The Race To The Bottom: Is Price Really A Factor?

Feb 4, 2020 | Finance, Operations

It’s long been claimed that price is the prime reason for the consistently low 25% to 30% adoption rate of hearing devices. With over-the-counter devices set to be regulated and available in late 2020, price will become even more important. Or will it? Is the race to the bottom really the right race to be in?

Is Price Really A Factor?

When I was a junior faculty member at Texas Tech University’s Health Sciences Center, I joined with an economist to analyze data about hearing aid adoption rates from the Hearing Industries Association.

Our results supported those of several MarkeTrak studies that have happened since then: Though price is among the reasons people choose not to purchase hearing aids, it’s never the primary barrier.

The adoption rate has hovered at around 25% to 30% for seven generations of hearing technology, and the demand hasn’t changed either. If price isn’t the prime barrier to adoption that providers and patients claim it is, is something else going on here?

The Race To The Bottom

The drive to lower your prices so you can get more people to buy your products is what we mean by “the race to the bottom.” It’s a result of this longstanding assertion that price is the prime barrier to hearing aid adoption.

Let’s look at the logic behind choosing this approach.

You own an audiology practice. Your market has a maximum of 100% revenue for you to capture. You can’t capture this 100% revenue because you have expenses.

Let’s say your expenses — rent, salaries, benefits, utilities, products, and the like — equal 25% of that possible 100% revenue. After expenses, the available revenue left in your market is 75%. In other words, your expenses chip away at the available revenue in your market.

The common approach to increasing that 75% of available revenue is trying to lower your expenses by negotiating a discount from your supplier. Let’s say you get that discount and your expenses are now 15%, not 25%.

You’ve managed to increase the revenue you could capture to from 75% to 85%. To try to capture that revenue, you lower the sales price of your devices.

The logic is sound, until you consider price sensitivity.

Price Sensitivity

We’ve done demand studies, and what we found was that hearing devices are, indeed, price insensitive. What does that mean? Let’s consider a shoe example.

I tell you these $10 shoes I’m offering are going to change your life, no blisters ever again, the whole nine yards. Odds are, that $10 price tag isn’t going to convince you to buy the shoes — you know that a low price often means low quality.

You risk scaring people away if you lower prices too far — that’s what we mean by price sensitive.

Using national data, we found that at around the $1,800 mark, hearing aids become price sensitive as well. This price point corresponds to economy devices (again, this is national data, so your regional price might be different). If you try to lower the price of an $1,800 device to $1,500, you’re actually constraining your market — people will be less likely to purchase, because that low price suggests poor quality.

To make matters worse, the service that comes with bargain-basement devices is often poor, so the frustrated patient shoves their hearing aids in a drawer at home, and they’ll wait six or 12 years before they consider devices again.

What’s the alternative to the race to the bottom?


Value is the perceived benefit for the price paid. To illustrate, let’s look at another shoe example.

You’re looking for the perfect pair of shoes to go with a black dress. You find the right material, the right heel height, size, and whatever variables factor into your shoe choice. You’ve found the perfect shoe, but then you notice the price: $350. Odds are, that’s outside your typical shoe price range. The perceived benefits of that shoe do not match the price asked.

But what if it comes with a 30-year, no-questions-asked, shoe-replacement guarantee?

Suddenly we’ve changed the value proposition. The shoe is now worth the asked-for price.

Value In Hearing Care

How does this relate to hearing care? One thing missing from health care in general is the value proposition. What services are we providing that set us apart?

Consider real-ear measurements. For 30 years, we have validated, verified, and promoted the practice of using a probe tube to measure ear-canal resonance and match it with the amplification that’s coming off the hearing aid. But only about one-fifth of audiologists use real-ear measurement.

It’s an easy win to clearly show the patient what benefit the hearing aid provides. Without the benefit of this real-ear validation step, the patient has little incentive to spend an extra $500 to $2,000 so they can hear better. This is just one example of a value proposition we could be touting.

After decades without a clear, unified value proposition, we now have this over-the-counter bill that allows consumers to purchase devices directly. We can’t, however, compete with OTC retailers on price. It’s that simple. So how can we compete?

Value-Based Service Offerings

Remember the example from before, where you negotiated with your supplier? In that example, you worried about lowering the 25% you were paying in expenses.

That’s where everybody is operating: trying to lower expenses. But the way to compete is to shift your focus to the 75% of available revenue — how do you capture that?

Your value proposition should be your service offerings. You charge above that $1,800 price point, but what you also provide is an experience. And you sell more devices.

The sweet spot in hearing care is those skills you can’t quantify: building rapport and counseling the patient.

Building rapport. People light up when you know their name, when you ask about the kids, when you mention that upcoming vacation they’d mentioned at the last visit. With follow-ups, clean and checks, and yearly hearing checks, those small conversations turn you into a friend, not simply a provider. They start to look forward to appointments so they can catch up with you.

Counseling. We often get so wrapped up in the results that we become data faucets, spouting information at the patient. They want solutions, though, not data. It’s useless to them. We need to meet them where they are: how to determine the best spot in a noisy room, how far you should sit from your conversation partner, here’s a tip sheet to have with you as you go about your day, et cetera. We’re trained to do this, and we’re the only ones who can do it. Yet no one’s doing it. Only recently have we rediscovered this, and it’s getting better.

Everybody Can Benefit From OTCs

The burning question is, “Who stands to benefit from OTCs?” The answer, and this might surprise you, is everybody.

Obviously, the consumer electronics companies will benefit the most. They will make money hand over fist because of the volume at which they’ll be able to distribute these products. Consumers will also benefit, because they’ll be able to afford to put something in their ear that potentially reduces the rate of cognitive decline.

But the providers can also benefit. A group from Bose has been testing whether patients can fit these devices in a meaningful way, and the answer is that they can’t. They can determine what sounds good, but they can’t work with the nuances. For example, is the device also amplifying noise, which will hinder hearing in a restaurant setting? Some patients also have difficulty placing the instrument in their ear.

That’s where the provider comes in. We can do testing, counseling, needs assessments, and environmental assessments — none of which are covered by insurance, so it’s a cash market. We’ll stand out because of our service model, and when they want to get a prescriptive hearing device, they’ll come to us.

OTCs Are A Good Thing

It might sound strange for me to close with this sentiment, but it’s true.

OTCs will bring greater awareness to hearing health. Furthermore, it gives folks the option to try a device without the pressure of finding and seeing a provider. Once they experience the benefits, they’re more likely to consider seeking out a provider and, perhaps, investing in a pair of prescriptive devices.

The model to look at is reading glasses: The American Academy of Optometry has data showing that, of the 18 million pairs of readers sold in a year, one-third of those people go on to get LASIK, contact lenses, or prescriptive glasses. Though we don’t know for sure, there’s a strong suspicion the same will happen with OTCs.

Though OTCs will lead to some bumps, you’re in control. Lean on those strengths like services, validation, and stronger integration of your front-office staff into the patient experience. There may be turbulence, but a firm hand on the controls will keep you on course.