MarkeTrak VI: Hearing Aid Industry Market Tracking Survey 19842000

1
MarkeTrak VIHearing Aid Industry Market
Tracking Survey 1984-2000

• Sergei Kochkin, Ph.D.
• Knowles Electronics, Inc.
• February 27, 2002

2
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

3
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

4
Hearing Aid Market Penetration has Historically
been low (1 in 5).
Recent advances due to VA and Direct mail
5
Hearing-impaired User Non-user Population
6
Hearing Loss Population by Age GroupOwners
versus Non-owners (2000)
7
Clinton Announcement Spurred Baby Boomer
Potential Market Growth
Huge Baby Boomer wave

• 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.

8
Little Change in Market Penetration by Age Since
1989
9
Physician Screening for Hearing Loss During
Physical Exam
HIA Targeting with Physicians
HIA Targeting ceases
10
Binaural Penetration Trend
11
Hearing Instrument Fittings by Perceived
Profession
12
Hearing Instrument Fittings by Source of
Distribution

• Mail Order has grown 91 since 1997 124,000
  hearing aid users.
• VA has grown 83 since 1997 411,000 hearing aid
  users.

13
Current Hearing Aid Owners by Source of
Distribution
Total Users 6.35 million
14
Factors Impacting Choice of Dispensing Practice
(n2,251)(Importance scores 4-5 on 5 point
scale)
15
Third-party Payment Trend
16
Average Retail Price Paid by Consumer (includes
free, direct mail hearing aids, third-party
discounts)
67
61
70
53
Price increase since 1994
17
Age of Hearing Instrument
Mean age of instruments 1991 3.1 yrs 1994
3.7 yrs 1997 3.8 yrs 2000 3.8 yrs
18
First Time User Rate
Beltones Eddie Albert Ads
FDA/FTC Issues
19
Factors Influencing New First Time Users to
Purchase

• 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)

20
Physician Recommendation Trends

• 1989 - HIA advertising to physician.
• Current initiatives
• AAA Best Practice
• BHI Referral program
• Trends , but not enough.
• Family doctor single most important influencer
  of hearing aid purchase.

21
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.

22
Factors Considered Helpful or Reliable When
Choosing Brand of Hearing Aid (n2,273)(Helpfulne
ss/reliability scores 4-5 on 5 point scale)
23
Average Age of New Users
24
New User Mean Household Income
25
U.S. Customer Satisfaction TrendsNo significant
differences (H.A. lt5 years.)
26
U.S. Customer Satisfaction TrendsNew Hearing
Aids (lt 1 year)
27
Hearing Aids In the Drawer
28
Hearing Aid Improvements Sought by Current
Hearing Aid Owners (n2,428)(Highly desirable
scores 4-5 on 5 point scale)
29
Hearing Aid Improvements Sought by Current
Hearing Aid Owners (n2,428)(Desirable scores
4-5 on 5 point scale)
30
Non-owner DemographyThe Opportunity
31
The Non-Owner OpportunitiesSelf-admitted Hearing
LossGender (Millions)
32
The Non-Owner Opportunities by Age Classification
33
The Non-Owner Opportunities by Household Income
34
The Non-Owner Opportunities by Level of Education
35
The Non-Owner Opportunities by Employment Status
36
The Non-Owner Opportunities by Metro-size
37
The Hearing-Impaired Market by StateSelf-admitte
d Hearing Loss

• Top 10 states
• California
• Texas
• New York
• Florida
• Pennsylvania
• Illinois
• Ohio
• Michigan
• Georgia
• North Carolina

38
Conclusions

• Hearing-impaired population gt 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.

39
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.

40
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

41
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

42
Key Findings from Knowles Market Development
Studies
43
The Decision To Purchase a Hearing Aid is Very
Complex and Little Understood
44
The Relationship Between Ad Expenditures
Hearing Aid Sales is Weak
45
The Issue of Price Value
46
Customer Satisfaction with Value
Price/performanceHearing aids 1-5 years of age
47
Satisfaction Highly Related to How Much the
Consumer Pays to Solve Their Problem
Note Handicap reduction measured by APHAB
48
Hearing Aid Prices are Inelastic at Higher Prices
Highly Elastic at Low Prices
Starter Hearing Aid Market
49
Stigma Price Are Not the Only Barriers to
Market Growth
50
The Issue of Stigma
51
Invisible Hearing Aids Have Greater Consumer
Acceptance
52
Invisible Hearing Aids Have Greater Consumer
Acceptance
53
Invisible Hearing Aids Have Greater Consumer
Acceptance
54
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

55
What is The Viable Market for Hearing Aids?
56
Market Penetration is Highly Related to
Recognition of Hearing Loss Handicap
57
Discriminant Function Probability of Non-owner
Resembling Current HA Owner Based on Multiple
Subjective Hearing Loss Measures.

• Probabilities 1-39
• 71 of non-owner market
• 14 of the owner market.

58
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.

59
Why Buy Hearing Aids?
60
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.

61
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Distribution
62
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Hearing Health Professional
Influence
63
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Hearing Loss
64
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Knowledge Level
65
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Lifestyle
66
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Hearing Aid Performance
67
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Hearing Aid Characteristics
68
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Social Influence
69
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Stigma Cosmetics
70
Hearing-Impaired Non-owner Attitudes Towards
Hearing AidsFactor Value of Hearing Aids
71
Top 12 Correlates of Hearing Aid Purchase Intent
72
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

73
Optimizing Quality of Life Benefits for the
Consumer of Hearing Aids
74
Summary of Quality of Life Benefits Associated
with Hearing Aids (NCOA Study January 2000
Hearing Review)

• gtInterpersonal relationships
• ltHearing loss compensation
• ltAnger frustration
• ltDepression
• gtEarning power
• gtEmotional stability
• ltIntroversion
• gtControl of life

• ltSelf-criticism
• ltParanoia
• gtOverall health
• gtCognitive functioning
• ltDiscrimination
• ltAnxiety
• ltSocial phobias
• gtSocial activity

75
Leveraging the Quality of Life Findings

• Best way to leverage is to assure that your
  clients have achieved significant benefit with
  their hearing aids.
• Post-fitting benefit measurement and customer
  opinion surveys critical.
• Minimize hearing aids in the drawer.
• Use technology and processes which enhance
  customer satisfaction.

76
907,120 Customers do not Use Their Hearing
Instruments (1997)
325,000 1-4 years
77
Impact of Dissatisfied Customers

• Deming proved that a dissatisfied customer tells
  16 other people but a satisfied person only 8
  others.
• Negative word-of-mouth has blocked close to 4
  million from purchasing our product.
• Potential 19 billion loss to dispensers.

Some key reasons why people do not buy HA
78
Customer Satisfaction Translates into Consumer
Behavior
79
Reasons for Non-Use

• 1. Poor benefit (30) - 268,507
• When ______sold me the H.A., I was confident
  it would help me hear better. When I received it
  and wore it every day, it did not make my hearing
  any better. So, I dont wear the HA and feel
  like I wasted my money. I tried to return it and
  the person did not seem to want to help me. I am
  quite dissatisfied with the whole experience.

80
Reasons for Non-Use

• 2. Background noise (25) - 229,383
• I dont wear my H.A. because I need it at a
  dance, restaurants, and large groups. All the
  H.A. does is increase all sound including
  background sounds. No help.

81
Reasons for Non-Use

• 3. Fit Comfort (19) - 169,431
• Its hard to keep it in my ear. I travel for
  business a lot and cant risk it falling out of
  my ear.

82
Reasons for Non-Use

• 4. Negative side effects (11) - 99,048
• Ears that hurt, too much pressure in the ears,
  blisters in ears, rashes in ears, itching ears,
  dizzy, nervous, ears that sweat, builds up wax in
  inner ear, headache, hair gets caught in hearing
  aid, infections in ear, problems chewing or
  swallowing, plugs up ears.

83
Reasons for Non-Use

• 5. Price cost (10) - 93,839
• My H.A. was never dependable. Taking it in
  for an adjustment was only a headache as it never
  performed very long. Had to be looked at again.
  The last time I had trouble, the office wanted to
  send it to _____ at 200 just to check it, plus
  another 200 to repair it.

84
We must minimize hearing aids in the drawer

• 907k inactive hearing aid owners
• Key reasons
• Poor benefit
• Background noise
• Fit and comfort
• Negative side effects
• Maintenance Cost/broken HA
• Impossible for consumer to experience QOL changes
  if their hearing aid is in drawer.
• Dispenser must find ways of optimizing the
  consumers experience

85
Dispenser does have control over hearing aids in
the drawer

• 1. Poor benefit
• Use programmable technology (analog or DSP)
• Pre-post benefit measurement
• Real ear measurement
• 90 day post fitting customer satisfaction survey.
• 100 money back guarantee
• Aural rehabilitation
• Significant impact on hearing aid satisfaction.
• Return rates been shown to be cut in half.

86
Dispenser does have control over hearing aids in
the drawer

• 2. Hearing in noise
• 100 use of dual microphones not just in
  high-end product
• DSP for comfort in noise
• Volume control necessary for some segments
• Manual omni/directional switch necessary for some
  consumers
• Binaural fitting for bilateral loss customers
  (85 rate in US- much lower in Europe)
• Deep-fitting CICs give some benefit.
• Aural rehabilitation

87
Dispenser does have control over hearing aids in
the drawer

• 3. Fit and Comfort
• Extreme vigilance during impression taking.
• Multiple shell impressions if necessary with
  best going to the manufacturer.
• Silicon material considered superior.
• Explore emerging soft shell technology for
  difficult cases.
• Rework within office.
• Assess manual dexterity and visual acuity
  considerations relative to hearing aid style.
• 14 or 30 day trial post-fitting subjective
  measure of fit and comfort.

88
Improving Customer Satisfactionwith Hearing Aids
Recent Research
89
Strategic Objective of Knowles

• Participate with the industry in a continued
  dialogue on factors impacting customer
  satisfaction.
• Customer satisfaction improvement
• critical to growth of the market
• the only way to properly leverage QOL findings.
• Knowles conducted research on 25,000 consumers.
• Customer satisfaction
• Subjective benefit
• Publication of journal dedicated to customer
  satisfaction High Performance Hearing Solutions.

90
Previous MarkeTrak Customer Satisfaction Research

• Advanced technology enhances customer
  satisfaction
• Programmable (digital or manual)
• Multiple memories
• Multiple channels
• Multiple microphones directional hearing
  instruments (strongest factor)
• Non-linear signal processing (e.g. WDRC)

91
Previous MarkeTrak Customer Satisfaction Research

• Other important factors
• Volume control (some segments)
• Telecoils
• Completely in the canal instruments (CIC)
• Binaural hearing aids
• More recent research
• Cerumen management systems (Sep. 2001 HR Apr.
  2002 HR)
• Digital Hearing Aids (Nov. 2000 HR)
• Now 40 of the market
• Smaller clinical studies generally positive

92
Recent Research with MicroWaxbuster Demonstrates
it Will Dramatically Reduce Hearing Aid Service
Rates
CIC with MicroWaxbuster installed
MicroWaxbuster Cutaway
93
In analyzing 7,000,000 small receivers Knowles
has discovered that receiver replacements are 8
times less likely if the manufacturer was a heavy
user of the Waxbuster or MicroWaxbuster than if
they used none.
94
Study 2 90,000 Consumers

• Database query of one US manufacturer.
• 24 month study across three styles of hearing
  instruments CIC, ITC, ITE.
• Consumers segmented
• Age of instrument 1-24 months
• MicroWaxbuster usage or None.
• Tracked receiver replacements in corporate
  service files.

95
Receiver replacement rates per 100 CIC hearing
aids (n21,345)
96
Receiver replacement rates per 100 ITC hearing
aids (n47,316)
97
Receiver replacement rates per 100 ITE hearing
aids (n21,647)
98
Percent reductions in receiver replacements by
style of hearing aid due to the MicroWaxbuster
across all months and over two years (n90,308).
99
Conclusions

• Increased penetration of ITE, ITC, and CIC
  hearing instruments with the MicroWaxbuster
  product will have a positive impact on the market
  place.
• Offer this as a strongly recommended option to
  your patients/customers.
• Both manufacturers and dispensers should
  recognize increased profits by selling this
  optional component while reducing within-warranty
  repairs.
• Consumers for a small additional fee, will
  experience
• Greater reliability in their product,
• Resulting in fewer hearing instrument repairs,
• Reduced frustration and therefore,
• Increased consumer satisfaction.

100
Digital StudyNovember 2000 Hearing Review

• Multiple manufacturer products were studied.
• Results of first large-scale study on
  satisfaction with DSP hearing aids
• Single European based manufacturer
• 200 single mic (44 ITE / 56 ITC)
• 296 multiple mic (69 BTE / 31 ITE)
• Compared to 418 MarkeTrak (analog) norms
• Average age of instruments 7-8 months
• Consumer completed Knowles MarkeTrak survey
• 45 ratings of hearing aid and dispenser

101
Top ten correlates of overall satisfaction (in
rank order)

• Perceived benefit
• Sound clarity
• Value (price/performance)
• Reliability
• Use in leisure activities
• Natural sounding
• Use in noisy situations
• Use in large groups
• Use in restaurants
• Use outdoors

102
Factors showing at least 10 improvement in
customer satisfaction
Dual 14 Omni4
103
Significant Differences Overall, Consumer
Behavior Dispenser
104
Significant Differences Product Features
Factor in yellow denotes top ten correlate of
overall satisfaction.
105
Consumer Need for a Volume Control
106
Customer Satisfaction is Related to Need for a VC
107
Significant DifferencesPerformance Factors
Factor in yellow denotes top ten correlate of
overall satisfaction.
108
Significant Differences Performance Factors
(Cont.)
Factor in yellow denotes top ten correlate of
overall satisfaction.
109
Significant DifferencesListening Situations
Factor in yellow denotes top ten correlate of
overall satisfaction.
110
Significant Differences Listening Situations
(Cont.)
Factor in yellow denotes top ten correlate of
overall satisfaction.
111
Summary of Key Findings
112
Conclusions

• Performance in noise
• Key reason why hearing-impaired do not buy
  hearing aids (MarkeTrak).
• 1 hearing aid improvement sought by hearing aid
  users (United States MarkeTrak study - 2001).
• 1 hearing aid improvement sought by hearing aid
  users (German study - 1995).
• 2 reason why 907,000 of our customers place
  their hearing aids in the drawer (MarkeTrak).

113
Conclusions

• Consumer studies now demonstrate the superiority
  of multiple microphone hearing aids over
  omni-directional only aids
• Kuk (Hearing Instruments, 1996) - analog
• Kochkin (Hearing Review, 1996) - analog
• Schuchman, Valente, Beck, Potts (HR, 1999)
  analog (double blinded study)
• Kochkin (Hearing Review, 2000)- digital
• Consumer research supportive of dozens of small
  clinic/lab studies or theoretical papers.

114
Recommendations

• Fit all qualified candidates with directional
  hearing aids (BTE, Full concha, half shell).
• Ask manufacturers to extend directional feature
  to lower priced product (not just high end
  programmable.)
• Completely automatic aids are tremendous feature
  for some, but not all, consumers
• Make sure your patient can live without VC or
  directional/omni-directional switch.
• Lack of control could dramatically impact
  satisfaction.
• Consider active wax protection system as standard
  feature on all In-the-ear instruments.