged as one of the youngest self-made billionaire (still in her 20’s) in 2015 by Forbes.

However, where the company faltered was in execution of the promises made. The company was valued a whopping $9billion within a decade’s time but the product was yet to be launched in the market. For the same, Theranos partnered with Walgreens to create ‘wellness centers’. These centers were meant to conduct n number of tests for a basic amount (as low as $3 V/S $50 in other diagnostic centers) with just a doctor’s prescription & insurance card. But Theranos machines (named Edison after the famous inventor) didn’t perform. They were instead found to be using competitor testing machines to conduct most of the tests. These cracks in the system were brought to the public's notice by their own employees. And by 2018, the company officially ceased operations following the scandal.

What are some of the lessons in marketing & communications that we can draw from Theranos?

1. Marketing without a credible product isn’t sustainable-

   Product comes before marketing; build your product and test it in a variety of scenarios before releasing it to the market.Without product viability, marketing is nothing but a sunk cost. According to reports, Theranos used Siemens machines to conduct their tests because their own machines were unable to provide accurate results.

2. Get subject matter experts to do the talking (especially if its a technical product)-

   Elizabeth Holmes was the only face of the brand who lacked medical expertise. None of the board members or promoters of the company were from medical backgrounds. When the viability of a technical product is questioned, having an expert who vouches for the product is a more credible move to restore lost confidence.

3. Be open about how your product claims work-

   Theranos had not participated in any peer-reviewed literature. They were very secretive about how the mechanism worked. Elizabeth responded to such questions by giving vague answers such as, "A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel." Neither did Theranos release its own data, nor did it allow any third party, citing accuracy issues.
   If the audience feels like you’re withholding information, they will begin to doubt your product. And trust, once lost, is very difficult to gain back.

4. Don’t oversell & underperform-

   "Fake till you make it" doesn’t always lead to favorable results. While building marketing plans, one should remember to not exaggerate the truth! Keep the focus simple: what is the gap you’re filling and how is your product best suited to fill it? If not, you might end up shelling out more money to back up stretched claims.

5. Always be ready for crisis management-

   Theranos didn’t respond to queries from customers once the scandal unfolded. They kept posting testimonials from customers and employees.
   During times of crisis, if you choose to disengage from your audience, it makes them feel like you’re hiding something. To be able to get through this, have mitigation plans set beforehand with responsibilities clearly defined.

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   If you would like to know more about the case, catch the HBO documentary “The Inventor: Out for Blood in Silicon Valley” on Disney +Hotstar