Personalization & AI in skincare: opportunity vs. hype
Most big players in the skincare industry are already investing in personalized and digitally enabled skincare solutions. Despite the fact that everyone seems to be eager to enter the game, it is still not clear what the game actually is. What is personalized skincare? How does AI and other digital technologies change the landscape of the skincare industry? Here is an overview of the solutions marketed under these terms with a few analytical points that will hopefully help you separate "smoke & mirrors" from a real opportunity.
A quick general note on AI in skincare: "AI" is not the best term to specify what kind of actual technology is used in a digital skincare solution. Most solutions that are marketed under the AI label use one or combination of the following technologies: image recognition (face scan apps and devices), natural language processing (recognition of user intent or command from free written text, or classification of another type of text, for example, cosmetic product description), voice recognition. While advanced, none of these technologies comes close to delivering on the promise of "revolutionizing the skincare industry". If such a revolution were to happen, it would most likely result from business model innovation (e.g. online first, D2C sales) and personalization through better utilization of data about the consumer rather than futuristic technologies typically imagined under the "AI" banner.

When it comes to personalized skincare, it makes sense to distinguish its two types: skincare product personalization and skincare advice personalization. While in practice, the two approaches are often (and rightfully so) combined, it is helpful to look at them separately at first to "define the terms".

Product personalization solutions

  • Skincare products with formulations uniquely tailored to the customer's biological data. Despite marketing claims, this futuristic idea is not implemented on the market yet. The inspiration for this approach comes from successes of personalized medicine, an umbrella term for medical practices when treatments are uniquely tailored to each patient, often based on their DNA analysis and analysis of other individual biological markers. Personalized treatment approaches are a growing area of research in medical dermatology, with most notable advances made in the topic of skin microbiome. For example, in a 2017 early stage study, five patients with atopic dermatitis were treated with preparations that included live "good" bacteria isolated from their own skin, with positive outcomes. Despite the medical promise, larger scale studies of this nature are still too technologically challenging even in the research setting, which serves as a good illustration of how far we currently are from the potential commercial application of these approaches in the cosmetic area. Beyond these challenges, there are other barriers to commercialization of these approaches in the cosmetic industry:

  • Viable solutions are likely to remain in the medical area. Based on the research available today, the skin concerns that the approach can target successfully include sensitive skin & dryness (while studies in the anti-aging realm have yet to produce a technology with a clear application potential). Sensitive & dry skin conditions caused by skin diseases (eczema, psoriasis, rosacea), will be still treated most effectively as medical cases, with treatments possibly covered by medical insurance. For non-medical cases, where skin sensitivity and dryness is caused by wrong skincare regimen or environmental factors, it is doubtful that the personalized approach would yield enough benefits for consumers compared to a traditional combination of a gentle cleanser and well-formulated moisturizer to justify the significantly higher price tag.

  • Scaling these solutions will require addressing a long list of technological and operational challenges including bacteria strain isolation on an industrial scale, stability & safety testing for the "batch of 1" products, and the order-to-delivery speed. Potentially, the required price tag and process inconveniences will outweigh the benefit for a cosmetic skincare consumer.

  • Custom skincare "mixer" solutions (Shiseido Optune, Olay Lab's Moments): devices that are able to customize a few aspects of a product formula depending on the user preference or input of a skin diagnostic solution (e.g. a face scanner). In essence, it's a coffee machine for skincare: it can create a double-espresso, a less concentrated americano, or creamy cappuccino, but ultimately the product's content is pre-defined by the coffee beans, water, and milk supplied. While the jury is still out on the success of these products, they are arguably less convenient for most consumers than buying a few pre-mixed products that one can alternative depending on the skin needs. To make the "coffee machine" solution work, the consumer needs to own the "mixer station", replenish the mix components (ultimately the same as buying new products or getting them on subscription), and take care of cleaning the containers or disposing the used ones in case of single-used dispensers.

  • "Personalized products" as a marketing technique used to fuel a D2C sales channel and skincare subscription model (Yours, Proven, Atolla). Traditional sales process starts with presenting a line of products with their specific benefits (for example, a moisturizer for oily, dry, or sensitive skin), letting the consumer select the product that fits their needs best. The sales process in "personalized product" marketing strategy starts with identifying the user needs and preferences first using a questionnaire and/or a face scanner tool. Once the consumer need is known, she or he is presented with skincare products that fit the need. The products themselves are not customized any more than they are in a traditional product ranges: their formulas can vary in terms of textures (e.g. light or rich moisturizers), active ingredients used (e.g. rational in an anti-wrinkle serum and panthenol in a serum for sensitive skin), and their concentration. However, because the consumer is only presented with a product that matches their skin need, they get an impression of a product personalization.
    • Drug prescription streamlining solutions (Curology, Skin+Me): these services provide consumers with easier access to prescription-only skincare ingredients (most notably tretinoin and high percentages of azelaic acid) while using the "personalized products" D2C marketing strategy as described above. The match between online prescriptions and the "product personalization" marketing model is made in heaven because the online prescription service requires a degree of personalization (including patient record and diagnostic data) due to regulations, while the "product personalization" marketing approach enables higher price points compared to traditional brands of prescription-only skincare products and helps to "lock the customer in" with the own product label. This business model is understandably vulnerable to changes in regulations (for example, availability of tretinoin over-the-counter as is the case in some European and other countries could end the model's attractiveness), or enhanced scrutiny from the regulators over the prescription practices.

    • Diagnostics technology (Olay Skin Advisor, Neutrogena Skin360, Vichy SkinConsult AI). These solutions use image recognition technology to diagnose the state of the consumer's skin and pinpoint "problematic" areas. These solutions have been on the market the longest and so far have largely failed to win a wide user adoption. Here are some of the possible reasons:

    • Consumers mostly know their skin concern because of its cosmetic nature (it is visible), and do not see additional value in a device telling them what's wrong with their skin.

    • Even in the best technical execution, the face scanning technology and portable cosmetic skin diagnostic devices have a limited value add: dermatology practice does not rely on these technologies in in-person clinics (dermatologists rarely use devices that measure trans-epidermal water loss, wrinkle scanners, or skin pH readers - the parameters that face scanning and other portable diagnostic devices can tackle). Despite the limitations, the face scanning technologies are still useful as a progress tracking tool for the data-driven category of consumers.

    Advice personalization

    Skincare Advice personalization solutions rely on approaches that are successfully applied in other industries, most notably, in e-health.

    Despite the tech availability and the success of the approach in the offline world with cosmetic dermatological and estheticians' consultations, it is not widely used in the online skincare space yet. The advice component is treated as secondary to the face scanning or other "skin diagnostics" solution, and is mostly limited to direct product recommendations (see the diagnostics technology examples above). In contrast, a more advice-focused solution would take into account a wider array of consumer data (including, for example, current skincare habits and experience with skincare products in the past), and supplement product recommendations with holistic skincare routine advice and educational elements that would empower consumer to take a better care of their skin.

    The main reasons for the limited application of this advice-focused approach, in our view, is that brands & retailers see a more direct path towards the return on investment with the straight focus on pushing a sale rather than investing in an advice solution with deeper value-add for consumers.

    This approach however is shortsighted: solutions focused on product recommendations have already become a commodity in the online space and, due to their low value add for consumers, they fail to generate customer engagement, trust, and loyalty.

    Overall, investment in the personalized skincare so far has heavily leaned towards the real or positioned personalization of physical products, leaving the opportunity for engaging consumers with in-depth skincare advice untapped. The winners of the future will likely combine the two approaches and delight consumers with "augmented" skincare solutions: high quality online personalized advice delivered continuously throughout the customer's skincare journey complimented with customizable skincare products that are developed and marketed with the "e-commerce first" mindset.

        NOVEMBER, 2 / 2020

        Author: Maria Semykoz
        Photography: Unsplash
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