Happy New Year? It all depends on where you stand in the hearing industry. In 2015, hearing aid manufacturers will continue introducing new products and technologies at an accelerating pace, and legions of new and current customers with hearing loss will win.
But with lower prices and sometimes brutal competition, everyone who serves those customers — from audiologists and dispensers to manufacturers and retailers — will have to stay on their toes to survive, let alone prosper. Following are five trends to follow in the New Year:
- Awesome New Products: More powerful digital processing technologies, improved integration of wireless features, constant improvements in sound processing software, and integration with mobile phones will continue to result in fantastic new products. Hearing aids and personal sound amplifiers will be small-to-near-invisible, more powerful, more feature-rich, and more connected than ever before. There will be more multi-function devices that stream phone, music, radio and TV direct from the source in addition to providing hearing enhancement, and more will go beyond basic Bluetooth functionality to integrate seamlessly with smartphone apps. Many others will be affordable situational listening devices for specific applications such as TV streaming. And most if not all will be wireless.
- Consumers in the Driver’s Seat: As the new products get new markets of customers excited, the “consumerization” of the hearing business will accelerate. Tech-savvy consumers will continue demanding more and better features and ever lower prices. As “Android hearing aids” make their debut following last year’s rollout of the first iPhone-integrated hearing aids, hearing products will become true consumer technologies. In the past, choices were so limited that the old-line hearing aid companies could control the sale to consumers. Today, customers have more choices, are more sophisticated about what tech-based products can and should do, and are more demanding about the level of performance they expect.
- Hot Competition/Lower Prices/Lower Margins: More choices mean more competition for manufacturers. As digital technologies continue to deliver higher performance at constantly lower costs, hearing product providers will have to deliver more and better products at even lower prices. And now that standardized, lower-cost products are sold easily over the Internet and through “big box” retailers like Costco, barriers to entry will continue to fall, and even more new competitors will enter the fray. The result will be even more price cutting as manufacturers try to stay competitive. Those who make the wrong investment bets won’t survive on slim-to-vanishing margins, while those who reach significant new markets with hit products will achieve the sales volumes required to build sustainable businesses.
- Bigfoot and Big Brother: Big Brother in the form of federal governments providing various subsidies to consumers will play an even larger role in driving demand for hearing aids. The Veterans Administration in the U.S. and the National Health Service in Great Britain will account for ever more substantial percentages of hearing-product sales in those two countries. And Bigfoot, in the form of the personal health insurance industry, will play an increasingly important role — especially in the U.S., where in the past insurance reimbursements for hearing aids were miniscule. UnitedHealth has led the way with its HiHealth Innovations direct-to-consumer hearing aid business and associated insurance plans. In 2015, other large insurance carriers can be sure to follow.
- The Audiologist Squeeze–Adapt or Die: Audiologists, hearing-aid dispensers and other hearing health professionals have been the heart and soul of the hearing products business since its inception. But in the past several years, direct-to-consumer Internet sales and the big-box-retail “Costco phenomenon” have squeezed the profits of private independent audiologists and started to undermine their base of patients. First-time hearing-aid purchases who in the past had nowhere else to turn are now often going first to the Internet and then to Costco before even considering a visit to their local audiologist or hearing-aid dispenser. Audiologists’ soul-searching and reconsideration of their business and practice models that started in 2014 will intensify in 2015. Expect to see more independent audiologists banding together in buying collectives and/or rolling up into chains. And watch for new ways independents find to stay in business, especially by leveraging better information technology, faster and lower-cost diagnostic technologies, and lower-cost hearing-aid systems to appeal to a broader customer base.
What’s the upshot of these trends? We’ll see them play out in several major industry segments through the course of the year. Among other things:
- We can expect to see the vertically integrated “Big Six” manufacturers, who still control 80 percent of the global hearing aid business, experimenting with their business models to respond to growing competition and pricing pressure. Some will embrace consumer innovations and marketing in the way GN Resound did in 2014 with its first-to-market iPhone hearing aids. Others will extend their vertical integration into more protected hearing-health businesses, such as Sonova’s decision to acquire and invest in the Advanced Bionics cochlear implant business. And the wild card in the bunch is Siemens Hearing Instruments, whose sale to a private equity group will close early in the year and inject some much-needed excitement into the Big-Six competition.
- We can expect to see other Big Box retailers challenge Costco’s lead in retail hearing aid sales. Karl Strom of Hearing Review says that while private commercial sales of hearing aids have been growing at only three percent a year, Costco’s sales have been growing at annual rates of 20-25 percent in recent years, to an estimated total 0f 300,000 units 2014 — 10 percent of the three million units sold industrywide. With Walmart already in the hearing aid business, especially with its successful Sam’s Clubs hearing centers, it can only be a matter of time before the industry gorilla ramps up its investment to compete with Costco and the other big retailers.
- Lower cost products will start delivering premium hearing aid features and achieve broader acceptance. Internet sales are here to stay, and manufacturers like IntriCon will continue introducing the best new technologies in lower cost components and systems that are the basis of the next generation of affordable, high-function hearing products. An industry ecosystem of technology developers, manufacturers, distributors, and branded retailers is rapidly gelling to provide credible, affordable alternatives to the Big Six suppliers. So expect to see the Big-Six grip on hearing industry sales and service continue to loosen in 2015.
- Audiologists, who feared for their future in 2014, will find ways not only to survive but to thrive in 2015. Those who embrace change in their business models will find the patients who need them most and validate the fact that personal, professional service and care for people with even moderate degrees of hearing loss are absolute necessities. But success will require change.
We will be following all these story lines and more during the course of the New Year, so watch this space!