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MarkeTrak VI: Hearing Aid Industry Market Tracking Survey 1984-2000 Sergei Kochkin, Ph.D. Knowles Electronics, Inc. February 27, 2002 Method • National family opinion panel – 80,000 households • Balanced to key census variables – HIA survey in 1984 used NFO – All MarkeTrak surveys • Screening Question – Phase I (November 2000) – “Does anyone in your household have a hearing difficulty in one or both ears without the use of a hearing aid?” – Physician screening for hearing loss during last physical within last six months. – Self, Spouse, Other, Child (Under age 18) – 15,800 hearing-impaired individuals – 72% response rate Method • Hearing Aid Owner Survey - Phase II – Detailed questionnaire 3,000 hearing aid owners based on Phase I response. – Response rate 87% • Topics: – – – – – – – – – Customer satisfaction (more than 50 areas) Hearing aid usage (e.g. hours worn) Use of ALDs First time user influences Brand selection Factors impacting choice of audiologist/dispenser Suggestions for improving hearing aids Perceived quality of life changes Use of computers in hearing healthcare Hearing Aid Market Penetration has Historically been low (1 in 5). 25 % Penetration 24 Recent advances due to VA and Direct mail 23.8 22.9 23 22.6 22 22.2 21.3 21 20.4 20 19 18 1984 1989 1991 1994 1997 2000 Hearing-impaired User & Non-user Population Non-users 25 Non-owners 22.3 21.7 20.6 20 19 20 Millions Users 15 10 5.1 4.9 5 0.8 1 0.7 5.6 4.7 4.6 0.9 0.7 0 1989 1991 1994 1997 2000 Hearing Loss Population by Age Group Owners versus Non-owners (2000) 85+ Owners Non-owners 75-84 65-74 55-64 45-54 35-44 18-34 <18 0 1 2 3 Millions 4 5 6 Clinton Announcement Spurred “Baby Boomer” Potential Market Growth Huge Baby Boomer wave 6.5 1994 6 1997 2000 Millions 5.5 5 4.5 4 3.5 3 3544 4554 4564 6574 75+ • Clinton news release 10/97. • M5 Survey taken 11/97. • Age 45-54 hearing loss growth =23% • $60k growth =35% • Some college growth = 30% • Growth continues. • But penetration among “Boomers” unchanged. Little Change in Market Penetration by Age Since 1989 60 55 Year 1989 50 1991 % Own hearing instruments 45 1994 1997 40 2000 35 30 25 20 15 10 5 0 <18 18-34 35-44 45-54 55-64 Year 65-74 75-84 85+ Physician Screening for Hearing Loss During Physical Exam Percent screened 25 20 15 HIA Targeting with Physicians 20.2 18.8 18 16.3 15.1 HIA Targeting ceases 16.6 16.6 14 10 5 0 May-89 Nov-89 May-90 Nov-90 Jan-92 Dec-94 Dec-97 Dec-00 Binaural Penetration Trend 90 80 Total Owners 70 Total Owners - Current 60 Bilateral loss Ss - Current 85 79 74 70 65 61 50 65 64 60 52 51 47 40 37 30 20 79 22 25 10 0 1984 1989 1991 1994 1997 2000 Hearing Instrument Fittings by Perceived Profession 70 66.4 65 1984 1991 1994 1997 2000 60 % Fittings 50 40 28.8 30 22 20 10 4.8 6.9 4.1 2.1 0 Audiologist Physician H.I.S Other Hearing Instrument Fittings by Source of Distribution % purchases 0 10 20 30 40 Audiology office Mail Order has grown 91% since 1997; 124,000 hearing aid users. Hearing aid store ENT office VA Home Family Dr. Other Hospital Department store Clinic Military Mail 2000 1997 VA has grown 83% since 1997; 411,000 hearing aid users. Current Hearing Aid Owners by Source of Distribution Family Doctor's Office 0.3% Military 1.0% Mail order Hospital 2.0% 1.8% Audiologist's Office 45.6% Other 2.4% Department Store 2.4% Clinic 2.8% Home 3.6% Total Users = 6.35 million Ear Doctor's Office 8.6% Hearing Aid Store 23.2% Vet. Admin. 6.5% Factors Impacting Choice of Dispensing Practice (n=2,251) (Importance scores =4-5 on 5 point scale) Professional staff 77 Convenient location 64 Convenient hours 63 Price 63 Free hrg screening 59 Range of hearing aids 52 Physician referral 51 Live demonstration 50 Insurance coverage 46 Previous purchase 41 Friend recommended 31 0 10 20 30 40 50 60 % highly important 70 80 90 100 Third-party Payment Trend 35 30 % of sales 25 20 15 10 20.4 22.2 1984 1984 21.1 23 27.5 28.6 1997 2000 16.2 5 0 1989 1991 1994 Average Retail Price Paid by Consumer Dollars (includes free, direct mail hearing aids, & third-party discounts) 1000 900 800 700 600 500 400 300 200 100 0 +67% +61% +70% +53% 1989 1991 1994 1997 2000 Total BTE Price increase % since 1994 ITC ITE Age of Hearing Instrument % of sales Mean age of instruments: 50 45 40 35 30 25 20 15 10 5 0 1991 = 3.1 yrs 1994 = 3.7 yrs 1997 = 3.8 yrs 2000 = 3.8 yrs <2 yr 3-4 yrs 5-6 yrs 7-8 yrs 1991 1994 1997 2000 9+ yrs First Time User Rate Beltone’s Eddie Albert Ads 60 53.4 FDA/FTC Percent of sales 50 40.5 40 Issues 39 31.6 29 30 20 10 0 1989 1991 1994 1997 2000 Factors Influencing New First Time Users to Purchase % New users 0 10 20 30 40 50 60 70 68.5 H.L. worse 45.2 Family 40.5 Audiologist 22.1 ENT 17.4 H.I.S. HA Owner 12.1 Family Doctor 11.6 Free HA 11.6 80 • Factors less than 10% mentions: – – – – – – – – Ad-magazine (3%) HL Literature (2%) Boss/co-worker (5%) Newspaper (6%) Direct mail (5%) Ad - TV (2%) Ad – radio (0%) Telemarketing (0%) Physician Recommendation Trends 30 Family ENT % of new users 25 20 • 1989 - HIA advertising to physician. • Current initiatives: – AAA Best Practice – BHI Referral program 15 10 5 0 89 91 94 97 20 • Trends + , but not enough. • Family doctor – single most important influencer of hearing aid purchase. Factors Influencing New First Time Users to Purchase • Notable changes since last MarkeTrak: – Audiologist influence increased to 40.5% - up from 26% in 1997. – ENT influence increased to 22.1% - up from 10.8% in 1997. – “Free” hearing aid influence nearly doubled. Factors Considered Helpful or Reliable When Choosing Brand of Hearing Aid (n=2,273) (Helpfulness/reliability scores =4-5 on 5 point scale) Medical doctor recommendation AARP recommendation Manufacturer websites H.I.S. recommendation Other hearing aid owner recommendation Audiologist recommendation Consumer reports Scientific papers Magazine articles Books on hearing aids Newpaper articles HHP websites Family members recommendation TV ads Manufacturer brochures Internet chat sites Newspaper ads 0 76 61 60 55 49 46 37 36 26 25 24 22 20 16 15 11 10 10 20 30 40 50 60 70 80 90 100 % helpful/reliable Average Age of New Users 69 68.8 68.4 68.5 Average age 68 67.8 67.5 67 66.5 66 66.3 66 65.5 65 64.5 1989 1991 1994 1997 2000 New User Mean Household Income $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $46,300 $40,100 $35,300 $30,800 $30,500 1989 1991 1994 1997 2000 U.S. Customer Satisfaction Trends No significant differences (H.A. <5 years.) Positive Negative 70 % Satisfaction 60 50 40 30 60.7 59.3 58.7 59.2 20 10 17.8 17.3 14.9 17.1 0 1991 1994 1997 2000 % Satisfaction U.S. Customer Satisfaction Trends New Hearing Aids (< 1 year) 80 70 60 50 40 30 20 10 0 Positive Negative 71 66 12 1991 63 7 1994 62.9 10 1997 14.7 2000 Hearing Aids “In the Drawer” 17.9 % Hearing aids in drawer 18 16.2 16 14 13.5 12 12 11.7 10 8 6 4 2 0 1984 1991 1994 1997 2000 Hearing Aid Improvements Sought by Current Hearing Aid Owners (n=2,428) (Highly desirable scores =4-5 on 5 point scale) Speech in noise Better sound quality Less whistle/buzzing Lower price More soft sounds Longer lasting batteries Work better on telephone Loud sounds less painful Speech in quiet Better fit & comfort Should have VC Longer money back guarantee Less costly to repair 95 88 85 84 83 82 82 81 81 79 77 74 73 0 10 20 30 40 50 60 70 % highly desirable 80 90 100 Hearing Aid Improvements Sought by Current Hearing Aid Owners (n=2,428) (Desirable scores =4-5 on 5 point scale) Easier to regulate volume Mask tinnitus Easier to clean Work better on cell phone Better sound to music Should not break down as much Less visibility Easier battery change 2-5 year payment plan Should have remote More fashionable Color Lease hearing aid 72 71 66 63 62 56 52 48 34 32 28 21 15 0 10 20 30 40 50 60 70 80 90 100 % highly desirable Non-owner Demography “The Opportunity” The Non-Owner Opportunities Self-admitted Hearing Loss Gender (Millions) 8.9 13.4 Male Female The Non-Owner Opportunities by Age Classification 55-64 18% 65-74 15% 75-84 9% 85+ 1% <18 5% 45-54 26% 35-44 16% 18-34 10% The Non-Owner Opportunities by Household Income $50-$59 9% $60+ 30% $40-$49 10% <$10 8% $30-$39 12% $20-$29 15% $10-$19 16% The Non-Owner Opportunities by Level of Education College-some 9% High School 28% College 16% Post-graduate 10% Some Elem. 2% Elementary 7% HS-some 28% The Non-Owner Opportunities by Employment Status Part time 10% Full time 49% Unemployed 12% Retired 29% The Non-Owner Opportunities by Metro-size 500k-1.99 mil. 20% 50k-499k 16% <50,000 26% 2 Million + 38% The Hearing-Impaired Market by State: Self-admitted Hearing Loss • Top 10 states – California – Texas – New York – Florida – Pennsylvania – Illinois – Ohio – Michigan – Georgia – North Carolina Conclusions • Hearing-impaired population > to 28.6 million. • Major increases in “Baby Boomer” and 75+ age brackets. • Penetration increased to 22.2%: – Free and direct mail impact • Physician screenings declined to 14%. • Overall customer satisfaction unchanged. – New hearing aid satisfaction on decline • Hearing aids in the drawer improved to 11.7%. • Audiologist influence in dispensing continues to grow. Conclusions • New user rate has dropped to 31.6%. – Average age increase to 69 – Household income increase to $46.3k • Binaural rate is at an all time high of 84.5% for bilateral loss consumers. • Third-party payments continue to increase. • “Out-of-pocket” retail price to consumer increased 67% since 1994. • “Baby-boomer” age wave continues to grow with no indication that industry has tapped this segment. Conclusions • The top hearing aid improvements sought by current hearing aid owners: – – – – – Hearing in noise Better sound quality Less whistling & feedback Lower price More soft sounds • Least important improvements: – Leasing a hearing aid – Color of hearing aid – More fashionable hearing aids Conclusions • Top factors in choosing dispenser: – – – – Professionalism Convenient location Convenient hours Price • Top factors considered to be helpful and reliable when choosing a hearing aid brand: – – – – Medical doctor recommendation AARP recommendation Manufacturer website Hearing instrument specialist recommendation Key Findings from Knowles Market Development Studies The Decision To Purchase a Hearing Aid is Very Complex and Little Understood Internal stigma Influential others External stigma Physician attitudes Product perceptions Stages of denial Attitudes towards HA Specific impactors Predisposition Perceived loss of communication performance & need Physical impairment Communication situations Perceived age Change & emotional reaction Alternative solutions Social comparisons Behavior intent/ HA purchase Attitude toward Getting hearing solutions Price General moderators Socioeconomic status Health Personality Lifestyle & activity level Social network Psychological health The Relationship Between Ad Expenditures & Hearing Aid Sales is Weak Estimate (regression) that $25 million = 6% growth 1700 30 1500 1662 23.9 1580 20 10 14 9.8 11.6 9 21 1463 23.7 1555 1617 1473 1308 13.4 1100 1316 11.1 1200 1514 1300 1672 37.6 1400 1000 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Calendar year Ad expense ($Mil) Hearing aid sales 1600 40 Hearing aids Ad Expense ($Mil) The Issue of Price & Value Customer Satisfaction with “Value” = Price/performance Hearing aids 1-5 years of age 60 54 53 49 50 Percent Satisfied 54 Dissatisfied 40 30 21 20 17 16 17 1997 2000 10 0 1991 1994 Satisfaction Highly Related to How Much $$ the Consumer Pays to Solve Their Problem Percent Satisfaction 100 90 80 70 60 50 40 5 25 45 65 85 $ Spent for 1% Handicap Reduction Note: Handicap reduction measured by APHAB 105 200+ Hearing Aid Prices are Inelastic at Higher Prices & Highly Elastic at Low Prices Starter Hearing Aid Market 80 60 40 20 Lowest Available HA Price 1100 1000 900 800 700 600 500 400 300 -20 200 0 100 Market Growth (%) 100 Stigma & Price Are Not the Only Barriers to Market Growth 5 year purchase intent (%) Only 35% of non-owners would tak e a "free" invisible hearing instrument. 60 55 50 45 40 35 30 25 20 15 10 5 0 H.I. Owners Nonowners Increasing Invisible CIC Price ($) The Issue of Stigma Invisible Hearing Aids Have Greater Consumer Acceptance Cosmetics/stigma Attractive Not embarrassing Old age image Visible Product features Reliable Comfortable Nuisance Sound quality Natural sound Safe High-tech 0 20 BTE Empty ear 40 60 % positive image 80 100 Invisible Hearing Aids Have Greater Consumer Acceptance Economics Affordable Worth expense BTE Empty ear Expense to maintain Utility & value Benefit Value Noisy situations Quiet situations Large group situations 0 10 20 30 40 % positive image 50 60 70 Performance & value (Means) Invisible Hearing Aids Have Greater Consumer Acceptance 4.95 4.85 4.75 4.65 4.55 4.45 4.35 4.25 3 3.5 4 4.5 5 Cosmetics & comfort (M eans) 5.5 6 Can Positive Role Models Help Consumers Overcome Stigma? • Only Two examples I am aware of in our industry: – President Reagan – 1983 (associated with 20% growth) – Eddie Albert in Beltone commercials – 1989 • Apparent Clinton effect in Fall of 1997 – Probable impact on admission of hearing loss by male “baby-boomers” – No impact on sales to date What is The Viable Market for Hearing Aids? Percent Penetration Market Penetration is Highly Related to Recognition of Hearing Loss Handicap 90 80 70 60 50 40 30 20 10 0 1-4 5-9 10- 15- 20- 25- 30- 35- 40- 45- 50- 55- 60- 65- 70- 75- 80- 85- 90- 9514 19 24 29 34 39 44 49 54 59 64 69 74 79 84 89 94 99 APHAB Unaided Score Discriminant Function Probability of Non-owner Resembling Current HA Owner Based on Multiple Subjective Hearing Loss Measures. 40 Non-owners HA owners Percent of Market 35 30 25 Probabilities 1-39% = 71% of non-owner market 14% of the owner market. 20 15 10 5 0 1-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80-89 90-99 Discriminant Function Probability Four Methods of Measuring Viable US Hearing Aid Market • Based totally on hearing loss measures the additional possible market growth is: Gallaudet Scores (est. dB Loss Better ear) = 125% Hearing Handicap Inventory (HHIE) = 154% APHAB = 127% Discriminant Function Modeling = 102% • Clear that the current market could easily double based totally on hearing handicap. • And, even more based on situational need. Why Buy Hearing Aids? Attitudes Per Se are Important, But Relationship to Hearing Aid Purchase Intent is Perhaps More Important • Sample of 2,753 non-owners • Measured their attitudes on 76 issues. • Measured their hearing aid purchase intent in the next five years. • Categorized them as a high or low purchase intenders. • Took ratio of high/low purchase intenders for each attitude item. • Ranked ratios • First – present their attitudes in key categories. – On following charts – view red (negative) as “barrier” to growth. Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor = Distribution Trust audiologists 30 day trial available Truth in advertising HA sellers take advantage of you HA sellers are customer welfare oriented Trust HA dealers Exposure to HA ads Negative Neutral Positive Trust doctors 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of hearing-impaired non-owners Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor = Hearing Health Professional Influence ENT Family doctor Audiologist Dispenser Negative Neutral Positive 0% 10% 20% 30% 40% 50% 60% 70% Percent of hearing-impaired non-owners 80% 90% 100% Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor =Hearing Loss HA help high frequency loss Hear well most situations Need surgery HA help tinnitus HA help nerve deafness Loss severe enough HA for unilateral loss Negative Neutral Positive Loss too mild 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of hearing-impaired non-owners 90% 100% Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor =Knowledge Level Where to get hearing aids Audiologist vs HIS Knowledgeable about HA Aware of invisible aids Know where to go for testing Some HA automatic Negative Neutral Positive 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of hearing-impaired non-owners 90% 100% Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor =Lifestyle More serious priorities Can afford HA Would like to hear soft sounds Loss disruptive to life Negative Neutral Positive 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of hearing-impaired non-owners 90% 100% Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor =Hearing Aid Performance Use in noisy situations Make only certain sounds louder Stop hearing loss decline Background noise Effective in most situations Eliminate background noise They work well Tried HA - don't work Work in multiple listening situations Use in large crowds Perform as promised Negative Neutral Positive Use on telephone 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of hearing-impaired non-owners 90% 100% Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor =Hearing Aid Characteristics Durability of HA Needs constant adjustments Whistling & feedback Hassle Comfort Differences in brand Ease in handling Natural sounding Warranty reasonable Seldom breakdown Physical fit Battery change Negative Neutral Positive 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of hearing-impaired non-owners 90% 100% Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor =Social Influence Spouse Friends Hearing aid owner Children Negative Neutral Positive 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of hearing-impaired non-owners 90% 100% Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor =Stigma & Cosmetics Treated differently when HA worn Make you look weak/feeble Make you look disabled Too proud to wear HA Noticeable Embarrassed to wear Difficult to admit loss People make fun of you Make you look mentally slow Negative Neutral Positive Old age image 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of hearing-impaired non-owners 90% 100% Hearing-Impaired Non-owner Attitudes Towards Hearing Aids Factor =Value of Hearing Aids Perceived benefit Good value Maintenance expense Restore hearing to normal Worth the expense Use less expensive device Worth what you pay Too expensive Negative Neutral Positive 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of hearing-impaired non-owners 90% 100% Top 12 Correlates of Hearing Aid Purchase Intent ENT Recommendation Loss severe enough Family doctor recommendation Perceived benefit HA durability Child's recommendation Dispenser recommendation Audiologist recommendation Friend's recommendation Spouse's recommendation Loss disruptive to life Hearing well in most situations 0 100 200 300 400 Purchase Intent Ratio (H/L) 500 600 Lowest Correlates of Hearing Aid Purchase Intent • Brand • HA make only certain sounds louder • Too expensive • HA sellers take advantage of you • Can afford hearing aids • Need surgery • Know where to go for hearing tests • Know where to buy hearing aids • Old image of hearing aids • Use lower expense product • Customer orientation of dispensers • HA warranty • Knowledge of hearing aids