Let's face it, 2008 was a banner year for a lot of things. The main things of course most remember apart from the election of Barack Obama are close to $5 gasoline and the beginning of the Great Recession with the collapse of Lehman Brothers. The latter of these is important because we continue to feel the effects today. In the hearing care business, the the main thing we notice is not only the destruction of wealth, but the general fear and unease that resulted. The main change we noticed right away is that people who would normally buy premium hearing devices, now are buying mid range or cheap devices if they buy at all. Even then, they will buy only if they really and truly feel they are falling short with their current devices.
Whether Obamacare is ultimately upheld or not, the hearing care industry, like everything else is changing. It used to be that your local audiologist or dispenser is where you went to get your hearing needs attended to and you didn't generally shop it. These days, with the proliferation of the internet and the general destruction of wealth and earning power caused by the Great Recession, that's less and less true. The internet in this case is a double edged sword because you have people using it to learn about hearing loss with no way of knowing whether the information they are receiving is accurate or not. They further use this information to pair off one care provider against another in terms of not only price, but also in terms of plan of treatment. Further, some companies post prices and offer to sell hearing devices direct to the patients. This is dangerous because it can really make a relatively moderate problem a lot worse.
Because of this, the industry is moving, slowly but surely to a three tier model for care delivery. The first tier is the Community Clinic. The second tier is Costco and other discounters, and the third tier is the Boutique clinic.
The Community Clinic tier is the one that will serve MediCaid patients. These patients are generally poor and MediCaid reimbursement is generally a pittance to the point where most providers across all specialties of medicine cannot generally afford to care for them in private practice due to overhead and administrative costs. In a Community Clinic setting, the overhead and administrative costs are pooled, allowing care to be rendered in a cost-effective manner consistent with what the providers can hope to get from all of their services. In this kind of setting, you have a couple of primary care doctors along with specialties like gynecology, orthopedics, vision care, ear nose and throat and audiology and dispensing all in the same building. This is largely not accepted among providers now because they would make a lot less than they can on a cash basis in private practice. However, with the destruction of wealth among retirees who did the right thing and ended up getting hoisted for it, this is likely to be their only option since they will likely to be covered by both MediCare and MediCaid and most independent providers will stop taking MediCaid because any money they do realize on top of their costs of goods dispensed will be eaten up in necessary administrative overhead, leaving no incentive to treat MediCaid patients.
Costco and other discounters will form the middle tier of the new hearing care delivery system. This will serve people who either can't afford nor want the attention that a value boutique gives, yet are not poor enough to qualify for MediCaid, nor have a loss severe enough to qualify under MediCaid. This is key because with the destruction of wealth and retirement funds among baby boomers who did the right thing is leaving them scared, making steep discounts for devices a major priority. They will get a solid set of devices, very often digital, at this level for a deep discount. They will not get the same attention or necessarily the hyper customization that somebody at a value boutique will get, but their problem will be tended to. This is likely where most of the baby boom will start, due to either not saving enough, having to get help to keep a job due to not saving enough, or loosing their retirement funds and having to do this to have enough to live on -- likely where most of the population of the United States is going to be for the forseeable future.
The highest end devices are going to be found in the Value Boutique clinics. These clinics will generally have a small to medium sized patient load. This allows them supply hyper customized solutions for their patients and charge a premium for it, as everybody gets the attention they need. This will serve not so much the rich, as they tend to price shop everything, but rather those who want and desire the boutique experience as well as truly want and value a hands on professional to take care of their hearing. This could include not just on-call or house call services, but also the environment of the office, which would be very homey and not as clinical, except in some areas such as the laboratory. The whole idea is to help put patients at ease and make the experience of getting help for a hearing problem as relaxed and as customized as possible. The idea here again, is not necessarily to sell everybody amplification, but rather finding a solution that works for their lifestyle -- something most will pay a premium for.
In a lot of ways, this is similar to what happened when supermarkets started selling meat. It used to be that if you wanted meat, you went to the butcher to get it. In addition to cutting and weighing your meat for you, he would give you some recipes and tips on how to best prepare it. Now, if you want meat, you can get it in the cooler at the supermarket with a limited selection at the meat counter. The butchers that have survived are generally boutique or specialty outfits that charge a premium that a certain niche of the market is happy to pay for either the advice, or certain cuts or kinds of meat they can't get anywhere else.
Another example of this happened to me not long ago. I'm a recreational archer and had purchased some arrows at a generic sporting goods store. The arrows flew ok, but had some issues with loosing their heads in targets. On the recommendation of one of my fellow archers, I went to a local archery store to get some more arrows. When I got there, the owner asked what kind of bow I was shooting, what kind of shooting I was doing (target, hunting, etc.) as well as analyzed my release and stance. He then recommended some arrows for me that were not cheap, but allowed me to shoot much more accurately. Further, he was able to pick a bow for me that when I decide I'm ready to hunt, will serve me well. The arrows were not cheap, nor was the bow he recommended for me, but I was happy to pay a premium for the arrows because he knew what he was doing and it showed.
This is a classic example of a value boutique. You do pay a premium, but you are taken care of by a trusted professional who takes the whole you into account. He can do this because he doesn't see that many people, allowing him to take the time to figure out exactly what you need and what you value, whether it be understanding the priest, being able to understand somebody at a party, or a quick and easy solution for understanding somebody on the phone as well as having a fighting chance at understanding small grand or great grandchildren.
Because of the economic and personal realities, the market niche for a value boutique is quite small. Therefore, not every currently existing clinic or office is going to be able to embrace this model, meaning most will fail, with their providers being forced to join either the community clinics or the deep discounters. They will still make money but it will not be what it was before. A sales guru friend of mine wrote a book entitled "The Market Has Changed, Have You?" Our market has changed due to a number of large forces and we need to adapt to this new reality or else get run over into oblivion.
For more sales strategies, techniques and ideas and insight for how to change in the climate we're in, visit pauldsouza.com
