More on Costco and Audiologists: Apples to Apples?

Hearing Health & Technology Matters
December 4, 2012

Hearing Economics went out on a testimonial limb two weeks ago by describing one Audiologist’s positive interactions with a local Costco dispensing operation.  The Audiologist was me and I braced myself for an onslaught of insults and vituperation from colleagues.  Remarkably, that has not happened (yet) and I’ve canceled my reservation for the witness protection program.  Readers’ comments were measured and surprisingly supportive.  Here’s one I thought deserved its own post. 

Reader’s Comment: Your experiences with Costco hearing aid dispensers do sound encouraging.  However, one concern that I have is whether the consumer understands the difference between the devices and services that private audiology clinics and Costco provide.  We have heard price-shopping patients say, “I can get the same thing for $2000 less at Costco,” when in fact, as far as I can tell, their “premium product” is similar in features to our  “basic technology.”  These comparisons are difficult to make, even for the professional because they are not simply “apples to apples.”  Ideally, all patients would recognize the value of our training and expertise as hearing health care professionals, and would want our advice in order to achieve the best possible communication outcomes.  However, if the patient chooses to go ‘discount,’ I would hope that no one is sitting there telling them, it’s the same thing, just cheaper.

Answer:  Me too.  The currency of any satisfactory transaction/exchange needs to include full disclosure.  Otherwise, people end up dissatisfied, return for credit, and do not become repeat customers.  Financially, that’s not efficient– the business and the consumer are hurt in their pocketbooks.  Audiologically, that can be embarrassing (e.g., you forgot to mention something important) or unethical (e.g., you deliberately misrepresented).  Either way, your reputation and the customer’s faith are are damaged. No doubt,  Failure to Disclose is a lose-lose.  From what I can tell, Costco does a reasonable job of full disclosure by posting its limited list of products at the front counter and referring patients out when premium fittings are required.  Do you have similar concerns about other Audiology competitors?  

That’s the business and professional answer.   but  let’s have some Economic Fun{{1}}[[1]]Well, at least I think it’s fun….[[1]] and consider the Reader’s Comment using Econ 101 concepts from previous posts.   

 A 12/2011 post on Rational and Irrational Consumer Behavior  introduced the concept of Rationality in economic markets and concluded that consumers lack sufficient information to act rationally in their consumption choices.  Here’s the gist of that post:

Classical economists believed that consumers were rational, meaning that they and everyone else had full knowledge of the markets and therefore made decisions that were in their best interests. [The famous economist] Keynes …argu[ed] that rational choice was limited in reality by uncertainty–insufficient knowledge in the present, inability to predict the future… there is no way that consumers can gain full knowledge of hearing healthcare, not to mention predict their future consumption needs.  Uncertainty is scary and promotes irrational behavior.  

The Reader makes the uncertainty point: “comparisons are difficult to make, even for the professional.”  We’re all doing the best we can with the information we’ve got, are given, or turn up by our own efforts.  That goes for Audiologists as well as consumers.  It behooves each of us to do due diligence before parting with our scarce resources.  The more we learn, the more likely we are to make a rational choice.  Does this imply that the private audiology clinic is always the rational choice?  No.  Read on.

Utility is the Economist’s name for consumer preferences — what used to be called consumer satisfaction.  Utility can ONLY be measured relative to the consumer’s other choices; the same choices do not offer the same Utility to different consumers.  Here’s the gist of the Utility posts:

Faced with consumption choices, consumers will always choose the combination that gives them maximum Utility, subject to their budget constraints.  Consumers make hearing aid purchase decisions by comparing their Utility for hearing aids against all other possible consumption choices that lie within their budgets…[as we all do] when we weigh the choice of paying for anything versus using that money for something else.  That is what is meant by “willingness to pay.” 

The Reader is concerned that patients erroneously think aids purchased at discount are the “same thing” as aids purchased at private audiology clinics, just half the price.  Economically, they ARE the same thing if the consumer assigns the same Utility to both.  How’s that?  Audiologists assign more Utility to higher technology hearing aids– as the Reader Comments, it’s not “apples to apples.” But, that’s our Utility, not the consumer’s.  We have to convince him that higher technology and personalized service offer more Utility to him.   He assigns Utility by functionality rather than technology or service. To the extent that he derives the desired hearing functionality from several choices-all of which look like apples to him, he will be Willing to Pay for the one that costs the least, because they are the “same thing” to him.  Does that imply that all consumers will purchase at discount?  No.  Read on.  

Consumer Demand, or Willingness to Pay, is influenced by a number of fluid factors:  changing tastes in the market; information and quality of information in the market; consumer incomes; consumer expectations of future prices; number of consumers in the market; and prices of similar goods (e..g, PSAPs).  Here’s the gist of that post for one of the factors:

When the economy is good, the Demand Curve shifts up; when the economy is down, the curve shifts down.

Some consumers will always get the most Utility by buying at discount; other consumers will do so only if their incomes prevent “buying up” to higher Utility levels.  The latter are the mainstay of Audiology private clinics and their numbers will wax and wane according to general economic conditions.  Whether “buying up” provides more Utility because of higher technology, individualized service, easier access, prestige, or something else, depends solely on the individual consumer’s internal, constantly shifting, calculation of Utility for hearing aids versus all other consumption choices.  

 I’ll wrap up this topic by shifting over to Psychology for just a moment. I was surprised that no comments were elicited by the shameful way that local Audiologists allegedly speak of Costco Audiologists and dispensers.  Absent factual data to back it up, speaking poorly of other professionals in the hearing healthcare field is a clear violation of our ethics.  On the other hand, it is not especially surprising if we (“private” audiology)  experience bias blind spot when viewing them (discount stores).   Here’s the gist of that from a previous post:

Bias blind spot is something everybody has — it’s our unconscious means of seeing ourselves as better than others while simultaneously believing that we are less biased in our judgment than most others.  Studies have repeatedly demonstrated that people tend to inaccurately score themselves as ”better than average” on positive traits and “less than average” on negative traits. 

It’s healthy for our profession to question activities and products that may not serve consumers well.  I appreciate the Reader’s Comment and suggest that we apply it broadly rather than restricting it to lower price competitors.  Thanks, Dear Reader, for stimulating this discussion. 

photo courtesy of healthhappyhumanbeings 

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  1. Holly, I couldn’t agree with you more. Even though in our practice we see people who went to Costco being fit very inappropriately with hearing aids, it doesn’t mean that all Costco dispensers and audiologists are unqualified. However, because Costco’s model has hurt and threatened many private audiology and hearing aid businesses, they are an easy target for many dispensers and audiologists to speak negatively about.

    I have to admit my own longstanding bias against Costco, which was primarily due to feedback I’ve received from patients and colleagues, but also when I’d see patients with severe hearing losses being fit with slim tube BTEs or other inappropriate styles. However, I will say I was encouraged by reading your last post on the topic. I think people may begin to change their minds about Costco after they read your articles. Whether we like it or not, Costco isn’t going anywhere… I just hope for our patient’s sake that Costco will ensure all their clinics, not just a select few, are utilizing best practices like the clinic you previously mentioned.

    1. mjaudseo

      It’s always disheartening to see patients fitted incorrectly, though I think we all know patients in our own practices who have ignored our recommendations and insisted on a less-than-ideal fitting which maximized their Utility and not ours. It’s very tough to know where to draw that line and simply tell the patient to go elsewhere to be poorly fit. I don’t doubt that some Costco clients are fit poorly. I’m also certain and that some Costco “clinics” (what DO we call their set-ups, anyway?) are sub par. It’s possible that the one in my neighborhood is the cream of the crop. Costco’s management seems pretty savvy and I’m guessing they watch their numbers closely. If so, the good dispensing operations will probably gain sway and raise the overall quality of their dispensing program. Good communication with their Audiologists and dispensers should be helpful to those of us in private practice, since we can complement their program and fit the premium products and accessories that some of their clients will need/demand.

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