Industry
Shopping Around For A Pair Of Hearing Aids Is Harder Than You Think, Starting With The Hearing Exam
Shopping around for a pair of hearing aids is harder than you think, starting with the hearing exam. Getting a hearing test resulting in an accurate audiogram is easy enough. The test only takes twenty minutes or so, and when administered by a trained audiologist or licensed hearing aid fitter, the result is usually an accurate map of your hearing profile. It’s the first essential step in getting fitted for hearing aids programmed to precisely match your levels of hearing loss at all frequencies.
But because in nearly all cases hearing exams and other audiologists’ services are bundled with the end sale of a pair of hearing aids, the hearing test very often is the first step in a sales process that applies subtle pressure on the consumer to follow through with the purchase of a pair of expensive hearing aids from the provider administering the initial test. People buying hearing aids don’t try out as many brands as consumers in other markets, lessening competition that would otherwise drive product innovation, price competition, and faster market growth.
The process should be like getting your eyes checked by an ophthalmologist, who you pay for an exam and who then gives you a prescription for eyeglasses that you can use at any retailer stocking a variety of manufacturers’ eyeglasses to choose from. Instead, when you go to an audiologist, the usual process is to get your hearing test for free, then a prescription for the one brand of hearing aids that audiologist sells, with an immediate invitation to try and then buy those hearing aids. The difference is that with eyeglasses, exams and prescriptions are usually unbundled from the sale of the eyeglasses, whereas most audiologists bundle their professional services with the price of the hearing aids they sell.
Bundling services with product sales limits consumer choice because audiologists have a strong incentive to move the consumer quickly to purchase of the manufacturers’ hearing aids they stock. It’s uncomfortable for a consumer who has gotten a “free” hearing exam to stop the process then and there, ask for a copy of the results, and use the audiogram to shop around for the best aids they can find. So many consumers fail to try different brands of hearing aids, and competition in the market is constrained.
Therefore, unbundling of hearing health services from the sale of hearing aid products in the hearing-health supply chain would increase competition, opening the way for more product choice at a broader range of price points. As in other industries where competition increases, growth in the hearing device market would accelerate as more products, including lower priced products, reached a much larger available market of users.
Several forces are at work that may dramatically disrupt this status quo in the hearing aid supply chain. First, the Hearing Loss Association of America (HLAA) came out in favor of unbundling hearing aid sales from professional services as part of its Campaign to Make Hearing Aids Affordable. Meanwhile, there are a growing number of manufacturers offering lower priced hearing aids programmed at the factory to match audiograms sent in by users who got their hearing tested but did not buy their hearing aids from the professional who administered the exam. And third, hi HealthInnovations, a newly formed subsidiary of the huge UnitedHealth Group insurance company, has started selling more affordable hearing aids direct to consumers who take a simple test that’s available on the hi HealthInnovations web site. In the coming year, we may see a new distribution channel grow in the hearing aid industry, offering more a la carte services unbundled from the final sale of hearing aids.
As I embark on my shopping expedition for a new pair of hearing aids, I will be writing about my experiences with bundled and unbundled hearing aid sales. One way or the other, I plan to try out as many manufacturers’ hearing aid models as I can. And I’ll write about my experiences with both approaches to hearing aid sales and service.
Why The Hearing Aid Industry Ignores Black Friday
Hearing Aid Manufacturers Avoid The Price-Cutting Madness Of The U.S. Black Friday Sales Holiday
Even as I get tired of all the hype about Black Friday, I wonder why the hearing aid industry is conspicuous by its absence on the biggest shopping day of the year in the U.S. Today is the big day, the day after the Thanksgiving holiday when shoppers flock to the malls as retailers cut their prices and offer the best price-cutting and one-day sales events of the year.
But while my email inbox is full of offers from every retailer and manufacturer I’ve had contact with in 2011, I haven’t heard a peep from the many hearing aid manufacturers and resellers that send me sales pitches on other days of the year.
But on reflection I realize it should be no surprise. Why? Because manufacturers only reduce prices and put their products on sale when demand is weak and there’s enough competition in their market to make them worry. A little price incentive, especially in the holiday selling season, can be a great way to win a point or two of market share in a hotly contested market.
But the hearing aid industry is more like an oligopoly. Each of the five or six major manufacturers has a comfortable market share, and price comparison shopping is a rarity. Instead, sales channels are limited mainly to audiologists and hearing-aid dispensers, each of whom often only carries one manufacturer’s product line. People shopping for hearing aids usually get a referral to a good audiologist, and if they engage and start the process of buying a hearing aid, they often simply stop shopping around.
Lack of price competition or active consumer product comparisons means the price reduction curve that we see in other industries, especially during slow economic times, is a lot less pronounced in the hearing aid business. Customers who can afford to buy hearing aids still pay many thousands of dollars, while those who can’t afford them spend what money they have looking for Black Friday deals on other less expensive goods.
I’m wondering if Black Friday in 2012 will be any different for the hearing aid industry. In 2011 we’ve seen a number of “over the counter” hearing aid manufacturers enter the market, including UnitedHealth Group insurance company’s hi HealthInnovations subsidiary. These vendors are bypassing the traditional audiology sales channel and selling direct to consumers over the internet. They are trying to reach the tens of millions of Americans with mild hearing loss that can be treated with open-fit hearing aids providing a modest degree of amplification. The new products are less expensive and easy to purchase.
Hearing aid industry groups and professional audiology groups are up in arms about the new competitors, saying that without a full hearing exam and professional fitting, hearing aids can often do more harm than good. But U.S. regulators, who several years ago gave a green light on the internet sale of Personal Sound Amplification Products (PSAPs) directly to consumers, may not be inclined to intervene.
So, don’t be surprised if on Black Friday 2012, your email inbox is full of offers not only from your favorite department stores, but also with offers from some new competitors in the staid old hearing aid industry.
ReSound Alera Success Drives GN Store Nord Hearing Aid Sales To 9% Global Growth And 23% Growth In U.S.
ReSound’s Alera hearing aids have put the Denmark company back on a strong growth track, with parent GN Store Nord reporting its hearing aid business revenues grew nine percent worldwide in the first fiscal quarter of 2011, with growth in the healthy North American market growing 23 percent. ReSound Alera high-end hearing aids feature like wireless connectivity, sophisticated sound processing software, and other advanced features. And in February 2011 ReSound announced availability of its new innovative “Remote Microphone” form factor for the Alera hearing aids, with the microphone sitting in the ear’s cymba concha and the speaker and sound-processing chip sitting deep within the ear canal.
“In Q1, we saw encouraging topline growth driven by ReSound Alera™ and the corresponding Beltone True™ family, including the wireless accessories,” said GN ReSound CEO Lars Viksmoen. “Organic revenue growth reached 9% mainly as a result of the first wave of form factors launched in 2010. During Q1, we launched the second wave of form factors and based on the experience so far we are adjusting the revenue guidance for 2011 upwards.”
The announcement came close to top competitor Sonova’s preliminary year-end fiscal announcement that its Phonak and Unitron hearing-aid sales grew more than 10 percent in its 2010-2011 fiscal year.
Sonova Reports 10 Percent Increase In Hearing Aid Sales And Resumes Cochlear Implant Shipments
Sonova Group, parent of the Phonak and Unitron hearing aid brands, issued a preliminary financial report announcing that its hearing-aid sales increased 10.1 percent in the 2010-2011 fiscal year, powered by strong market acceptance of its high-end hearing aids based on its new Spice sound processing hardware and software platform.
The Swiss holding company also announced that it is resuming sales of its cochlear implants outside the U.S. following approval by European regulators of manufacturing changes that it says solved its product quality problems with its Advanced Bionics cochlear implants following a worldwide recall after problems surfaced with several of its implants. The company also said it is filing notice of the manufacturing changes with the U.S. Food and Drug Administration (FDA) to gain approval for resuming sales in North America as well.
Sonova, which was rocked by an insider-trading scandal that resulted in the resignations of its chief executive officer and chief financial officer in April, said overall sales for the group, which includes its implant business as well as hearing protection products, grew 7.8 percent in the fiscal year. The company said it will report complete results for the fiscal year on May 24.
New Siemens Aquaris Hearing Aids Are Waterproof
You Can Go Swimming With The New Siemens Aquaris Waterproof Hearing Aid
The new Aquaris waterproof hearing aids from Siemens Hearing Instruments have taken the recent industry trend toward more durable, water-resistant hearing aids to a whole new level. Siemens says the Aquaris hearing aids are fully waterproof to depths of three feet for up to 30 minutes.
The new hearing aids promise to eliminate the repair problems associated with sweat, dirt and humidity, in addition to expanding their functionality: Siemens has even developed a sound-processing program that can be switched on while swimming to help the hearing aids adapt to the sound of water splashing and other acoustic challenges.
The company describes the technology developed for the new waterproof hearing aids in its news release:
A scratchproof, rubber-like surface holds the device securely behind the ear and prevents it from slipping. The battery compartment is equipped with a waterproof but air-permeable membrane. As a result, environmentally-friendly zinc air batteries can be used, which always require “air to breathe”. The cover clip is attached to the top of the casing via ultrasound. It also protects the waterproof but acoustically transparent microphone membrane, which was specially developed for Aquaris. A nano coating and a seal protect the earpiece.
As with its other latest-generation hearing aids, Siemens equipped Aquaris with its BestSound Technology, which improves speech understanding, the wearer is able to make adjustments using Siemens “Tek” and “miniTek” remote operation, and the hearing aids link wirelessly with modern communication and entertainment electronic devices.
How Big An Impact Will Departures of Sonova CEO and CFO Have On The Company’s Hearing Aid Brands?
The resignations of Sonova Group CEO Valentin Chapero and CFO Oliver Walker following improper stock transactions was an unwelcome surprise to a hearing aid industry still struggling to revive sales growth following the global economic recession. Sonova is the world’s leading hearing aid manufacturer, owner of well-known brands including Phonak and Unitron (hearing aids), Advanced Bionics (cochlear implants), and Lyric extnded-wear hearing aids. Chapero was an industry leader known for a strategy that combined aggressive investments in new technology and expansion of sales channels as well as growth through acquisition. His abrupt departure raises obvious questions about what effect the changes will have the hearing aid brands sold by its subsidiaries.
The management shakeup came after the Sonova board of directors determined that a March 16 financial projection warning of lower than expected sales and profits should have been made earlier, and that Chapero, Walker and other insiders with knowledge of the impending lower forecast sold stock before the announcement, avoiding a loss in the value of their shares when their prices fell after the public announcement. Sonova Chairman Andy Rihs, who built the company from a family-owned hearing-aid concern to a publicly held global leader, also stepped down from his position as chairman, but he remains on the board of directors. Swiss regulatory authorities are investigating.
The Sonova board’s quick appointment of Alex Zschokke as interim CEO and Paul Thompson as interim Chief Financial Officer made it clear the company intends to continue on the course charted by Chapero. Zschokke has run Sonova’s marketing and retail operations and has been a motivating force behind the company’s drive to develop and introduce new products based on its new Spice sound processing platform. And Thompson is a long-term Sonova financial executive whose most recent position was Group Vice President of Corporate Development.
At this week’s American Academy of Audiology (AAA) AudiologyNOW conference in Chicago, Sonova brands will make multiple announcements demonstrating continued forward motion: Phonak will be introducing a new member of its Naida high-power hearing aid family based on the Spice platform, Unitron will introduce its new Era sound processing platform that shares many of the Spice platform technologies, and the company’s Sona brand will introduce another version of its field-upgradeable hearing aids.
But now the company must deal with a major unexpected change in its leadership and an insider trading investigation, even as it continues to work its way out of the problems that caused the March 16 profit warning, including a recall of its Advanced Bionics cochlear implants. When I wrote that Sonova hit a “speed bump” with its March 16 profit warning, little did I know it was also about to land in a pot-hole.
Sonova To Write Off Up To $200 Million In Losses Associated With Advanced Bionics Cochlear Implant Recall
The bad news for Sonova Holding AG, the world’s leading manufacturer of hearing aids, is that it will have to write off up to 200 million Swiss francs (CHF) or $217.8 million USD, to cover losses associated with the global recall of Hi-Res 90K cochlear implants made by its Advanced Bionics subsidiary. The good news is that it can afford to absorb the loss, even in a 2010-11 fiscal year when market conditions have prompted a revised forecast for slower growth than in the previous year.
Sonova, parent of leading global hearing aid brands Phonak and Unitron as well as Advanced Bionics, also issued an update on its guidance for financial analysts projecting 40-50 million CHF less in sales growth than an earlier forecast. That translates into 7 percent revenue growth versus the original projection of up to 10 percent growth. The company also said operating profits would be in the 20-21 percent range, approximately 20 percent lower than the earlier forecast of up to 26 percent operating profit. Sonova attributed the slower-than-anticipated growth to “an unclear regulatory situation in the U.S. market,” which has delayed the launch of new Phonak hearing instruments, as well as a slowdown in Unitron’s sales growth.
Additionally, the company said it would revise its 2009-10 fiscal year financial statement to reflect the goodwill impairment write-off of between 150 and 200 million Swiss francs to cover losses from the Advanced Bionics cochlear implant recall.
While the report made it clear the Sonova juggernaut has hit a speed bump, the company indicated it is intent on maintaining its position as the world’s number-one hearing-aid company with continued investments in new products and technologies. In addition to predicting continued growth with solid profitability, it also said it is expanding its new Spice sound processing platform, first introduced with Phonak products, to the Unitron hearing aid line, with multiple product announcements expected at next month’s AAA Congress in Chicago. Sonova is also working to fix the problems that prompted the recall of the Advanced Bionics cochlear implants, which are expected to drive growth and profitability for the parent company in future years.
However, the global hearing aid market leader’s slowdown gives both Oticon parent William Demant and ReSound parent GN Store Nord an opportunity to gain ground on Sonova. Both recently issued upbeat financial reports for 2010, crediting their success in part to strong sales of the new Oticon Agil and ReSound Alera hearing aids.
Oticon And ReSound Corporate Parents Report Strong Financial Results Driven By Agil and Alera Hearing Aids’ Success
It was a good year for Oticon and ReSound, which got a turbo-boost in sales growth from their introductions of new flagship Agil and Alera hearing aid families.
Oticon’s corporate parent William Demant Holding reported 21 percent revenue growth with strong profitability for its 2010 fiscal year, driven by the success of the new Oticon Agil hearing aid family. William Demant Chief Executive Niels Jacobsen told Reuters that William Demant recaptured its position “as the fastest growing player in the hearing aid industry” in 2010. It also increased its market share with the 2010 acquisition of Otix Global, maker of Sonic Innovations hearing aids, but still is chasing Sonova Holdings, parent of Phonak, the global leader in the hearing aid industry.
ReSound parent GN Store Nord also ended 2010 on a high note, reporting 10 percent fourth-quarter growth with strong growth in profitability for the year. GN Store Nord Chairman Per Wold-Olsen attributed the strong end-of-year results in part on the successful launch of the new ReSound Alera hearing aid family.
