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Hearing aidopportunities
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Hearing aidopportunities

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  • No Growth
    Restricted access
  • (2006) 10% percent of US population (31,500,000) suffer from some form of hearing loss that would be helped by a hearing aid(2006) – Currently only 25% of that 10% population or about 7,875,000 people wear hearing aids CONCLUSIONS: TODAY (2006) About 28,350,000 potential customers with a total need for about 48,195,000 hearing aids are not being served
  • (2006) – Currently 25% or about 7,875,000 people wear hearing aids
    (70% of these wearers – 5,512,500 wear 2 hearing aids for a total of 11,025,000 units worn)(30% of these wearers – 2,362,500 wear 1 hearing aid for a total of 2,362,000 worn)
    Source: Better Hearing Institute Marke Trak VII™ Sem-Annual Hearing Aid Market Survey/ Sergei Kotchkin Phd
  • Audiologists & Hearing Aid Stores combined aka “Dispensers”
    USA - Only 12,000+ Hearing Aid Dispensers TOTAL (9000 Audiologists and 3,000 professionals at stores)
    Avg. unit volume per dispenser is 16 units/mo. (Total for all dispensers is a little over 2,000,000 units/yr.)
    Professional Dispensers retiring faster than new entrants
    Current professional are not meeting today’s demand
  • No Growth in Dispenser entering the field
    Penetration/adoption rates hold at about 25%
    REPEAT: Market will be almost 36,000,000 Potential users by 2015
    Future demand will definitely not be met by current distribution channels
    i.e. New Distribution Channels must be created to meet demand
    CONCLUSIONS
    Market is ripe for disintermediation & high volume entrants
  • No Growth in Dispenser entering the field
    Penetration/adoption rates hold at about 25%
    REPEAT: Market will be almost 36,000,000 Potential users by 2015
    Future demand will definitely not be met by current distribution channels
    i.e. New Distribution Channels must be created to meet demand
    CONCLUSIONS
    Market is ripe for disintermediation & high volume entrants
  • No Growth in Dispensers
    Penetration/adoption rates hold at about 25%
    REPEAT: Market will be over 60 Million units by 2015
    Future demand will definitely not be met by current distribution channels
    i.e. New Distribution Channels must be created to meet demand
    CONCLUSIONS
    Market is ripe for disintermediation & high volume entrants
  • No Growth in Dispensers
    Penetration/adoption rates hold at about 25%
    REPEAT: Market will be over 60 Million units by 2015
    Future demand will definitely not be met by current distribution channels
    i.e. New Distribution Channels must be created to meet demand
    CONCLUSIONS
    Market is ripe for disintermediation & high volume entrants
  • Assumes 70% of users will opt for 2 hearing aids
    Market will be almost 36,000,000 Potential users and 60+ million units by 2015
  • Assumes 70% of users will opt for 2 hearing aids
    Market will be almost 36,000,000 Potential users and 60+ million units by 2015
  • Monopoly
    Restricted distribution
    No Competition
    Prices rise over time
  • Monopoly
    Restricted distribution
    No Competition
    Prices rise over time
  • Dramatic upheaval in this sector
    Shift to mass markets
    Lower prices encourage higher adoption rates
  • Dramatic upheaval in this sector
    Shift to mass markets
    Lower prices encourage higher adoption rates
  • Dramatic shift from dispensers to mass marketers
    By 2015 Drug Stores could have a 40% market Share
    Walgreen Co. could get a substantial piece of this market
  • Dramatic shift from dispensers to mass marketers
    By 2015 Drug Stores could have a 40% market Share
    Walgreen Co. could get a substantial piece of this market
  • Mass marketers will drive down prices
  • Mass marketers will drive down prices
  • Increased competition will decrease margins
  • Increased competition will decrease margins
  • More Mass Marketing outlets will cause adoption rate to rise from 25% to 57% by 2015
    i.e. new mass marketer entries causing:
    LOWER PRICES
    CONVENIENCE
    Will cause at least 38% of the hearing impaired to purchase at least one hearing aid by 2015
  • More Mass Marketing outlets will cause adoption rate to rise from 25% to 57% by 2015
    i.e. new mass marketer entries causing:
    LOWER PRICES
    CONVENIENCE
    Will cause at least 38% of the hearing impaired to purchase at least one hearing aid by 2015
  • More outlets will cause adoption rate to rise from 25% to about 57% by 2015
    This translates into about 23,240,000 units being sold by 2015
    Lower prices and mass marketers will drive out inefficient dispensers
  • More outlets will cause adoption rate to rise from 25% to about 57% by 2015
    This translates into about 23,240,000 units being sold by 2015
    Lower prices and mass marketers will drive out inefficient dispensers
  • More outlets will cause adoption rate to rise from 25% to about 57% by 2015
    Lower prices and mass marketers will drive out inefficient dispensers
  • More outlets will cause adoption rate to rise from 25% to about 57% by 2015
    Lower prices and mass marketers will drive out inefficient dispensers
  • Transcript

    • 1. Hearing Aid Marketing OpportunitiesHearing Aid Marketing Opportunities United States Hearing Aid MarketUnited States Hearing Aid Market (U.S.A Hearing Aid Market)(U.S.A Hearing Aid Market) Hearing Central LLCHearing Central LLC 1390 Kathryn Lane1390 Kathryn Lane Lake Forest IL 60045Lake Forest IL 60045 847-295-6946847-295-6946 phil@hearingcentral.comphil@hearingcentral.com Updated June 2008Updated June 2008 Updated December 2007Updated December 2007 Summer 2006Summer 2006 Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com
    • 2. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Current And FutureCurrent And Future Market TrendsMarket Trends Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com
    • 3. 7,875,000 23,625,000 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 2006 People w / hearing aids People w / out hearing aids U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Current Hearing Loss PopulationCurrent Hearing Loss Population Source: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin PhdSource: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin Phd Total Hearing Loss Population = 31,500,000 Current hearing aid adoption rates - 25% i.e. 75% of hearing impaired who could wear a hearing aid do not.
    • 4. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Current Hearing Aid Usage (2006)Current Hearing Aid Usage (2006) Source: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin PhdSource: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin Phd Includes All Hearing Aid Types (BTE, ITE, ITC) 5,512,500 2,362,500 11,025,000 2,362,500 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 People Wearing 2 Hearing Aids People Wearing 1 Hearing Aid Binaural Hearing Aids (2/ user) Single Hearing Aid (1/ user) Wearers (7,875,000) # Units Worn (13,387,500) Binaural Single
    • 5. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Reasons for Slow AdoptionReasons for Slow Adoption  ““Mom and Pop” distribution systemMom and Pop” distribution system (9000+/- Audiologists, 3000+/- Dispensers)(9000+/- Audiologists, 3000+/- Dispensers)  Stigma of wearing a hearing aidStigma of wearing a hearing aid (will change as more people age and need a hearing aid)(will change as more people age and need a hearing aid)  High Cost ($1500 - $3000 ea.)High Cost ($1500 - $3000 ea.)  Most are not covered by private insuranceMost are not covered by private insurance  No Medicare/ Medicaid Coverage (VA does)No Medicare/ Medicaid Coverage (VA does)  Barriers to entryBarriers to entry Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com
    • 6. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected Hard-Of-Hearing PersonsProjected Hard-Of-Hearing Persons 31.5 31.9 32.3 32.7 33.1 33.6 34 34.5 35 35.8 29 30 31 32 33 34 35 36 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Tot al Market ( Millions Users) Source: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin PhdSource: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin Phd
    • 7. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected Hard-Of-Hearing PersonsProjected Hard-Of-Hearing Persons Source: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin PhdSource: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin Phd Comments on Prior GraphComments on Prior Graph  There will be a steady increaseThere will be a steady increase in hard-of-hearing personsin hard-of-hearing persons  Boomers with prior loud listening habitsBoomers with prior loud listening habits and subsequent hearing loss willand subsequent hearing loss will accelerate this market by 2010accelerate this market by 2010 Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comHearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com
    • 8. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected NewProjected New Hearing Aids SoldHearing Aids Sold With No Channel Changes (OnlyWith No Channel Changes (Only Dispensers)Dispensers) 53.55 12.32 54.23 13.02 54.44 13.73 55.59 13.9 56.27 14.07 57.12 14.28 57.8 14.45 58.65 14.66 59.5 14.88 60.86 15.22 0 10 20 30 40 50 60 70 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Tot al Need ( Millions Unit s) Max Capacit y of Current Channels Source: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin PhdSource: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin Phd Assumes Current Adoption Rate holds at about 25%
    • 9. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected NewProjected New Hearing Aids SoldHearing Aids Sold Source: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin PhdSource: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin Phd  Dispenser channel is not expected to grow – more people are retiring than entering the profession  No growth in dispensers causes adoption rates to hold at 25% of hard-of-hearing population  CONCLUSIONS  Future hearing aid demand will definitely not be met by current distribution channels Comments on Prior GraphComments on Prior Graph
    • 10. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected Total Demand for Hearing AidProjected Total Demand for Hearing Aid UnitsUnits 31.5 53.55 31.9 54.23 32.3 54.44 32.7 55.59 33.1 56.27 33.6 57.12 34 57.8 34.5 58.65 35 59.5 35.8 60.86 0 10 20 30 40 50 60 70 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Tot al Hard of Hearing Persons Tot al Hearing Aids Needed Source: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin PhdSource: Better Hearing Institute Marke Trak VII™ Semi-Annual Hearing Aid Market Survey/ Sergei Kotchkin Phd In MillionsIn Millions
    • 11. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected Total Demand for Hearing AidProjected Total Demand for Hearing Aid UnitsUnits CONCLUSIONS  Market potential of over 60 Million units by 2015  New distribution channels must be created to meet demand  Market is ripe for disintermediation & high volume entrants Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com
    • 12. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Pricing Trends Through Current ChannelsPricing Trends Through Current Channels w/ No Mass Market Entriesw/ No Mass Market Entries $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2006 2007 2008 2009 2010 2011 2013 2014 2015 Average Retail Cost (BTE, ITC, ITE) Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com
    • 13. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Pricing Trends Through Current ChannelsPricing Trends Through Current Channels w/ No Mass Market Entriesw/ No Mass Market Entries Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com Comments on Prior GraphComments on Prior Graph  If the current 12,000+/- Audiologists andIf the current 12,000+/- Audiologists and Dispensers remain as the only channelsDispensers remain as the only channels for consumers to purchase hearing aids:for consumers to purchase hearing aids: 1.1. Demand will rise as more peopleDemand will rise as more people become hard-of-hearingbecome hard-of-hearing 2.2. Prices will rise due to the monopolisticPrices will rise due to the monopolistic nature of the distribution channelnature of the distribution channel
    • 14. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market The Future : 2006 - 2015The Future : 2006 - 2015 Upheaval!Upheaval! Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com
    • 15. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Expected Channel ChangesExpected Channel Changes 2006 - 20152006 - 2015 FROM:FROM:  AudiologistsAudiologists  Hearing Aid storesHearing Aid stores TO:TO:  Mass Markets i.e.Mass Markets i.e.  Drug StoresDrug Stores  Big Box StoresBig Box Stores  InternetInternet  Mail OrderMail Order Toll-KeepersToll-Keepers Open MarketsOpen Markets Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com
    • 16. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected Distribution Channel ChangesProjected Distribution Channel Changes 20062006  AudiologistsAudiologists 62%62%  H.A. Stores/Dispens. 19%H.A. Stores/Dispens. 19%  MDs/VA/ENTsMDs/VA/ENTs 13%13% TotalTotal 94%94% MASS MARKETSMASS MARKETS  Mail OrderMail Order 3.5%3.5%  InternetInternet 2.5%2.5%  Super StoresSuper Stores >1%>1%  Drug StoresDrug Stores >1%>1% TotalTotal 6%6% 2015 (Est.)**2015 (Est.)**  AudiologistsAudiologists 15%15%  H.A. DispensersH.A. Dispensers 3%3%  MDs/VA/ENTsMDs/VA/ENTs 15%15% TotalTotal 33%33% MASS MARKETSMASS MARKETS  Mail OrderMail Order 9%9%  InternetInternet 12%12%  Super StoresSuper Stores 12%12%  Drug StoresDrug Stores 32%32% TotalTotalSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com
    • 17. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected Distribution Channel ChangesProjected Distribution Channel Changes **Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com**Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com Comments on Prior Slideomments on Prior Slide  In the US hearing aid markets, there will be a dramatic shift from dispensers to mass marketers  US hearing aid market will expand from 25% to 67% of the hard-of-hearing  Traditional channels will lose market share to mass market channels  Traditional channels will make money on custom molded hearing aids and hearing tests
    • 18. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market AverageAverage Retail Pricing TrendsRetail Pricing Trends Through Mass Market Channels AloneThrough Mass Market Channels Alone $750 $700 $650 $600 $500 $400 $300 $200 $150 $125 $0 $100 $200 $300 $400 $500 $600 $700 $800 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Retail Cost Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045
    • 19. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Mass Market Channels Retail Pricing TrendsMass Market Channels Retail Pricing Trends Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 Comments on PriorComments on Prior SlideSlide Mass Market channels will drive down hearing aid prices due to:  Multiple competitors  Supplier manufacturing economies  Large ad budgets  Price erosion will accelerate beginning in 2010  RESULTS: Audiologists and dispensers will move to higher end custom hearing aids and to customers who want personal service
    • 20. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected Distributor Profit MarginProjected Distributor Profit Margin DeteriorationDeterioration Due to Mass Market CompetitionDue to Mass Market Competition 50% 48% 45% 43% 40% 38% 35% 33% 30% 28% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Margin Deterioration Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com
    • 21. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Projected Profit Margin DeteriorationProjected Profit Margin Deterioration Due to Mass Market CompetitionDue to Mass Market Competition Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com Comments on Prior GraphComments on Prior Graph  Mass Market competition will force down prices and margins will deteriorate accordingly  Margins will bottom out at around 25% by 2015  Comments: This relentless price and margin deterioration could accelerate. If so, the projected timeline could be compressed to 2010 or 2012, depending on the aggressiveness of the mass marketers
    • 22. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market ProjectedProjected UserUser Hearing Aid Adoption RatesHearing Aid Adoption Rates 7.88 0.08 31.5 3.22 13.67 35.8 0 5 10 15 20 25 30 35 40 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Current Channels Mass Market Channels Total Hearing I mpaired Source: Better Hearing Institute Marke Trak VII™ Annual Hearing Aid Market Survey/ Sergei Kotchkin PhdSource: Better Hearing Institute Marke Trak VII™ Annual Hearing Aid Market Survey/ Sergei Kotchkin Phd and Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comand Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com In Millions of usersIn Millions of users
    • 23. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market ProjectedProjected UserUser Hearing Aid Adoption RatesHearing Aid Adoption Rates Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comHearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.com Comments on Prior GraphComments on Prior Graph  More outlets  Lower hearing aid prices = Greater availability + More choices Result: More people who need hearing aids will make a purchase decision
    • 24. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market ProjectedProjected UNITUNIT ForecastForecast w/ Mass Market Channelsw/ Mass Market Channels 8.6 0 5.5 23.24 0 3 6 9 12 15 18 21 24 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Current Channels Mass Market Channels In Millions of unitsIn Millions of units **Assumes 70% of users will purchase 2 hearing aids**Assumes 70% of users will purchase 2 hearing aids Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com Market Share of Dispensers is reduced over time
    • 25. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market ProjectedProjected UNITUNIT ForecastForecast w/ Mass Market Channelsw/ Mass Market Channels Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com Comments on Prior GraphComments on Prior Graph  Current trends will continue where 70% of purchasers choose 2 hearing aids (binaural)  67% market penetration rate by 2015 translates to over 23 million hearing aids  Market will split into:  OTC (low cost/low maintenance) hearing aids sold through mass marketers/Internet/mail order  Custom /programmable hearing aids (high cost) sold through traditional channels
    • 26. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Dollar Value of Mass Market ChannelsDollar Value of Mass Market Channels (67% of Total Market in 2015)(67% of Total Market in 2015) $67 $342 $749 $1,191 $1,624 $1,991 $2,185 $2,515 $2,744 $2,905 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Value of Mass Market Channels In Millions of DollarsIn Millions of Dollars **Assumes 70% of users will purchase 2 hearing aids**Assumes 70% of users will purchase 2 hearing aids Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com 23,240,000 units X$125
    • 27. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Dollar Value of Mass Market ChannelsDollar Value of Mass Market Channels Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com Comments on Prior GraphComments on Prior Graph  In the next 10 years, the growth rate in hearing aid sales will accelerate  Mass marketers and other efficient channels (Internet and mail order) can expect to participate in a 5 Billion dollar market by 2015
    • 28. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Requirements for EntryRequirements for Entry  Customer EducationCustomer Education  They don’t need a prescriptionThey don’t need a prescription  They don’t need to visit a dispenser or MD/ENTThey don’t need to visit a dispenser or MD/ENT  No Medicare or Medicaid reimbursement (except VA)No Medicare or Medicaid reimbursement (except VA)  Hearing Aid RequirementsHearing Aid Requirements  Need sufficient display “shelf space” (website or store)Need sufficient display “shelf space” (website or store)  Must be high quality (perceived value for the money)Must be high quality (perceived value for the money)  Must be relatively inexpensive i.e. must hit price pointsMust be relatively inexpensive i.e. must hit price points  $299 - $899 in 2007$299 - $899 in 2007  $99? - $499? in 2015$99? - $499? in 2015  No custom molds i.e. no visit required to audiologistNo custom molds i.e. no visit required to audiologist  Self regulation – Easy to adjust (volume control)Self regulation – Easy to adjust (volume control)  Self Maintain - Easy to cleanSelf Maintain - Easy to clean Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com
    • 29. Mass Market Entry OptionsMass Market Entry Options Option 1: Put Audiologists in StoresOption 1: Put Audiologists in Stores  Lease space or hire audiologistsLease space or hire audiologists  AdvantagesAdvantages  Professional can dispense & answer questionsProfessional can dispense & answer questions  Complies with most State regulationsComplies with most State regulations  DisadvantagesDisadvantages  Customer must make appointment ifCustomer must make appointment if audiologist is busy (impulse buy is dampened)audiologist is busy (impulse buy is dampened)  CustomerCustomer mustmust meet with a professionalmeet with a professional i.e. Audiologist must “dispense”i.e. Audiologist must “dispense”  Hearing aids can probably be sold for under $1,000Hearing aids can probably be sold for under $1,000  Depending on price, margins can be reasonable orDepending on price, margins can be reasonable or relatively lowrelatively low Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com U.S.A Hearing Aid MarketU.S.A Hearing Aid Market
    • 30. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Mass Market Entry OptionsMass Market Entry Options  Phase IPhase I: Start selling on corporate website: Start selling on corporate website  Lower startup costsLower startup costs  Suppliers can fulfill ordersSuppliers can fulfill orders  No inventory carrying costsNo inventory carrying costs  Requires Supply Chain integrationRequires Supply Chain integration  Can see how hearing aids sellCan see how hearing aids sell  Phase IIPhase II: Start selling Direct in stores: Start selling Direct in stores  Pilot test in a city/ regionPilot test in a city/ region  Go nation-wide after kinks worked outGo nation-wide after kinks worked out Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com Option 2: Sell Directly Thru Web & StoreOption 2: Sell Directly Thru Web & Store
    • 31. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Mass MarketMass Market Web/Store Product StrategiesWeb/Store Product Strategies  Start selling just 2 modelsStart selling just 2 models (will meet most(will meet most consumer requirements)consumer requirements)  Sell one OTE digital modelSell one OTE digital model (Over the Ear)(Over the Ear) w/ the new “open ear” technologyw/ the new “open ear” technology  AdvantagesAdvantages  No mold i.e. no audiologist fitting requiredNo mold i.e. no audiologist fitting required  Self fittingSelf fitting  Lightweight and invisibleLightweight and invisible  Sell one ITE digital modelSell one ITE digital model (In The Ear)(In The Ear)  Find one that doesn’t require a moldFind one that doesn’t require a mold  Find one that will fit in either earFind one that will fit in either ear Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com
    • 32. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Web/Store Product StrategiesWeb/Store Product Strategies December 2007 UpdateDecember 2007 Update  Costco is now selling hearing aids in their stores usingCostco is now selling hearing aids in their stores using audiologists:audiologists:  Name brand CICs, ITEs and OTEs. Price points areName brand CICs, ITEs and OTEs. Price points are $1500 - $2,000 each – about a 30% discount from$1500 - $2,000 each – about a 30% discount from regular audiologistsregular audiologists  Walmart is now selling hearing aids through theirWalmart is now selling hearing aids through their website:website: ““Sport Ears” (ITE) ostensibly for the hunter marketSport Ears” (ITE) ostensibly for the hunter market ($380)**Update Feb. 2008 – These are no longer on($380)**Update Feb. 2008 – These are no longer on the Walmart websitethe Walmart website  Walker (BTE) “Game Ear” ostensibly for the gamerWalker (BTE) “Game Ear” ostensibly for the gamer market ($199)market ($199)
    • 33. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Web/Store Product Strategies (1 of 3)Web/Store Product Strategies (1 of 3) December 2007 Update – BigDecember 2007 Update – Big BoxesBoxes TargetTarget is selling on the hearing aid periphery thruis selling on the hearing aid periphery thru their websitetheir website  ““Listen up” – ear pieces and pocket amplifier forListen up” – ear pieces and pocket amplifier for TV/theater listening ($14.95)TV/theater listening ($14.95)  ““TV Ears” – for listening to TV ($69.99 - $99.99)TV Ears” – for listening to TV ($69.99 - $99.99)  CostcoCostco is selling “TV assistants” on theis selling “TV assistants” on the hearing aid periphery thru their websitehearing aid periphery thru their website  ““TV Ears” – ($59.99 - $89.99)TV Ears” – ($59.99 - $89.99)
    • 34. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Web/Store Product Strategies (1 of 3)Web/Store Product Strategies (1 of 3) June 2008 Update –The MarchJune 2008 Update –The March ContinuesContinues TargetTarget now is selling hearing aids thru their websitenow is selling hearing aids thru their website  ““Nexear” – Selling for $429.99Nexear” – Selling for $429.99  Drugstore.com is selling hearing aids thruDrugstore.com is selling hearing aids thru their websitetheir website  NexEar – selling for $499.99NexEar – selling for $499.99  Discount Drug Mart stores are selling NexEarDiscount Drug Mart stores are selling NexEar –– no other infono other info  CVS website is selling 2 models of NexEarCVS website is selling 2 models of NexEar –– $389.99 and $489.99
    • 35. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Web/Store Product Strategies (2 of 3)Web/Store Product Strategies (2 of 3) June 2008 Update – Drug Store ChainsJune 2008 Update – Drug Store Chains  BJ’s – No ActionBJ’s – No Action  Walgreen – No ActionWalgreen – No Action  CVS – No actionCVS – No action  Rite Aid – No ActionRite Aid – No Action  Longs Drugs – No ActionLongs Drugs – No Action  Jean Coutu – No ActionJean Coutu – No Action  NOTE: Just because there is no action at this date, it does notNOTE: Just because there is no action at this date, it does not mean these channels are not seriously looking at the hearing aidmean these channels are not seriously looking at the hearing aid market. Some or all of these Drug Store Chains are already openingmarket. Some or all of these Drug Store Chains are already opening medical clinics in certain stores. If this trend becomes prevalent,medical clinics in certain stores. If this trend becomes prevalent, there is no reason why these clinics could not also offer optometrythere is no reason why these clinics could not also offer optometry and audiology products and services.and audiology products and services.
    • 36. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Web/Store Product Strategies (3 of 3)Web/Store Product Strategies (3 of 3) June 2008 Update- Grocery ChainsJune 2008 Update- Grocery Chains (A possible future 800 lb. gorilla)(A possible future 800 lb. gorilla)  Grocery stores get 8-10 times the foot traffic of mostGrocery stores get 8-10 times the foot traffic of most drug stores.drug stores.  Many grocery chains now have a small pharmacy inMany grocery chains now have a small pharmacy in an area of their store, usually a contractoran area of their store, usually a contractor arrangement with a local hospital or pharmacy chain.arrangement with a local hospital or pharmacy chain.  As with the Drug Store Chains, there is no reason why theseAs with the Drug Store Chains, there is no reason why these in-Grocery Store drug dispensing centers could not also offerin-Grocery Store drug dispensing centers could not also offer clinical services and optometry and audiology products at aclinical services and optometry and audiology products at a future date.future date. ((We will have more details on this channel in future updatesWe will have more details on this channel in future updates))
    • 37. Marketing IssuesMarketing Issues Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com U.S.A Hearing Aid MarketU.S.A Hearing Aid Market
    • 38. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Barriers to EntryBarriers to Entry  Regulations Differ from State to StateRegulations Differ from State to State  Some State require a licensed dispenserSome State require a licensed dispenser  Some states have reciprocal dispenser recognitionSome states have reciprocal dispenser recognition (Licensed dispenser can be in another state)(Licensed dispenser can be in another state)  Some States do not require a licensed dispenserSome States do not require a licensed dispenser  FDA RegulationsFDA Regulations  Anyone who wants to purchase a hearing aid may do soAnyone who wants to purchase a hearing aid may do so without visiting a doctor but the customer “must be givenwithout visiting a doctor but the customer “must be given the opportunity to sign a waiver”the opportunity to sign a waiver”  All states incorporate these FDA regulations into theirAll states incorporate these FDA regulations into their statutesstatutes  ALWAYSALWAYS have customer sign the waiver and keep onhave customer sign the waiver and keep on file for State or FDA inspectionfile for State or FDA inspection (website click-(website click-thru’sthru’s are OK)are OK) Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045
    • 39. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Overcoming Legal BarriersOvercoming Legal Barriers  Hire/Train dispensers in each StateHire/Train dispensers in each State (Dispensers are(Dispensers are NOTNOT required full-time in each store!) ***required full-time in each store!) ***  Initially 1 or 2 licensed dispensers per StateInitially 1 or 2 licensed dispensers per State  They visit a store every week or twoThey visit a store every week or two  Visit times are posted for customersVisit times are posted for customers  Customer can set up a time for consultationCustomer can set up a time for consultation Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com ***As long as a dispenser is available at reasonable dates and times at a store,***As long as a dispenser is available at reasonable dates and times at a store, it appears that this arrangement will meet most State requirements.it appears that this arrangement will meet most State requirements. (Have your legal counsel review this strategy for compliance)(Have your legal counsel review this strategy for compliance) IMPORTANT: To meet State regulations customer shouldIMPORTANT: To meet State regulations customer should always be given the opportunity to set up a time to see aalways be given the opportunity to set up a time to see a dispenser at the time of first interest or at the time of sale.dispenser at the time of first interest or at the time of sale. Make sure FDAMake sure FDA handout and waiver is signed by customerhandout and waiver is signed by customer and kept on fileand kept on file
    • 40. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Regulatory StrategyRegulatory Strategy Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com  For Chain Drug stores – Get the NACDS to petition/ lobbyFor Chain Drug stores – Get the NACDS to petition/ lobby the FDA to make certain hearing aid models reclassified asthe FDA to make certain hearing aid models reclassified as OTC (OTC (OOverver TThehe CCounter i.e no professional intermediary)ounter i.e no professional intermediary)  Arguments to useArguments to use  New hearing aids do not require canal moldsNew hearing aids do not require canal molds  New “Open Ear” OTEs have no occlusionNew “Open Ear” OTEs have no occlusion  Certain ITE models have soft tips insteadCertain ITE models have soft tips instead of a canal moldof a canal mold  Once the FDA gives their blessings, the StatesOnce the FDA gives their blessings, the States will defer to the FDA within 18 mos. and follow suitwill defer to the FDA within 18 mos. and follow suit  The potential market size of $5 Billion would justifyThe potential market size of $5 Billion would justify the lobbying investmentthe lobbying investment
    • 41. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Store StrategyStore Strategy Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com
    • 42. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Store Intro StrategyStore Intro Strategy  Choose one StateChoose one State  Rollout to stores in all large metroRollout to stores in all large metro areas within designated stateareas within designated state within 3 monthswithin 3 months  EvaluateEvaluate  Modify the strategyModify the strategy  Rollout to rest of state within 3 more monthsRollout to rest of state within 3 more months  Re-EvaluateRe-Evaluate  Re-Modify the strategyRe-Modify the strategy  Go nationwide after 6 monthsGo nationwide after 6 monthsSource: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com
    • 43. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Suggested Store PlacementSuggested Store Placement  Keep inventory behindKeep inventory behind pharma / vision counterpharma / vision counter  1 of each model on a1 of each model on a secure display and 2 ofsecure display and 2 of each model in inventoryeach model in inventory  Have POP display at end-Have POP display at end- cap or in Pharma/ visioncap or in Pharma/ vision waiting area (4-6 sq.ft. ?)waiting area (4-6 sq.ft. ?)  Nice to have:Nice to have:  TV on POP display with a 2TV on POP display with a 2 minute VCR/CD tape loopminute VCR/CD tape loop  PC w/ hearing test for selfPC w/ hearing test for self hearing testhearing test
    • 44. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market SummarySummary Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com  The hearing aid market is too big to ignoreThe hearing aid market is too big to ignore  Current distribution channels (audiologistsCurrent distribution channels (audiologists and dispensers) cannot meet current andand dispensers) cannot meet current and future market needsfuture market needs  Reclassification of some hearing aidsReclassification of some hearing aids as OTC (as OTC (OOverver TThehe CCounter) by the FDAounter) by the FDA will open up this marketwill open up this market
    • 45. U.S.A Hearing Aid MarketU.S.A Hearing Aid Market Author InformationAuthor Information Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045Source: Hearing Central LLC., 1390 Kathryn lane, Lake Forest IL 60045 www.hearingcentral.comwww.hearingcentral.com For comments and feedback onFor comments and feedback on this presentation, please contact:this presentation, please contact: Phil Wyatt CEOPhil Wyatt CEO Hearing Central LLC GroupHearing Central LLC Group 1390 Kathryn Lane1390 Kathryn Lane Lake Forest IL 60045Lake Forest IL 60045 847-295-6946847-295-6946 phil@hearingcentral.comphil@hearingcentral.com The Hearing Central Group LLC manufactures and distributes hearing aidsThe Hearing Central Group LLC manufactures and distributes hearing aids for resale to mass marketers such as drug store chains and other highfor resale to mass marketers such as drug store chains and other high volume discount big box stores. The group also market their hearingvolume discount big box stores. The group also market their hearing aids through their own websites directly to consumers (aids through their own websites directly to consumers ( www.hearingcentral.comwww.hearingcentral.com andand www.hearingaidscentral.comwww.hearingaidscentral.com).).

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