MarkeTrak VI:

Hearing Aid Industry Market

Tracking Survey 1984-2000

Sergei Kochkin, Ph.D.

Knowles Electronics, Inc.
February 27, 2002
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
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
 Hearing Aid Market Penetration has
Historically been low (1 in 5).

25
23.8 Recent advances due
24
22.9 to VA and Direct mail
23 22.6
% Penetration

22.2
22 21.3
21 20.4
20
19
18
1984 1989 1991 1994 1997 2000
 Hearing-impaired User &
Non-user Population

25 Non-users Users Non-owners

21.7 22.3
20 20.6
20 19

15
Millions

10
4.9 5.1 5.6
4.6 4.7
5
0.8 0.7 1 0.9 0.7
0
1989 1991 1994 1997 2000
 Hearing Loss Population by Age Group
Owners versus Non-owners (2000)

85+
Owners
Non-owners
75-84

65-74

55-64

45-54

35-44

18-34

<18

0 1 2 3 4 5 6

Millions
 Clinton Announcement Spurred “Baby
Boomer” Potential Market Growth
Huge Baby
Boomer wave
• Clinton news release
6.5 10/97.
6
1994 • M5 Survey taken 11/97.
1997
2000 • Age 45-54 hearing loss
5.5
growth =23%
M illions

5 • $60k growth =35%

4.5 • Some college growth =
4 30%
• Growth continues.
3.5
• But penetration among
3 “Boomers” unchanged.
35- 45- 45- 65- 75+
44 54 64 74
 Little Change in Market
Penetration by Age Since 1989
60

55 Year
1989
50
1991
45 1994
1997
% Own hearing instruments

40
2000
35

30

25

20

15

10

0
<18 18-34 35-44 45-54 55-64 65-74 75-84 85+
Year
Physician Screening for Hearing Loss
During Physical Exam

25
HIA Targeting with Physicians
20.2 HIA Targeting ceases
20 18.8 18
16.3 16.6 16.6
Percent screened

15.1
15 14

10

0
May-89 Nov-89 May-90 Nov-90 Jan-92 Dec-94 Dec-97 Dec-00
 Binaural Penetration Trend
90
Total Owners 85
80
79 79
Total Owners - Current
70 74
70
60 Bilateral loss Ss - Current 65 65 64
61 60
50 51 52
47
40
37
30
20 25
22

10
0
1984 1989 1991 1994 1997 2000
 Hearing Instrument Fittings by
Perceived Profession
70 65 66.4

60 1984
1991
50 1994
% Fittings

40 1997
28.8
2000
30
22
20

10 6.9
4.8 4.1
2.1
0
Audiologist Physician H.I.S Other
 Hearing Instrument Fittings by
Source of Distribution
% purchases
0 10 20 30 40

Audiology office
Hearing aid store Mail Order has
ENT office grown 91% since
VA 1997; 124,000 hearing
Home aid users.
Family Dr.
Other
VA has grown 83%
Hospital
since 1997; 411,000
Department store 2000
hearing aid users.
Clinic 1997
Military
Mail
 Current Hearing Aid Owners by
Source of Distribution
Audiologist's Office Family Doctor's Office
45.6% 0.3%
Military
1.0% Mail order
Hospital 2.0%
1.8%
Other
2.4% Department Store
2.4%
Clinic
2.8%

Home
3.6%

Total Users = Ear Doctor's Office

Vet. Admin.
6.5%
6.35 million 8.6%
Hearing Aid Store
23.2%
 Factors Impacting Choice of
Dispensing Practice (n=2,251)
(Importance scores =4-5 on 5 point scale)

Professional staff 77
Convenient location 64
Convenient hours 63
Price 63
Free hrg screening 59
Range of hearing aids 52
Physician referral 51
Live demonstration 50
Insurance coverage 46
Previous purchase 41
Friend recommended 31
0 10 20 30 40 50 60 70 80 90 100
% highly important
 Third-party Payment Trend

35
30
25
% of sales

20
15 27.5 28.6
20.4 22.2 21.1 23
10
16.2
5
0
1984 1984 1989 1991 1994 1997 2000
 Average Retail Price Paid by Consumer
(includes free, direct mail hearing aids, &
third-party discounts)

1000
900 +67% +61% +70% +53%
800
700
600
Dollars

500 1989
400 1991
300 1994
200 1997
100 2000
0
Total BTE ITC ITE
Price increase % since 1994
 Age of Hearing Instrument
Mean age of
instruments:
50
1991 = 3.1 yrs
45 1991
1994 = 3.7 yrs 1994
40
1997 = 3.8 yrs 1997
35
30 2000 = 3.8 yrs 2000
% of sales

25
20
15
10
5
0
<2 yr 3-4 yrs 5-6 yrs 7-8 yrs 9+ yrs
 First Time User Rate
Beltone’s
Eddie
Albert Ads
60
53.4
50 FDA/FTC
Percent of sales

40.5 39
40 Issues
31.6
30 29

20

10

0
1989 1991 1994 1997 2000
Factors Influencing New
First Time Users to Purchase
% New users
0 10 20 30 40 50 60 70 80 • Factors less than
10% mentions:
H.L. worse 68.5
– Ad-magazine (3%)
Family 45.2
– HL Literature (2%)
Audiologist 40.5
– Boss/co-worker (5%)
ENT 22.1
– Newspaper (6%)
H.I.S. 17.4
– Direct mail (5%)
HA Owner 12.1
– Ad - TV (2%)
Family Doctor 11.6
– Ad – radio (0%)
Free HA 11.6
– Telemarketing (0%)
Physician
Recommendation Trends

30
Family • 1989 - HIA advertising
25 ENT to physician.
• Current initiatives:
% of new users

20 – AAA Best Practice

– BHI Referral program
15
• Trends + , but not
10 enough.
• Family doctor – single
5 most important
influencer of hearing aid
0 purchase.
89 91 94 97 20
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.

 Factors Considered Helpful or Reliable When
Choosing Brand of Hearing Aid (n=2,273)
(Helpfulness/reliability scores =4-5 on 5 point scale)
Medical doctor recommendation 76
AARP recommendation 61
Manufacturer websites 60
H.I.S. recommendation 55
Other hearing aid owner recommendation 49
Audiologist recommendation 46
Consumer reports 37
Scientific papers 36
Magazine articles 26
Books on hearing aids 25
Newpaper articles 24
HHP websites 22
Family members recommendation 20
TV ads 16
Manufacturer brochures 15
Internet chat sites 11
Newspaper ads 10
0 10 20 30 40 50 60 70 80 90 100
% helpful/reliable
 Average Age of New Users
69 68.8
68.5 68.4
68 67.8
67.5
Average age

67
66.5 66.3
66
66
65.5
65
64.5
1989 1991 1994 1997 2000
 New User Mean
Household Income
$50,000 $46,300
$45,000 $40,100
$40,000 $35,300
$35,000 $30,500 $30,800
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
1989 1991 1994 1997 2000
 U.S. Customer Satisfaction Trends
No significant differences (H.A. <5 years.)

Positive
70
Negative
60
50
% Satisfaction

40
30 60.7 58.7 59.3 59.2
20
10 17.8 17.3 14.9 17.1
0
1991 1994 1997 2000
 U.S. Customer Satisfaction Trends
New Hearing Aids (< 1 year)

Positive
80
Negative
70
60
% Satisfaction

50
40
66 71
30 63 62.9
20
10 12 7 10 14.7
0
1991 1994 1997 2000
 Hearing Aids “In the Drawer”
18 17.9
16.2
16
% Hearing aids in drawer

14 13.5
12 12 11.7
10
8
6
4
2
0
1984 1991 1994 1997 2000
 Hearing Aid Improvements Sought by
Current Hearing Aid Owners (n=2,428)
(Highly desirable scores =4-5 on 5 point scale)
Speech in noise 95
Better sound quality 88
Less whistle/buzzing 85
Lower price 84
More soft sounds 83
Longer lasting batteries 82
Work better on telephone 82
Loud sounds less painful 81
Speech in quiet 81
Better fit & comfort 79
Should have VC 77
Longer money back guarantee 74
Less costly to repair 73
0 10 20 30 40 50 60 70 80 90 100
% highly desirable
 Hearing Aid Improvements Sought by
Current Hearing Aid Owners (n=2,428)
(Desirable scores =4-5 on 5 point scale)
Easier to regulate volume 72
Mask tinnitus 71
Easier to clean 66
Work better on cell phone 63
Better sound to music 62
Should not break down as much 56
Less visibility 52
Easier battery change 48
2-5 year payment plan 34
Should have remote 32
More fashionable 28
Color 21
Lease hearing aid 15
0 10 20 30 40 50 60 70 80 90 100
% highly desirable
Non-owner Demography
“The Opportunity”
 The Non-Owner Opportunities
Self-admitted Hearing Loss
Gender (Millions)

8.9

13.4

Male Female
 The Non-Owner Opportunities by
Age Classification
65-74
55-64 15%
18%
75-84
9%

85+
1%

<18
5%
45-54
26%
18-34
35-44 10%
16%
 The Non-Owner Opportunities by
Household Income

$50-$59 $60+
9% 30%

$40-$49
10%

$30-$39 <$10
12% 8%

$10-$19
16%
$20-$29
15%
 The Non-Owner Opportunities by
Level of Education
College
College-some 16%
9%

Post-graduate
10%
High School
28%
Some Elem.
2%
Elementary
7%

HS-some
28%
 The Non-Owner Opportunities by
Employment Status

Part time
10% Unemployed
12%

Retired
Full time
29%
49%
The Non-Owner Opportunities by
Metro-size
500k-1.99 mil.
20%
50k-499k
16%

<50,000 2 Million +
26% 38%
 The Hearing-Impaired Market by State:
Self-admitted Hearing Loss

• Top 10 states
– California
– Texas
– New York
– Florida
– Pennsylvania
– Illinois
– Ohio
– Michigan
– Georgia
– North Carolina
 Conclusions
• Hearing-impaired population > 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.
 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.
 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
 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
Key Findings from Knowles
Market Development Studies
 The Decision To Purchase a Hearing Aid is
Very Complex and Little Understood
Influential Physician
Internal stigma others attitudes

External stigma Product Attitudes

perceptions towards HA

Stages of denial
Specific impactors

Predisposition

Physical Perceived loss of

communication Attitude toward Behavior intent/
impairment
performance & Getting hearing HA purchase
need solutions

Price
Communication
situations General moderators

Perceived age Change & emo-

tional reaction Social
Socioeconomic Personality
status network
Alternative
solutions
Social Lifestyle & Psychological
comparisons Health
activity level health
The Relationship Between Ad Expenditures
& Hearing Aid Sales is Weak
Estimate (regression) that $25 million = 6% growth
1700 40
Hearing aids
1600 Ad Expense ($Mil)

30
1500
Hearing aid sales

Ad expense ($Mil)
1400

1672
20

1662
37.6
1617

1580
1300

1555
1514
1473

1463

23.9
23.7
1200
21

10
1316

1308
13.4

14
11.6
11.1

1100 9.8
9

1000 0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Calendar year
The Issue of Price & Value
 Customer Satisfaction with
“Value” = Price/performance
Hearing aids 1-5 years of age

60 54 54 Satisfied
53
49 Dissatisfied
50

40
Percent

30
21
20 17 16 17

10

0
1991 1994 1997 2000
 Satisfaction Highly Related to How Much $$ the
Consumer Pays to Solve Their Problem
100
90
Percent Satisfaction

80

70

60

50
40
5 25 45 65 85 105 200+
$ Spent for 1% Handicap Reduction

Note: Handicap reduction measured by APHAB

 Hearing Aid Prices are Inelastic at Higher
Prices & Highly Elastic at Low Prices
Starter Hearing
100
Aid Market
80
Market Growth (%)

60

40

20

-20
200

300

400

600

700

800

900

1000

1100
100

500

Lowest Available HA Price

 Stigma & Price Are Not the Only
Barriers to Market Growth
Only 35% of non-owners would
take a "free" invisible hearing
instrument.

60
55   H.I. Owners
5 year purchase intent (%)

50  Nonowners
45 
40
35  
30  
25  
20  
15   
 
10 
5
0
Increasing Invisible CIC Price ($)
The Issue of Stigma
 Invisible Hearing Aids Have Greater
Consumer Acceptance
Cosmetics/stigma
Attractive  
Not embarrassing  
Old age image  
Visible  
Product features
Reliable 
Comfortable  
Nuisance  
 BTE
Sound quality  
 Empty ear
Natural sound  
Safe  
High-tech  
0 20 40 60 80 100
% positive image
 Invisible Hearing Aids Have Greater
Consumer Acceptance
Economics
Affordable    BTE
 Empty ear
Worth expense  

Expense to maintain  

Utility & value

Benefit  

Value  

Noisy situations  

Quiet situations  

Large group situations  

0 10 20 30 40 50 60 70
% positive image
 Invisible Hearing Aids Have Greater
Consumer Acceptance
4.95
Performance & value (Means)


4.85

4.75

4.65 
 
4.55

4.45

4.35

4.25
3 3.5 4 4.5 5 5.5 6
Cosmetics & comfort (Means)
 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
What is The Viable Market for
Hearing Aids?
 Market Penetration is Highly Related to
Recognition of Hearing Loss Handicap
90
80
Percent Penetration

70
60
50
40
30
20
10
0
1-4 5-9 10- 15- 20- 25- 30- 35- 40- 45- 50- 55- 60- 65- 70- 75- 80- 85- 90- 95-
14 19 24 29 34 39 44 49 54 59 64 69 74 79 84 89 94 99

APHAB Unaided Score

 Discriminant Function Probability of Non-owner
Resembling Current HA Owner Based on
Multiple Subjective Hearing Loss Measures.
40
35 Non-owners Probabilities 1-39% =
HA owners
Percent of Market

30
71% of non-owner market
25
20 14% of the owner market.
15
10
5
0
1-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80-89 90-99
Discriminant Function Probability
 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.

Why Buy Hearing Aids?
 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.
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor = Distribution
Trust audiologists

30 day trial available

Truth in advertising

HA sellers take advantage of you

HA sellers are customer welfare oriented

Trust HA dealers

Exposure to HA ads

Negative Trust doctors

Neutral 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Positive Percent of hearing-impaired non-owners
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor = Hearing Health Professional Influence

ENT

Family doctor

Audiologist

Dispenser
Negative
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Neutral
Percent of hearing-impaired non-owners
Positive
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor =Hearing Loss
HA help high frequency loss
Hear well most situations

Need surgery

HA help tinnitus

HA help nerve deafness

Loss severe enough

HA for unilateral loss

Negative Loss too mild
Neutral
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Positive Percent of hearing-impaired non-owners
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor =Knowledge Level
Where to get hearing aids

Audiologist vs HIS

Knowledgeable about HA

Aware of invisible aids

Know where to go for testing

Some HA automatic
Negative
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Neutral
Percent of hearing-impaired non-owners
Positive
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor =Lifestyle
More serious
priorities

Can afford HA

Would like to hear

soft sounds

Loss disruptive to
life
Negative
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Neutral Percent of hearing-impaired non-owners
Positive
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor =Hearing Aid Performance
Use in noisy situations
Make only certain sounds louder
Stop hearing loss decline
Background noise
Effective in most situations
Eliminate background noise
They work well
Tried HA - don't work
Work in multiple listening situations
Use in large crowds
Perform as promised
Use on telephone
Negative
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Neutral Percent of hearing-impaired non-owners
Positive
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor =Hearing Aid Characteristics
Durability of HA
Needs constant adjustments
Whistling & feedback
Hassle
Comfort
Differences in brand
Ease in handling
Natural sounding
Warranty reasonable
Seldom breakdown
Physical fit
Battery change

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Negative
Neutral Percent of hearing-impaired non-owners
Positive
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor =Social Influence

Spouse

Friends

Hearing aid owner

Children

Negative
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Neutral Percent of hearing-impaired non-owners
Positive
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor =Stigma & Cosmetics
Treated differently when HA worn
Make you look weak/feeble
Make you look disabled
Too proud to wear HA
Noticeable
Embarrassed to wear
Difficult to admit loss
People make fun of you
Make you look mentally slow
Old age image
Negative
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Neutral
Percent of hearing-impaired non-owners
Positive
 Hearing-Impaired Non-owner
Attitudes Towards Hearing Aids
Factor =Value of Hearing Aids
Perceived benefit

Good value
Maintenance expense
Restore hearing to normal

Worth the expense

Use less expensive device

Worth what you pay

Too expensive
Negative 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Neutral Percent of hearing-impaired non-owners
Positive
 Top 12 Correlates of Hearing Aid
Purchase Intent
ENT Recommendation

Loss severe enough

Family doctor recommendation
Perceived benefit

HA durability

Child's recommendation
Dispenser recommendation

Audiologist recommendation

Friend's recommendation
Spouse's recommendation
Loss disruptive to life

Hearing well in most situations

0 100 200 300 400 500 600

Purchase Intent Ratio (H/L)
 Lowest Correlates of Hearing
Aid Purchase Intent
• Brand • Know where to buy
• HA make only certain hearing aids
sounds louder • Old image of hearing aids
• Too expensive • Use lower expense product
• HA sellers take advantage
• Customer orientation of
of you
dispensers
• Can afford hearing aids
• HA warranty
• Need surgery
• Know where to go for • Knowledge of hearing aids
hearing tests