Do "tech level" prices reflect real cost? Or are just "market segmentation"

I cannot honestly answer your question Stephen, for I am no business person, and yes I do appreciate that you live and work in an extremely underprivileged community in Wales! We Scots, hold a strong affinity for our fellow Celts, the devastation caused by Brexit is coming home to roost, we remainers, didn’t stand a chance, given the downright lies that politicians told. The only problem was, the gullible believed them…I guess, if you are on a fixed income like me (Retired) I don’t have a choice, I have to go where I get the biggest bang for my buck, or stick with the NHS? So, I choose the best service that I can afford, at a price point that I can manage at Boots Hearing Care, my Audiologist there is extremely caring, and absolutely nothing is too much trouble, an absolute keyboard wizard whilst programming, and at breakneck speed!!! The service that I receive, could never be described as the “Sheep Dip Approach”… There are many monetary reason’s for that, but the main reason is Phonak own a controlling share in Boots, plus as you have stated before, Boots do not pay the same taxes as other companies, perhaps they are exempt? IMO, no one should be paying taxes on essential medical devices! Here in the Scottish Highlands, we have no “Independent Audiologists” that I am aware of, there isn’t enough footfall, we have around 300k folks, in an area the size of Belgium, so everything is usually expensive, more so in the Islands! For instance, I recently bought 3 x 16.1kWh Lithium batteries for a new 6kWh solar panel system, that I was installing myself, I had 4kWh professionally installed 13 years ago, this instal was to supplement the existing solar, and make me virtually independent from the grid, it did this in spadefuls, I haven’t bought in any electricity since the 11th of February this year! Anyway, they charged me £150 per battery, £450 for delivery, okay they weigh around 130kg each, but everywhere else south of the Highlands, is free delivery… I think it’s absolutely wonderful that you rent out aids Stephen, to those folks whom are financially struggling, more power to you Sir… Cheers Kev

It’s a real Catch-22. “Appropriate” is whatever it takes to sustain your business. Unfortunately there are a ton of pressures that make a small business model selling hearing aids impractical. Hearing Aid manufacturers are not helping by having their own retail outfits. I can’t speak for other countries, but in the US the audiology profession has not helped itself by it’s laissez faire attitude. Unless one has a recommendation one’s odds seem better of getting quality care from Costco than going to a random audiologist.

@Um_bongo said:

If a pair of aids ‘cost’ £2.5k wholesale, what would be (in the collective mind on this page) the appropriate mark up given the typical obligation/expectation listed above to see someone with about 3 decades of industry experience?

You should know better than I can.

It depends on your traffic (prospects into your office), your closing percentages, your desired load factor (how many patients/customers/clients you want to see in a week), your estimate of the hours/customer during the time horizon you want, cost of rent, utilities, staff, benefits, taxes, etc., etc., etc. And you bear the risk of loss if your costs turn out to be higher than you estimate.

I know small business is risky, though it can provide a great payoff. I know a skilled practitioner is important and worth the cost. I know it’s very tough to be a practitioner even if they don’t have to compete with Costco.

I wonder how Ziphearing, et al., impacts their practitioners. Do the lower prices result in enough extra sales to boost profit?

@Um_bongo said:

The problem is, that if you keep giving all your money to Walgreens (Boots), Bezos, Costco or whoever

Reading all this took me a while, here in Quebec (Canada) outside private Audi’s Ha’s are not allowed to be sold, so no Costco and such, BUT, the Audi’s are certified, meaning that they know what they are doing, and fitting Ha’s properly take time and knowledge, years of schooling, that is what we pay for, during the warranty time unlimited adjustments, replacements etc. 15 minutes from my home, so yes it cost a whole lot, but more important, I do hear properly and have a 98% normal life, nothing else matter.

I’m not sure I agree with the comparison to eyeglasses.

Is it not the case that the hearing aids in any particular range are identical pieces of hardware but that the manufacturer simply “locks” certain features in the firmware (if that’s the correct terminology) to create lower tech/price levels? Just a click of the mouse!

@thecaz said:

Is it not the case that the hearing aids in any particular range are identical pieces of hardware but that the manufacturer simply “locks” certain features in the firmware

That is true, but once you view HAs as a software package that comes with some unremarkable hardware attached, I believe the comparison with glasses holds. I can totally imagine a commercial software package that has all the code, but whose unlocked features depend on what password a publisher sells to their customers.

Except that I can get a very decent pair of glasses even here in Switzerland for 50$ or so (without sophisticated coating, ultra-thin glass etc) but not even a simple HA for under, say, 2,500$ apiece (thankfully, France is nearby, with half those prices).

Hey Mate - I’ve had a couple of replies to the post and I think you actually just missed the point I was trying to make. The topic was about identical hardware locked via software. What you have outlined is basic up-selling - ie: Macca’s, do you want fries with that. So in your analogy, it would be like Macca’s putting fries with every order BUT you couldn’t eat them unless you went back to the counter and paid more money. The eye glass example means that your sight has deterioated a little, so you go and get a single vision lense that corrects it and hey presto you leave the store being able to see pretty much the same as you did when you could see normally! The lenses don’t have all the tech built into them so that the retailer can magically click a mouse and all those things are instantly available to you in that same lense - big difference. In my opinion, once all the R&D payback has been achieved, then the basic manufacturing cost should include ALL the features that are built into that product. The eye glass comparision is 100% spot on - you can buy basic lenses that give the the vision you had before normal age retated degriation, basic hearing aids fall way sort of that scenario. Cheers Mikey

@CombatWombat said:

If you use the bundled model, you’re asking people to prepay a significant amount for services that they may or may not end up needing

That is exactly the problem. HAs are not like glasses, where you can assess in a nanosecond (or so) whether they correct someone’s vision adequately. Even if a HA is properly fitted it takes time for the wearer to test it under various conditions/programs, and adapt to them. For some, the level of amplification must be gradually increased over weeks. For many people the initial “standard” fit is no good, and/or they may test various models.

Thus, the time and effort (and costs) spent by audiologists is considerable, driving the bundled prices up. Manufacturers are reluctant to abandon this sales model, fearing reputational damage from dissatisfied customers if HAs are sold through unconventional/direct channels.

No easy solutions here.

This is a common business problem. It hits especially hard whenever a project has to be outsourced.

As a client, do you want a fixed price contract, time and materials, cost plus? As a contractor, how are you going to do a fixed price bid?

My insurance coverage is based on the total I pay when I buy HAs. That includes accessories that I buy with the aids, if they’re on the same sales sheet. I like bundled services. If I were paying put of pocket, I’d go for unbundled because 15 years of experience tells me I can get to an adjustment I like pretty quickly.

@Um_bongo said:

what do you think is reasonable for initial testing and fitting then five to eight years worth of professional fees for aftercare, clinic costs, annual checks and servicing/postage?

That is where the real value is.

What is find interesting is that in New Zealand one of the chains is fully owned by Sonova, and the promotional pricing including aftercare for multiple years is half the list price. How do they do that and look their 3rd party channel partners in the eye?

And FWIW I use them now. All things being equal there is another clinic I would prefer to use because of the experience (and stability) of the practitioners there but the difference in cost to me is too much. The Sonova owned clinics and staff are “good enough “ without being great

I suppose you’re right, everything is semi bundled unless it’s service for life. But sometimes patients don’t come back for services they really need. So REM should be bundled in along with the fit. It should also be bundled into the cost of custom tips. And I prefer custom tips to be bundled in with the cost of hearing aids because if you give patients a choice sometimes they won’t pay the extra for custom tips when they really need them. Tinnitus treatment protocols work better if patients show up and finish them, so bundling can help with that. Thank goodness our pediatric services are covered by governmental programs because in the first few years of life children with hearing loss need to be seen a lot, so if parents were paying for those they would need to be bundled to manage absenteeism.

I found Signia to be to the contrary. Between “levels” the functionality changes (more channels, etc.) but also does the physical hardware. I was told the circuit board and I.C.'s are different and the case is obviously different between levels.

Whether the added functionality is worth the price increase is for the purchaser to decide. Certainly hearing aids are expensive. In my part of the U.S., most non-UAW employee health insurance policies won’t pay for hearing aids. A few unionized government employee plans part. And in U.S. Medicare pays none.

I also wonder why my hearing aids cost about 5,000.00 USD with one year of follow up appointments when I bought a M-4 Mac computer for less than 1,200.00 USD- including 3 years of warranty. Which has more technology?

@PJB12 said:

Between “levels” the functionality changes (more channels, etc.) but also does the physical hardware. I was told the circuit board and I.C.'s are different and the case is obviously different between levels.

I love people who spin a good yarn too.

Just think about the complexity of type approval to international standards, CE marking, IC fabrication, production line equipment, inventory issues and supply chain. To provide 3-5 practically identical versions of the same thing.

Or, you just make the same thing, slice and dice the branding, performance, colours and market application 20 different ways and take the differing profit levels from each one.

Which company stays profitable for longer?

@PJB12 said:

I also wonder why my hearing aids cost about 5,000.00 USD with one year of follow up appointments when I bought a M-4 Mac computer for less than 1,200.00 USD- including 3 years of warranty. Which has more technology?

It’s about scalability of production, among others. Hearing aid market is more niche that computers. Majority of the HA cost is from R&D.