Back to the Future, Part II (con’t): Aliens Have Landed and Cross Pollination Has Commenced

Lars Kolind’s Prediction II:  There will be heavy pressure by trading by means of the Internet, driving competition to become fully global and putting those retailers particularly under pressure who do not add genuine value. Why should a consumer enter a shop if genuine additional value is not added?… [the answer is knowledge]…The retailer must develop and apply a concept for total patient care.

The Back to the Future series considers hearing healthcare predictions from the 1990s made by Lars Kolind{{1}}[[1]]Jerger JJ, Skafte MD, Kolind L. The future of audiology practice management.  Chapter 21. In Hosford-Dunn H, Roeser R, & Valente, M. (2000). Audiology: Practice Management (1st Ed). NY:  Thieme. pp 481-490.[[1]].  Post #1 concurred with his prediction/observation that we are retailers. Post #2 agreed with his second prediction that the profession and industry is suddenly and seriously beset by heavy pressure from online retailers.  Today’s post continues to look at that prediction, using Marketing parlance to consider Dr. Kolind’s demand that traditional retailers must offer added value and total patient care if they hope to survive and thrive in the new competitive market.  Post #2 looked at two Ps of the 4Ps of marketing — Price and Promotion.  Today’s complete the discussion with Product and Place.

  • P = Product.  Product covers a lot of ground– tests, instruments, and providers.  Direct-order products are limited:  “tests” are more what we usually think of as screenings; instruments come in 3 or 4 styles with a couple of color choices.  Contrast those limited choices with the wide range of “qualified” direct-order providers– running the gamut from plastic surgeons to anyone who legally drives a car, has a GED, uses MS/Office, and can get  a dispenser’s license.  The latter satisfies Hi HealthInnovations’ criteria for “qualified” employees.

Comment #1 on Product:   Traditional retailers recall the bad old days when there really were only a few styles, a few colors of hearing aids, and limited/no programming capability.  Back then, prices  were in line with current online pricing for direct sale instruments.  Talk about Back to the Future!  Successful providers moved on long ago, leaving the old traditions behind in favor of skillful fitting of advanced technology instruments, which cost more and offer more to people who really want to hear well.  Successful practices also use Price Lining to offer simple instruments to those who cannot afford exceptional hearing.

Comment #2 on Product:  To the extent that a monkey (or a Bonobo Ape ) can do a hearing test or a face lift,  the above-described  hiring qualifications may be overkill for internet hearing aid sales. When you think about it for a minute, the lax requirements for online providers makes sense since people are testing and ordering on their own. It’s not a stretch to envision providers sitting at their home computers in Dijbouti.  Why do they need driver’s licenses? Most, if not all, successful dispensing retail operations can beat those requirements hands down.  I don’t do face lifts, but I drive a car and I got through high school, so I’m not feeling too much pressure from the competitors. My patients consider my expertise and education as part of the product they are purchasing.  As Dr. Kolind insists, knowledge is the key value-add for which many consumers are willing to pay.

P = Place.  The good news and bad news is that traditional retailers have a place of business and internet retailers do not.  The good news for retailers is that they can offer  in-house time and expertise to take full histories, evaluate, counsel, fit and follow-up their patients.  That translates to the important value-add of long-term-customer-relations (LTCR).  The bad news is that rent and payroll raise costs of doing business, which must translate into higher cost of product delivery.  Total patient care does not come without a price.

Here’s how Internet “Place” looks.   United Healthcare’s 1-page order form insert resembles either the order form in an Improvements  catalog or  the Cub Scout popcorn order form my kids used to get more stinking badges.  United Healthcare’s form contains the 7 steps to better hearing.  Select the device; choose the color and quantity;  fill in the shipping and billing addresses; provide contact and credit card information;  Use a Gift Card if you’ve got one; sign the order which includes a tacit medical waiver{{2}}[[2]]For example: “By submitting this order form, I agree to the following terms. I have been advised …”  Gee, all this time our local Attorneys General and Consumer Protection Agencies were policing us to make sure we had signatures in place on the FDA waiver and in the chart.  Who knew that we could avoid that pesky way of losing our licenses by just saying to the patient … “by handing me your credit card, you are agreeing to….”[[2]].  You’re done!

Comment on Place:   Internet sales are galaxies away from the offices of traditional dispensers. They are not even in the same species and it is doubtful that they will compete for the same market. Rather, those people who prefer to stay home in their pajamas and order online can “talk” to their providers in Djibouti who are doing product fulfillment in their pajamas.  Those folks who prefer to get dressed and talk in person will seek out bricks & mortar offices staffed with professionals who are dressed for success and ready to provide the total patient care of which Dr. Kolind speaks.

Dr. Kolind’s prediction seems on target:  we traditional types are going to attract those who seek and desire a complete package.  We are not going to attract everyone — there is a reason why only 20% of those with hearing loss get hearing aids.  In fact, there are probably 4 reasons, encapsulated in the 4Ps.    Think about it.  The folks in their pajamas will never come to traditional offices in the first place and traditional offices will never hire pajama-clad “providers” to offer services.  The folks who want to pay $200 for a hearing aid will not expect (or get) total patient care.  The folks who go to Travel Zoo to find the best hearing aid deal will not get their hearing aids close to home.

But, some folks in pajamas with $200 or a yen to travel will get hearing aids — and these are folks that would never have gotten hearing aids in the past.  That’s why the Internet competition is not only OK, it’s good.  It will grow a new market which not only shifts but also  expands the Demand curve.  Expect some cross-pollination as that new market matures and some in it start to demand total patient care and professional knowledge.  Sure, we’ll lose some patients to the Internet but they probably didn’t value our services or knowledge much to begin.  We’ll also gain some patients who tried the Internet and weren’t satisfied.  To the extent that we offer the genuine value add of Dr. Kolind’s prediction, those patients are gonna love us!

 

About Holly Hosford-Dunn

Holly Hosford-Dunn, PhD, graduated with a BA and MA in Communication Disorders from New Mexico State, completed a PhD in Hearing Sciences at Stanford, and did post-docs at Max Planck Institute (Germany) and Eaton-Peabody Auditory Physiology Lab (Boston). Post-education, she directed the Stanford University Audiology Clinic; developed multi-office private practices in Arizona; authored/edited numerous text books, chapters, journals, and articles; and taught Marketing, Practice Management, Hearing Science, Auditory Electrophysiology, and Amplification in a variety of academic settings.

2 Comments

  1. I think so many people, you included, are missing the mark on the UHC issue. It is not about “can we compete with internet hearing aid sales”. The issue at hand is that an insurance company is overstepping their ethical, moral and legal rights. The testing is completely invalid and putting patients at risk, they are not licensed to be a health care PROVIDER, and they appear to violating HIPPA regulations. None of that is ok. This will set a precedence in healthcare–next we will be be filling out a questionaire and be diagnosed as depressed and medication mailed to us. I believe that we have a moral and ethical obligation to our patients and to the healthcare system to say “NO IT IS NOT OK FOR UHC OR ANY OTHER INSURANCE COMPANY TO EXPLOTE THE PUBLIC FOR THEIR OWN FINACIAL GAIN”

    1. Ah, finally a critical comment! Thanks so much for disagreeing. In fact, though, we don’t disagree and no, I haven’t missed the point of UHC’s interesting metamorphosis into a provider. I have made mention of that in previous posts, but you’d probably have to look to footnotes or asides to find it. Also, Hearing Economics is not usually an op-ed section, so I try to stick with facts or general assumptions and hold off on personal opinions.

      I will be addressing UHC among others when we get to discussing Supply Curves, down the line. So, it’s not that it’s being overlooked, it’s just that this post is not about UHC or any other supplier. It is part of a series looking at the Demand side of the economic equation. It is also a post about Dr Kolind’s prediction that Internet sales (regardless of origin) will increase competition. As you can see by reading the post, I agree with him to the extent that there is more competition and that is shifting the Demand Curve. However, I also think that consumption data will eventually show that it is expanding the Demand Curve as well.

      As for the ethics of suppliers, a recurring confusion in this editorial section as well as in the real world is that Economics and Ethics are the same. Far from it. They are completely different disciplines that sometimes converge to discuss philosophical issues and often they disagree in conclusions. Economics uses data impartially to construct supply and demand functions, using them to model effects of variables (e.g., government policies, membership organizations, technological advances, etc). Ethics looks at the effect of various actions and policies on well being of society (or at least certain groups within a society). I have addressed this issue in a previous post on the Stakeholder Paradox. I have also promised to address Ethics vs Economics in a series of posts later this year (after Supply and Demand). I’ll use your comments when I do that. Many thanks!

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