Calm: The Calm Before the Storm

Taking a Deep Breath In

Grounded in a mission to “make the world happier and healthier”,, Inc. (Calm) launched in 2012 to help users sleep better, boost their confidence and reduce stress and anxiety levels through a meditation application. Using recordings and soothing nature sounds, the app provides users with a guided meditation experience that ranges from general mindfulness to specific topics like self-confidence, anxiety, and insomnia. The company has so far performed exceptionally well, but with its core meditation service promoted primarily through a mobile application, Calm limits its upside potential by restricting its reach to the younger generation.

Ranked among the 50 top grossing iOS apps, Calm’s offering has proven attractive to its users. The application was awarded 2017 Apple App of the Year and recognized as the Happiest App in the World by the Center for Humane Technology. It has repeatedly been praised for its intuitive interface that features relaxing nature imagery and in-depth meditation modules. With a range of topics from self-esteem to dieting, Calm’s expanding portfolio of service offerings are tailored to the needs of each individual. Unlike the one-size-fits-all approach to traditional meditation, Calm provides users with real-life applications such as treating anxiety and improving sleep.

Calm is unique in introducing significant out-of-app aspirations. Co-CEO Michael Acton Smith has stated the importance of taking Calm offline in hopes of becoming a lifestyle brand, striving to become the “Nike of the mind.” It has already started this process through ancillary products such as a book and sleeping mist. Therefore, Calm is poised to create a seamless omni-channel experience and improve its accessibility to more consumers.

The Meditative Wave

With an expected average annual growth rate of 11.4 per cent and a projected market size of $2.08 billion by 2022, the U.S. meditation industry is one of the fastest growing segments in the wellness industry. Furthermore, 53 per cent of Americans aged 65 and above meditate at least once a week, whereas only 29 per cent and 38 per cent of 18-to-29- and 30-to-49-year-olds do so, respectively. These trends indicate meaningful behavioural differences between demographics and signal an untapped opportunity in the senior demographic.

While tech-enabled meditation is largely seen as more accessible, the abundance of such apps has overcrowded the market and facilitated the perception of mobile meditation as a predominantly middle-class millennial activity. Calm is a good example of this, as the median age of its users is between 30 and 35, limiting its ability to resonate with other demographics. While mindfulness app downloads are on the rise, jumping 36 per cent from last year, mobile apps restrict distribution to mainly the young and technologically savvy, even if other demographics present a more attractive market opportunity.

Growing Tensions

Calm’s reliance on the millennial consumer market poses several problems because this segment is competitive, price-sensitive, and less brand-loyal. These characteristics make Calm vulnerable to established content-sharing platforms such as YouTube and Spotify, which are starting to release meditation content. Meditation sessions on Spotify and YouTube can be accessed for free, an appealing alternative to an annual $59.99 Calm subscription. It has been proven that millennials are less brand-loyal than their predecessors, and low switching costs to other meditation services means that churn could pose a significant threat to Calm’s user base. The average millennial is subscribed to 1.65 paid subscriptions. If competitors can fulfill their many needs with fewer subscriptions, customers would less likely use separate apps. This makes Calm’s share of the consumer subscription market vulnerable to the growing availability of emerging meditation services.

In addition to content sharing platforms offering substitute services, there is fierce competition among meditation apps themselves. Calm’s biggest competitor, Headspace, is a major threat due to its rapid innovations, widespread partnerships, and outreach to other demographics. Headspace has launched a new subsidiary called Headspace Health, which aims to provide an FDA-approved, clinical-level product for a range of health conditions by 2020. As a medical app, Headspace Health has the potential to target new markets who use smartphones for medical needs. Those who use Headspace Health are more likely to also use the platform for meditation, increasing the urgency for Calm to augment its service offering for other underserved markets.

Headspace has made it a strategic priority to expand through partnerships with other organizations. In response to content sharing platforms entering the market, Headspace has partnered with Spotify, enabling users in certain European countries to purchase a discounted subscription to both services if purchased as a bundle. This partnership creates a sustainable source of revenue for Headspace. Additionally, Headspace partnered with Virgin Atlantic in 2011 to create an in-flight channel, which reaches over 800 million passengers per year on 11 airlines. It took Calm seven years to offer a comparable service, and the lag has allowed Headspace to establish itself as the primary airline brand for meditation. While Headspace is using partnerships to target the working age demographic, there are still opportunities for Calm to use partnerships to reach new markets.

The Retirement Home Opportunity

Headspace has shown that strategic partnerships are the fastest way to reach different demographics that would otherwise be difficult to access. Within the next few years, seniors will control roughly 70 per cent of all disposable income in the U.S., a clear signal of their enormous spending potential.

Calm should look to diversify beyond the millennial market by targeting seniors. Public retirement homes in the U.S. are funded through Medicaid, which lengthens the penetration process, and increases bureaucratic obstacles. As a result, Calm should begin by partnering with private and semiprivate retirement homes in California before expanding into other states.

Old vs. New Target Market

In addition, Calm should introduce a limited-functionality, easy-to-navigate service tailored to seniors’ needs. It could be offered through two pricing mechanisms: a bundled package paid for by the retirement home, and an individual subscription plan purchased by seniors. For the subscription plan, a lower price would be commensurate with the limitations of the offering. This product would be rebranded as “Calm for Seniors.”

The bundled package would include Calm for Seniors licensed for one device, such as a communal TV or computer. This package should also include a digital training kit for a nurse or caregiver within the retirement home, who in turn can lead group meditations offline. This offline component is essential for seniors who have more difficulty navigating new technologies.

As the state with the largest senior population in the U.S.—with over 5.5 million adults over the age of 65—and the highest number of private and semi-private senior housing facilities, California appears to be the best geography to initiate the product’s launch.

Choosing to target private retirement homes has its clear benefits. Seniors aged 65 and over account for 15.6 per cent of the U.S. population, a figure expected to rise to 22.1 per cent by 2050. Additionally, partnering with retirement homes rather than reaching out to individuals makes the recommendation scalable, allowing for rapid growth. The unit economics of a partnership are highly favourable: just one retirement home would result in hundreds of new, active users for Calm, which would lead to a significant boost in overall app engagement. Finally, in contrast to millennials, seniors are less likely to switch brands, and compared to other demographics, have a harder time adopting new technologies. Once seniors are proficient in using Calm, they are unlikely to switch platforms.

Calm’s current success can be partially attributed to a user-friendly interface that provides a good introduction to meditation. The application is simple in features and menus, and more relaxing in its look and feel. As a result, Calm’s interface could have a wide appeal among seniors who may be less technologically savvy.

Existing partnerships with schools such as Johns Hopkins and corporations like 3M have demonstrated that Calm can effectively manage strategic relationships. The partnerships have also validated the idea that collaborative initiatives can be used to reach previously inaccessible segments, as the Johns Hopkins partnership brought 4,000 new users onto the app. These partnerships increase barriers to entry for competitors and lend credibility to the app.

The Cost of Wellness

The new bundled price for retirement homes would be $400 per year, while subscriptions for individual seniors would be $30 per year. Considering that the average retirement home generates $11.6 million in annual revenue, this cost is relatively inconsequential. The $30 annual subscription for seniors is equivalent to Calm’s current corporate subscription. With this pricing model, Calm’s annual market potential in California from private senior homes would be approximately $23.4 million, with an additional $158.8 million from all private or semi-private retirement homes in the United States, several times the company’s current revenues of $22.3 million.

Retirement Home Market Size

The discounted subscription made available to individual seniors would be priced at 50 per cent of the original price of $59.99 per year. This version of the app would include tailored meditation techniques for seniors focused on various elements of well-being, a key example being improved sleep habits.

Keep Calm and Carry On

Targeting seniors risks alienating Calm’s current millennial user base. Once the older population adopts a product popular with younger generations, that product may quickly lose appeal among the latter. Calm can mitigate this risk through a rebrand specifically for seniors with limited functionality. Limiting the features available would also justify the reduced price while aligning with seniors’ potential technological learning curve.

While Calm has achieved success and public awareness to date, it would be prudent to remain proactive regarding its target market. Millennials are price-sensitive and lack brand loyalty, leaving the company vulnerable to other content sharing platforms entering the space. With the potential to tackle a concentrated pool of seniors, the demographic that meditates the most frequently, private retirement homes present an attractive opportunity to approach. This strategy presents a more sustainable user base while supporting the company’s goal of spreading the benefits of meditation. Though the company is currently soaring through periods of growth, Calm cannot afford to remain complacent in the calm before the storm.