Over the years, numerous surveys have indicated that one reason consumers do not purchase hearing aids is cost, including the cost of the instruments and their maintenance.
For example, in a 1993 study, 44% of non-users indicated that affordability was “somewhat” or “definitely” a reason for not purchasing hearing aids.1 In a similar study in 1998, 28% of non-users indicated that they could not afford hearing aids.2 In a study published last year, the price of maintaining hearing aids was fifth among the top 10 reasons why hearing aid purchasers put their instruments in the proverbial dresser drawer.3
During the late 1990s, the average price of hearing aids rose sharply, well above the consumer price index (CPI), due almost exclusively to the dramatic increase in the dispensing of instruments with digital signal processing (DSP). Since 1997, prices for non-programmable and analog programmable aids, as well as for specific styles, have remained steady or have declined, while prices for DSP aids have continued to rise.4-6
DO ADVANCED-TECHNOLOGY AIDS PRODUCE GREATER BENEFITS?
In his 1996 survey report, Kochkin concluded that high-performance hearing aids result in improved customer satisfaction.7 This was especially evident in listening situations that do not involve high noise levels. Multiple memories, multiple microphones, multiple channels, programmable aids, and CICs resulted in levels of satisfaction approaching 75%, the highest level of satisfaction ever observed by the hearing aid industry. More recently, hearing aids with multiple memories, multiple channels, and wide dynamic range compression were shown to produce measurable hearing aid benefit.8
The advantages of high-performance hearing aids, however, have to be weighed against their disadvantages. First and foremost, they are more expensive.9,10 Disadvantages to the dispenser include more time spent on fitting, adjustments, and counseling, as well as the higher cost for equipment needed to fit them. Consequently, these costs are passed on to patients as part of the purchase price, which, in turn, results in higher performance expectations. Alternatively, the higher costs of these advanced-technology instruments may be viewed as justifiable, in that they allow dispensers to spend time providing additional services that patients find beneficial.11
Although a binding relationship between price and demand is well established for hearing aids specifically and consumer products generally, the effects of hearing aid pricing on purchase intent2 and overall sales of hearing aids12 are less straightforward. Even the relationship between advanced-technology hearing aids and satisfaction seems less than completely resolved. Hosford-Dunn and Halpern reported that increased circuit sophistication generally raises the cost of hearing aids,13 but there was no evidence in their study of a relationship between cost and global satisfaction, as measured on the Satisfaction with Amplification in Daily Life (SADL) scale.14 Specifically, they noted a relationship between technology tiers and manufacturers' invoice costs, and a mild, statistically significant relationship between invoice cost and personal image on the SADL. Their data, though, did not confirm a direct relationship between technology tiers and satisfaction, either on the global or component measures of the SADL.
MATCHING FUNCTIONAL FEATURES AND MARKET SEGMENTS
Despite the unresolved nature of the relationship between hearing aid technology and user satisfaction, functional features such as volume controls and telecoils have been found to be highly associated with user satisfaction.15 The provision of various functional features by hearing aid manufacturers is an example of market and niche segmentation, both of which are common business practices.16
Market segmentation is a response to the fact that consumers differ in their wants and needs, purchasing power, and buying habits. Consumers belonging to a market segment are assumed to have similar, though not identical, wants and needs.
A niche market is a more narrowly defined group, typically a smaller market whose needs are not as well served by competitors. In the hearing aid industry, CIC aids and power aids, for example, may be considered market segments, while CROS aids and hand-held remote controls may be considered niches.
Many hearing-impaired individuals and most hearing healthcare professionals continue to view the cost of hearing aids as a critical issue. Hearing aid dispensers are faced daily with questions related to cost issues, including affordability, technologic sophistication, desirability of features that meet the needs of individual patients, product quality, and patient convenience, benefit, and satisfaction. In the end, dispensers need to make certain that their patients get the most bang for the buck.
FUNCTIONAL FEATURES AND COST
Periodic dispenser surveys have typically shown that retail costs for behind-the-ear (BTE) and in-the-ear (ITE) hearing aids are least expensive, and become progressively more expensive for in-the-canal (ITC) and completely in-the-canal (CIC) instruments.9,10 Another finding from these surveys is that retail costs, not surprisingly, are lowest for analog non-programmable (ANP) aids and increase progressively for analog programmable (AP) and fully digital, or DSP, aids.
This information has led many to assume that the retail costs of various hearing aid types and styles reflect the pattern of manufacturers' invoice costs to the dispenser. To simplify the situation for patients, and for accounting purposes, dispensers frequently portray the situation to their patients as one in which higher-cost technologic sophistication—rather than specific functional features—is needed to meet and satisfy their everyday communication needs. This may lead patients to believe that they have to spend a lot to get a lot, in terms of functionality. The aim of this study was to establish more definitively what specific functional features are available in varying cost ranges.
Because reports of retail costs usually bundle instrument costs and service fees, the relationships between style and cost and between technologic sophistication and cost are not altogether clear. Recent surveys found that 76% and 83% of dispensing practices in 1999 and 2000, respectively, bundled these charges, and it is these bundled fees that are reported as retail costs.6,10 In this study, these issues are examined through a descriptive analysis of the relationship between manufacturers' costs to dispensers and the instruments' technologic and functional features.
The unit of cost used for analyses in this study was manufacturers' single-unit cost, effectively the invoice cost to the dispenser before any volume discount. Single-unit cost, as opposed to retail cost to the patient, was used for two reasons: (1) It more directly reflects a manufacturer's costs in developing and marketing technologically sophisticated and fully featured instruments. (2) Its accuracy, as applied to specific models of hearing aids, is easier to establish. For purposes of this article, relative costs of hearing aids, rather than absolute costs, are reported.
Thirty manufacturers of hearing aids were asked to participate in a mail survey. These manufacturers included U.S. and international companies offering distinct lines of products for sale in the U.S.
Each was asked to provide the following two types of information: (1) specification sheets on at least five representative models of hearing aids manufactured by the company, and (2) manufacturer's single-unit (wholesale) cost, in U.S. dollars, for each model/style for which specifications were provided. Manufacturers were informed that neither their individual identities nor the actual costs of their hearing aids would be reported.
Twelve manufacturers responded; thus the survey response rate was 40%. The respondents consisted of large, medium, and small companies. Follow-up phone calls were made to several of the 12 responding companies to ensure accuracy and completeness of the data. In some cases, those phone calls resulted in changes in specific models for reporting purposes, so as to reflect those models that were most current and functionally diverse.
Data were entered into a Microsoft Access database, using the following 16 fields: ID (number); manufacturer; model; type (ANP, AP, DSP); style (BTE, ITE, ITC, CIC); CROS (yes/no); circuit type (Class A, B, D); input/output (I/O) type (adaptive compression [AC], K-Amp, linear [L], compression limiting [CL], wide dynamic range compression [WDRC]); volume control (VC; yes/no); T-coil (TC; yes/no), directional microphone (DM; yes/no); multichannel (MC; two or more channels, or bands; yes/no); multimemory (MM; two or more memories; yes/no); remote control (RC; yes/no); single-unit cost; and date of cost quote. Date information was intended for use in inflationary cost adjustments, to ensure comparability of costs in the event that prices changed during the period of data collection. Because all costs were verified to remain in effect throughout the data-collection period of August 2000 to January 2001, inflationary adjustments were unnecessary.
In the database, a record consisted of a given manufacturer's make and model, along with each instrument's specific features and cost. For example, if a VC were an optional feature for a given model, two separate records were included for the model, one with and one without a VC, each at its associated single-unit cost. If compression circuitry for a model was available as either CL or WDRC, or both, those two variants of the model, each at its associated cost, were entered as separate records. For those models in the sample, essentially all possible combinations of technologic and functional features were entered, along with their respective costs.
In an effort to ensure that a sufficient number of the examined features could be associated with their costs, some features were oversampled with regard to their current prevalence on the market.
Data on a total of 331 variants of hearing instruments from the 12 responding manufacturers were included for analysis. Selective retrieval from the database records allowed a determination of the combination of features that are available at specified costs, and, ultimately, a determination of individual features available in specific cost tiers.
RESULTS AND DISCUSSION
Description of sampled instruments
Based on the extent to which various cost ranges represented the distributions of the features studied, five cost tiers (1–5, from lowest to highest) were established for the analyses. Each tier covered a range of $275 in single-unit costs. (This interval value is reported to facilitate interpretation of the data; note that the lower and upper limits of these tiers are not reported, thereby placing the emphasis on relative rather than absolute costs.)
The sample of hearing aids is best described by referring to the pie charts in Figure 1 (A-L), where percentages of occurrence of the specified features are reported. Except for Tier 2, the percentages of aids in the various cost tiers were roughly comparable (Figure 1A). Of the sample, about half of the aids were analog programmable (Figure 1B), about one-third were ITE (Figure 1C), and 6% were CROS instruments (Figure 1D). Sixteen of the 19 CROS-type instruments were BTE in style, representing four different manufacturers.
Figure 1E shows that 95% of the instruments had Class D circuitry, and only 5% had Class B. No Class A instruments were included in the sample, possibly reflecting either the desire on the part of manufacturers to emphasize current and best-selling models or a low response rate from manufacturers whose product lines emphasize Class A circuitry.
A majority of the aids (51%) had WDRC characteristics, 33% were CL, and 13% were linear, or capable of linear programming (Figure 1F). Few aids in the sample had adaptive compression or were of the K-Amp variety, perhaps again because manufacturers that emphasize these features did not respond to the survey.
Over two-thirds (69%) had a VC option (Figure 1G), over one-third featured a T-coil as an option (Figure 1H), and 20% featured some variety of directional microphone (Figure 1I). Almost half (49%) had multiple channels (Figure 1J) or multiple memories (Figure 1K), and 8% featured a remote control (Fig. 1L). Of the sampled aids with multiple channels, 55% were analog programmable aids and 44% were DSP aids. Of the aids with multiple memories, 63% were AP aids and 36% were DSP instruments. Of the 27 aids with remote control, 89% and 11% were AP and DSP instruments, respectively. All aids featuring remote control were associated with aids having multiple memories.
Again, certain features (e.g., CROS, T-coil, etc.) are believed to be exaggerated due to oversampling, and thus the percentages in Figure 1 are better interpreted as a description of the sample of aids analyzed in this study rather than as representing the entire market of hearing aids.
The cost tiers represented by the sampled aids are broken down by type and style in Table 1. There, it is apparent that the lowest single-unit (Tier 1) costs were associated with ANP hearing aids that are BTE, ITE, or ITC in style. CIC-style aids that are ANP, and ITE and ITC aids that are AP, were next most costly (Tier 2), while BTE and CIC-style aids that are AP fell into mid-range Tier 3. BTE and ITE aids that feature DSP were at Tier 4, while ITC and CIC DSP aids were at Tier 5. Relationships between technologic sophistication and cost, and style and cost, are apparent in the table. The fact that analog programmable BTE aids tend to be more costly than analog programmable ITE or ITC aids may indicate that the larger-style BTE aid typically accommodates a larger number of cost-option features than ITEs or ITCs.
Availability and distribution data
The main analysis consisted of answering the following two questions with respect to costs:
- Of all hearing aids in a given cost tier, what percentage have the specified feature?
- Of all hearing aids having a specified feature, what percentage fall in a given cost tier?
Essentially, the first question is analogous to asking what percentage of all cars in a given price range have cruise control, and the second question is comparable to asking what percentage of all cars having cruise control fall in a given price range.
The intent of Question 1 was to determine the relative availability of specified hearing aid features within given cost ranges. These data, therefore, are labeled Availability for purposes of this study. Availability percentages may range from 0% to 100% within a given cost tier and will vary proportionately to the overall number of aids with the specified feature.
The intent of Question 2 was to determine the relative distribution, or dispersion, of specific features of hearing aids over various cost ranges. Features that are less expensive will be concentrated predominantly in the lower-cost tiers, and features that are more expensive will be concentrated mostly in the higher-cost tiers. A flat function for a given feature (across cost tiers) indicates that the feature is not a strong determining factor in a hearing aid's overall cost.
For purposes of this study, these data are labeled Distribution. Their sum across all cost tiers should always be 100%. Data in this category denote an underlying aspect of affordability, but affordability also depends strongly on the prospective buyer's financial resources.
These two factors, availability and distribution, are reported for a number of technologic and functional features of sampled hearing aids in the line graphs and bar graphs comprising Figures 2–12.
As seen in Figure 2, ANP instruments are available mostly in the lowest-cost tiers, being at 51.6% in Tier 1, and are distributed in decreasing proportions across Tiers 1–3. ANP aids were never present in Tiers 4 and 5. AP instruments were 48.4% of all aids in Tier 1, 78.3% of aids in Tier 2, and decreased considerably in the two highest tiers. Of all AP hearing aids in the sample, 48.5% occurred in Tier 2. Only a few DSP aids (3.8%) were available in Tier 2, but their percentage and overall distribution grew steadily through Tier 5. Not unexpectedly, the greatest number of DSP aids in the sample, 44.8%, fell in Tier 5.
Most styles of hearing aids were readily available in all cost tiers (Figure 3). The exceptions were that no CIC instruments were available in Tier 1, and relatively few were available in Tier 4. ITC aids were more readily available in Tiers 2 and 5, and more highly concentrated (at 42.7%) in Tier 2.
CROS-type aids, which included Bi-CROS and Multi-CROS, occurred with low frequency in the sample (Figure 4), but their distribution was fairly even across Tiers 1–4. Seventy-five percent of all CROS aids fell into Tiers 1, 2, and 4.
As seen in Figure 5, Class B (push-pull) circuits, typically used in power aids, occurred in only a small percentage of instruments in Tiers 1, 2, and 4. Eighty percent of all Class B instruments fell into Tier 1. In that same tier, 81.3% of all aids had Class D circuits, and the remaining cost tiers contained 100% or nearly 100% Class D instruments. Of all Class D aids, the largest percentage (32.9%) occurred in Tier 2.
At least some instruments with linear, CL, and WDRC occurred in each of the five cost ranges (Figure 6). The highest distributions of linear aids were in Tiers 2 (40.5%) and 1 (31%). CL and WDRC instruments were most heavily concentrated in Tier 2, at 30.9% and 31.6%, respectively. Perhaps the most striking feature of Figure 6 is that WDRC aids comprised from 29.7% to 50.9% of the sample in Tiers 1–3, and 69% and 64.7% of the sample in Tiers 4 and 5.
Recall that a volume control was an available feature in 69% of the instruments in the total sample (see Figure 1G). Figure 7 reveals that a VC was least available (44.8%) among instruments in Tier 4, and most available (81.3%) in Tier 1. Of all aids with a VC, the highest concentration was in Tier 2, at 34.8%. These data suggest that the cost of hearing aids is only modestly affected by the presence or absence of a VC.
As indicated earlier, a T-coil was available in 37% of the aids sampled (see Figure 1H). Of all aids falling in Tier 4, over half (51.7%) contained a T-coil (Figure 8). Of all instruments with a T-coil, the distribution was fairly even across the various cost tiers. As with the VC, the cost of a T-coil is not a major determinant of a hearing aid's invoice price.
With reference to directional microphones (Figure 9), both availability and distribution data suggest a strong association between the presence of a DM and the single-unit cost of hearing aids. Higher-cost hearing aids tended to consist of a greater percentage of aids with directional microphones, and directional microphones were strongly distributed toward the higher-cost levels. This association is the strongest observed for any feature studied.
Of aids in the various cost tiers, 81% in Tier 4 had two or more channels, or frequency bands (Figure 10). Tiers 3 and 5 also contained a fairly high percentage of multichannel aids (65.4% and 56.9%, respectively). The distribution of multichannel instruments was fairly even across Tiers 2–5, with a slightly higher concentration in Tier 4.
A somewhat similar picture emerged when multiple memories were considered (Figure 11). Higher-cost aids consisted of relatively high percentages with multiple memories, and multimemory aids were relatively evenly dispersed over Tiers 4–5.
Only 8% of the aids in the sample featured a remote control as an option (see Figure 1L). Figure 12 shows that of the various cost levels, Tier 2 featured the highest percentage of aids with RC (33.3%). Of all instruments with RC, the highest, and essentially equal, distributions occurred for Tiers 3–5.
A final step in the analysis was to depict the specific technologic and functional features that are readily available in each of the five tiers of manufacturers' costs.
For this purpose, only the features occurring in at least 25% of the sample for a given cost tier were selected. While a 25% threshold is somewhat arbitrary as an index of availability, it is a reasonable threshold if we assume that there is a trading relationship between the availability of specific features and the number of manufacturers from whom a dispenser purchases hearing instruments. The dispenser who purchases from several manufacturers is likely to have relatively unfettered access to any particular feature.
In a recent survey, dispensers reported that they offer 1 to 14 different brands of hearing aids, and offer a mean of 4.3 brands.6 If a higher percentage (for example, 50%) had been selected to define availability for this analysis, fewer features would have been identified in the various cost tiers, but access to any specific feature could likely be increased if instruments were purchased from a larger number of manufacturers.
Those features available in at least 25% of the sample in each of the five cost tiers are shown as a cost pyramid in Figure 13. Several features never reached the 25% threshold in any of the cost tiers, and thus do not appear in the figure. Those include CROS-type aids, Class A and Class B circuits, linear circuits, and remote controls.
An especially striking feature of Figure 13 is that analog non-programmable aids are readily available only in the lowest cost tier (Tier 1). This shows that manufacturers frequently charge dispensers no more than their lowest costs for ANP aids. In contrast, analog programmable aids are available (in at least 25% of the sample) at all tiers except Tier 5, and DSP aids are readily available only at Tiers 4 and 5.
With respect to style, BTE aids occurred in at least 25% of the aids in Tiers 1, 3, and 4. ITEs occurred at the same frequency only in Tiers 1, 4, and 5. ITCs were readily available in Tiers 2 and 5, while CIC aids were available in Tiers 2, 3, and 5.
Of the five circuit types studied, Class D (labeled CD in Figure 13) circuits dominated the overall sample, occurring in all five cost tiers. Compression-limiting circuits occurred in all tiers except Tier 4, and WDRC circuits occurred in all tiers. It is evident, therefore, that compression limiting is not relegated only to lower-cost instruments, and that WDRC is not reserved for higher-cost instruments. Similarly, volume controls and T-coils occurred at all cost levels.
Directional microphones occurred only in Tiers 4 and 5, indicating their close relationship to cost. Both multichannel and multimemory hearing aids were available in Tiers 2–5, with neither being available (at the 25% threshold) in Tier 1.
Inherent in these data is a reflection of the normal maturation of pricing, in that newer technology, over time, tends to be priced at levels of older technology.12 This maturation is especially evidenced by the relatively low costs of analog programmable hearing aids and features associated with those instruments. On the other hand, the relatively high cost of directional microphones suggests that such costs are linked to those technologic aspects that are most actively under development at a given time within the hearing aid industry.
Results should be viewed as a current snapshot that may well change in the future. The take-home message is that dispensers can readily purchase full-featured BTE and ITE hearing aids for their patients, including analog programmable aids, at the lowest costs offered by manufacturers. Essentially, DSP and directional-microphone aids are currently readily available only in the highest two cost tiers. Volume controls, T-coils, Class D circuits, WDRC, multiple channels, and multiple memories, however, are readily available across a wide variety of cost ranges, including the lowest ranges.
Having this information, dispensers can better understand the relationship between manufacturers' costs and the availability of various technologic and functional features of hearing aids. Also, they may be better equipped to counsel their patients with regard to hearing aid cost issues.
Gratitude is expressed to those customer-service representatives who responded to the survey on behalf of their companies. Amyn M. Amlani provided helpful comments on an earlier draft of the manuscript. This article is based on a presentation to the Hearing International Committee on Management and Rehabilitation of Hearing Loss, Singapore, March 31, 2001.