The Hearing Disruptions series seeks to cover the rapid changes taking place in hearing healthcare. Today’s post is culled from recent topics presented to the Institute of Medicine’s (IOM) Committee on Accessible and Affordable Hearing Health Care for Adults.
Most consumers are expressing their preference to live with hearing difficulty rather than adopting an ear level device of any kind.
Barriers other than Price are holding back the market: regulatory restrictions on the high end and incomplete consumer information on the low end of Price.
Those dreary observations derive from the first parts of this presentation and from the current hearing device report card (Fig 1) reproduced here from last post’s discussion.
The good news, at least for consumer welfare, is that Economics comes to the rescue when markets are in turmoil and misbehaving. At all times, according to classic economic theory, market forces jockey toward equilibrium by eliminating market barriers of all types. There is no reason to expect our market to behave differently.
Three salient market forces in play are:
- technological innovation by firms
- consumer demand for information
- consumer behavior effects on strategy of firms
Force 1: Technological Innovation
The same technologies heralded for Hearables are showing up in devices that call themselves hearing aids, look like Hearables, are distributed by Internet, have mid-level pricing, and may be parented by at least one of the high tech specialty hearing aid manufacturers (Figure 1). Emerging instruments such as the one in Fig 1 make it increasingly hard to support the claim that hearing aids, PSAPs and Hearables are, in fact, different products.
It is difficult for those in the industry to decide what the instrument in Fig 1 is, which makes it a sure bet that consumers don’t know what it is. At the same time, remarkable technological leaps in ear level devices, notably hearing aids, are delivering high levels of hearing satisfaction to established wearers and offering new avenues for optimizing listening improvement and enjoyment for much broader markets.
Regardless of definitions, the ear device market seems fast tracked toward a homogeneous goods market with a wide array of choices.
Inevitably, but only eventually, the market expands as new and diverse instrument types from diverse producers and distribution channels appear. More consumers in the market pursuing new technologies means a shift in Demand, irrespective of barriers from government, membership organizations, and established firms.
Force 2. Inadequate Information
The big cost to consumers is that they are constantly performing price search activities with limited information. On the one hand, they are reluctant to be the first to consume non-hearing aid devices that probably come across as inferior goods based on present definitions. On the other hand, they are reluctant to spend large amounts on traditional products and fittings, in case they’re expending more resources than they need to.
This market standoff will persist until consumers of all stripes gain sufficient information to make confident consumption choices.
In times of uncertainty about the future market, consumers decide to consume now if they think prices are going to go up and defer spending if they think prices are going to go down. The extreme differences in pricing between PSAPs and hearing aids at the same time that remarkable technological infusions are being injected into devices of all types are cases in point. So much happening, so many price points, so many delivery methods — all guaranteed to usher in an era of uncertainty among consumers, within policy making circles, and in the confines of corporate financial analyses.
Force 3. Price/ Quality Trade-offs
Consumer behavior influences the behavior of firms, including their R&D strategies. Consumers’ relentless price searching inevitably forces more information into the public domain. That benefits the market by increasing consumption, attracting more suppliers, shifting Supply and Demand curves, resulting in higher Quantity Demanded at lower Price.
But, the trade-off of lower price is lower profit margins and fewer firm resources to give to R&D (Buschle N-B, 2002) which slows innovative intensity. Lower price also attracts new, opportunistic suppliers and providers with more interest in quick sales or turf protection than in innovations that further consumer welfare.
What, If Anything, Can We Do to Bring About Market Efficiencies?
Market growth will only get off the dime when consumers feel a compelling need for the product. “No compelling need” means that the value consumers expect to gain is less than what it costs them in time, effort and money.
The final post next week considers three ways in which we can, and should, influence compelling need for hearing devices in the US market.
- Buschle N-B, 2002). The impact of consumer behavior on technological change and the market structure. dissertation. Dresden technical University, 2002.
- Van Tasell D. Hearing aids, enabling technologies, barriers. IOM Committee on Accessible and Affordable Hearing Health Care for Adults. April 27, 2015.