This may sound like “Doom & Gloom” … but there are some real concerns about the next 5-10 years in the world of hearing care, and my intention with this article is to raise them to you, share some observations based on what’s happened in other industries, and share the proactive steps that you can take to mitigate against these potential threats.
Let’s jump in.
I have three observations based on what I see happening in the hearing care industry right now:
- Manufacturers are aggressively acquiring clinics through a big push for mass consolidation – this means they’ll control the entire process of production through to consumer sale, giving them power to maximize margins and control expected consumer pricing.
- (Prediction) I believe industry ASPs will drop over the next few years – it only requires one manufacturer to reduce their prices (which some are already doing secretly in one-to-one situations), and all others will have no choice but to follow in order to stay competitive.
- Third party benefits are becoming more and more common in the US, resulting in the provider being further devalued in the process (further bolstering the narrative that people need hearing aids, not hearing care).
It’s an interesting time.
And my view on all of this is that it’s leading to one thing …
… The days of making your margin from selling hearing aids are going to be a thing of the past.
Here’s why I believe this to be the case.
A decade ago, privately owned clinics were one of just a small number of ways that people could purchase hearing aids. You had autonomy, you could build in healthy margins and give yourself enough profit to serve the patient for the years that follow the fitting.
However, today and as we enter the future, this isn’t going to be the case with more options becoming available online, big boxes continuing with market dominance, a booming secondhand hearing aid market, and more manufacturer owned chains having autonomy over low-priced COGs.
This means that more consumers are becoming educated that they can buy a pair of premium hearing devices from places like Costco for $2,000-$3,000 rather than the $5,000-$7,000 that most private clinics sell them for.
This results in people believing that you’re ripping people off, and this pressure is going to either result in you selling more basic technology or cutting your margins and being forced to sacrifice your quality of patient care (or run yourself into financial hardships by trying to deliver champagne care on lemonade budgets!).
If you’re only perceived to sell hearing aids, then you simply won’t be able to compete with competitors who can buy lower cost of goods and benefit from economies of scale around operations … you’ll be forced to slash your margins to a point that you’re not profitable.
How to Mitigate against This Risk.
My belief is that the solution is to STOP selling hearing aids … and instead change your brand messaging/focus to share how you actually “sell” hearing care.
Your role as a clinic is not to simply sell hearing aids; it’s to help people to achieve better hearing. The more you can focus your value on the way that you help patients to achieve better hearing, and deliver a premium experience/customer service, the more you’ll create a point of difference that has patients understand that they’re buying your care, not your widgets.
If you can achieve this, you create a strong point of difference.
Look at the hotel market as an example.
The hotel industry has gone through mass-consolidation over the past few decades with a small number of large hotel companies now owning the majority of hotels across the country (under multiple brand names).
It has meant that independent hotels have had to make one of three choices.
- They have had to lower their prices and try to compete with these larger chains resulting in reduced margin (which often results in reduced service/maintenance for their customers)
- They have given up the battle and sold to one of the large hotel chains (that only end up getting gobbled up themselves by a chain higher in the food chain).
- They have focused on becoming boutique, premium, and delivering an experience that makes them unique and no longer seen as a competitor to a lower priced hotel.
The same similarities can be applied to our industry.
The way that you can step away from the messy battle around hearing aid prices, and the ASP challenges we’ll face in the near future, is to focus on developing a boutique clinic that attracts people because they want a special experience with a specialist … not because they simply want a convenient place to buy hearing aids.
This is not a simple thing to do … but if you want to play this game for decades to come, it will be far more lucrative and far more fun if you can position yourself as a boutique premium independent business.
Here are the key things I would be considering right now:
- Does your website focus on promoting hearing aids or your unique methodology for achieving better hearing?
- Is your existing patient experience actually special? What could you do to take your customer care up several notches.
- Does your brand/website/marketing look like a premium boutique experience or yet another place to buy a set of hearing aids?
- What would you have to do to justify that paying an extra few thousand dollars from you would be worth it to a patient?
There’s so much depth behind the ways that you can achieve this, but use the above as a thought-experiment.
Because if you are still positioned as a place to buy hearing aids (even if that’s not the truth) – you will end up being squeezed over the coming years, and right now would be an ideal time to fix this and prepare for decades to come.
Final note, if you want to learn what the best clinics in the world are doing right now to win, then our next Practice Growth Masterclass in New York City is coming up soon. Full details are here.