Hearing aids are in the news this week as the FDA announced new rules allowing people to buy some of the over-the-counter devices. Previously, you needed a prescription.
This simple rule change will transform the industry.
Hearing aid branding
Here’s a simple quiz about hearing aid brands.
1. How many brands of hearing aids do you remember?
2. What is the premium hearing aid brand? What is the discount brand?
3. Who owns these marks?
If you didn’t do very well on this quiz on your own, let’s simplify things and consider assisted brand awareness.
Which of these brands of hearing aids do you know? Jones, Anta, Widex, Ramya, Oris?
I suspect you didn’t answer the quiz questions very well without help. On the assisted quiz, only Widex is actually a hearing aid brand. I hope you at least got this one right.
A strange world
Hearing aids are a strange industry. It’s a huge market; sales in the United States alone exceed 4 million units, often priced at $3,000 to $5,000. Four million units priced at $4,000 each would yield total revenues of $16 billion.
The main target is the elderly, an often overlooked group when it comes to fashion marketing. A few large companies dominate the industry. Interestingly, many of them are based in Denmark. The major Danish players are Demant (Oticon brand), GN Store Nord (Resound brand) and WS Audiology (Widex and Signia). Starkey is a great actor based in the United States.
Historically, hearing aids were sold by audiologists, a group of trained and licensed healthcare professionals. Indeed, the only way someone could buy a hearing aid was with a prescription. As a result, companies focused on professional marketing since recommendations from audiologists mattered more than consumer preference. There has been very little branding or marketing in the industry.
The emphasis on professional marketing has limited competition. The barriers to entry were huge and the motivation to change was low. All the players were making good products and adopting new technologies as they came.
The new rules
This week, the FDA announced that consumers will soon be able to buy hearing aids over the counter. It would no longer require a visit to an audiologist for testing and fitting.
This radically changes the game. Now someone can just walk into a Walgreens, buy a hearing aid, and start it.
It’s a new game.
Does that mean you should burn out and start a hearing aid business? Maybe.
I suspect it wouldn’t be hard to make a decent hearing aid. Many companies do this, and the world is probably full of people who used to work in these companies and know the technology. It would also be easy to build an advisory board of respected audiologists and develop an innovative brand. A strong spokesperson, social media influencer support, and off you go.
But the big question is: how will the existing players react? Will they defend?
If established players defend their business, they could block new entrants. Remember, these are huge, immensely profitable businesses. WS Audiology, for example, has over €2 billion in revenue per year and over €400 million in profit. The companies have deep industry expertise and strong ties to key players. If established players are aggressive, they could easily protect their business.
Indeed, while some say the new rules will lead to more competition, it could have the opposite effect. The industry could consolidate and a single major player will take over. That’s what happened with glasses and Luxottica.
But if the established players don’t defend, then there is an opportunity for new entrants and innovation. An intriguing and fun brand could fundamentally change the industry. Why are hearing aids just for older people? What is the difference between an earphone that streams music and a hearing aid? When you look at the stunning array of new, innovative direct-to-consumer brands hitting the market, it’s easy to see the opportunity.
So, will the established players defend? I suspect not. These are old private companies. Consumer marketing is intimidating. These companies have never been good at consumer branding. The required expenses will seem unreasonable.
As HBS professor Clay Christensen has warned, established players have a strong incentive to focus on existing business, even if that means not investing in innovation.
If you want to create a new entrant into the space, call me. I suspect it could be a lot of fun and a great opportunity.
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