Business Development | September 2019 Hearing Review
Should you try to compete on price, focus on a specific audiological niche like pediatrics or implants, or differentiate your practice by creating a unique patient experience? Here’s how to “avoid getting stuck in the middle” and instead develop a competitive strategy that is right for your hearing healthcare practice and right for your market.
In independent audiology practice, competition is fierce. There is no shortage of literature that discusses the reduction of independent practices over the past few years and the prediction of fewer in years to come.1 On the bright side, however, Windmill and Freeman2 assessed Medicare data and found that there will be an unprecedented number of patients for audiology and dispenser clinics. According to their investigation, the current plethora of patients will continue well into the 2040s, causing Barry Freeman to state that “We will not run out of patients any time soon!”
If this market is big enough for everyone, the question becomes how do I keep and/or get my fair share (and then some) of this huge and supposedly “neverending” hearing care market? In the June and August 2018 issues of The Hearing Review, I offered some methods for the analysis of a practices’ position within a specific market or region.3,4 In particular, sound competitive intelligence and the use of the SWOT analysis, Porter’s Five Forces, and the Three Circle technique 5-7, can lend great insights for developing a practice’s positioning within a specific market. Once the market position, strengths, and weaknesses of the practice are known, practice managers are then challenged to take the necessary business steps that result in the development and implementation of a competitive practice strategy (Figure 1).
Fundamentals of a Competitive Strategy
While the ultimate competitive strategy will take shape according to market specifics determined by analysis and the needs within your community, there are some fundamentals that all practice managers should consider as their strategy develops, including:
- The resources available to the practice which may include facilities, equipment, funding, clinical skills, business skills, and other valuable assets that could be tapped to spawn a specific strategy.
- The distinctive competencies of the clinic itself, including reputation, location, and other physical limitations.
- The capabilities and interests of the clerical and professional employees within the practice. It is essential that the staff is on board with the type of practice it will become in terms of training, interests, and clinic time to make the appropriate changes necessary for success.
Once the practice’s resources, competencies and capabilities have been considered, Porter9 offers some generic strategies including: Focus, Overall Cost Leadership, or Differentiation (Figure 2).
Stuck in the Middle. Let’s get the worst option out of the way first. Strategically, the worst place to be is “stuck in the middle” with no direction. Any business—including a hearing care practice—should orient to a generic strategy that involves cost leadership, target marketing (focusing), or achieve some uniqueness (differentiation) to be successful. Attempting to be all things to all types of patients is a strategy for failure. The bottom line: recognize your strengths and build on them.
Overall Cost Leadership. In a cost leadership strategy, pricing of products and services relative to the competitors becomes the theme running through the entire practice. A cost leadership strategy demands that the practice is centered on the capability to deliver products and services of competitive quality at lower costs.
At lower costs, consumers will not expect quite the same level of product or services offered by higher cost clinics; however, they do expect acceptable performance and services from the low-cost provider. Kokemuller10 indicates that to price-sensitive patients, if a product can be delivered for less than the competition, more sales will be generated. Therefore, if the products are not as good as the competition or the services are delivered by less qualified individuals, and the product/procedure costs less, more people will purchase.
Hurwich11 cautions that while Kokemuller’s strategy works in some markets, it does not make sense where demand is so high that price increases are warranted or when demand declines to the point that price discounts are needed to reduce inventories. In the hearing industry, it is obvious that big box stores and pharmacies, the internet, and PSAPs (and future OTC/DTC hearing aids) are the natural champions in the cost leadership strategy. Depending upon the market and the products offered through these outlets, their costs are usually about one-third less than a typical audiology clinic.
Experience suggests that practices that attempt to be the cost leaders do not survive, as most of their business/cost models are not designed to become a low-cost provider.
Focus strategy. A focus strategy involves specializing in a specific area of practice, such as the treatment of pediatrics, balance, tinnitus, noise control, implants, and other specialties or niche markets that can be exploited. Often practices obtain a “first-mover advantage,” allowing the establishment of strong brand recognition, product/service loyalty, and specialized expertise before other entrants move into the niche. There are several advantages in being the first business to execute a focus on a specific area of the profession:
- Establishes a best practice standard for the focus or niche specialty.
- Achieves a strong impression with patients and their families leading to brand recognition and loyalty.
- Hinders patients and other consumers from switching to other practices when they enter the market niche.
The last of Porter’s generic strategies is one of differentiating the product and/or service offerings into something that is perceived as a distinctive experience, having unexpected quality and performance, with service that is truly unique from the competition.12 While a differentiation strategy may be coupled with a lower market share, the requirement is a perception of exclusivity, which will generally yield higher margins. If successful, it allows charging a premium price for higher-quality products and services.
To succeed fully, patients need to perceive that there is no other place to obtain the product quality, service expertise, or the experience. Differentiation of a practice provides insulation against the competition by generating brand loyalty (to the providers, not necessarily the device), resulting in low patient sensitivity to price.
Attaining Practice Differentiation
Although it may seem simple logic based upon the competitive intelligence and analysis to arrive at a strategy, actually attaining differentiation demands the learning of some basics. There may be some areas that require attention if the practice is to be perceived as different from the big box, manufacturer owned, ENT clinics, and others. The following are some areas of differentiation that should be considered:
1) Product. To have an edge over the competitors, a practice must offer innovative products that best meet the requirements for hearing impairment, performance, and budget. In addition to hearing aids and accessories, hearing protection devices, custom earmolds/plugs, headsets, high-quality OTC products and hearables, assistive/alerting devices, captioned telephones, loop systems, and any other hearing-related item that might offer excellent benefit should be part of the products offered.
As noted in an earlier article, the product is not simply a device, but rather it is the entire patient experience which may involve a higher initial cost in office decor, equipment, certifications, training of staff, and marketing.12,13 Nevertheless, the return on investment is usually more than the cost involved, as the practice becomes the market leader within the community. Products should also be evaluated using best practice techniques for verification.
2) Technology. The clinic should be a mecca for anything hearing. Displays should be in the waiting room for virtually all products relative to hearing that the practitioner has deemed beneficial for their patients. Therefore, as mentioned previously, everything from OTC hearing aids, to HPDs, headsets, musician monitoring devices, etc, should be made available. The practice should amaze patients and their companions, demonstrating that they are working with a hearing center that defines “the edge of technology” for not only products, but innovations in equipment, impression techniques, and training. The newest equipment from many companies allows for seamless connections to audiometers, immittance, otoacoustic emissions, and probe microphone equipment for verification. Among other innovations are digital impression techniques that drastically cut down the time needed to fabricate in-the-ear products.
3) Pricing. To gain differentiation through pricing, a practice may opt to charge either lower prices for its product or gain market superiority by charging maximum prices. Market forces such as Porter’s supplier power and buyer power are key in some markets and may be a factor in the path chosen by the practice manager. While the managed care market is influencing the marketplace, differentiation of a practice as the best of the clinics available, will sell to those that choose not to use these programs. The practice should set the price of the product based on the features of the product, the service and follow up, clinic operating costs, and purchasing power of the local patient population. Of course, most markets require pricing tiers that calibrate product pricing with the patient’s budget. An alternative method of differentiation could also be the use of an unbundled pricing system which keeps the perception of costs lower for high quality products and services.
4) Diagnostic Services. Differentiation can also be achieved by offering the most technological, scientifically based diagnostic evaluations possible. For example, the use of immittance, distortion product otoacoustic emissions, and speech-in-noise testing are essential to offering an unexpected experience—which is fundamental in the development of the perception that a clinic is truly different. When using these techniques, comments such as “I have never had this thorough of a test before!” are common and there is more information available to the practitioner regarding the hearing impairment.
5) Time with patients. In this new century, there is nothing that affirms a practice is unique and a provider is different, caring, and respectful, than the time spent with each patient. Long waiting room times for a 5-10 minute appointment with a physician are commonplace. If a patient has minimal waiting time and an hour plus with the audiologist, an atmosphere of true difference is created. If the clinician listens, takes the time necessary to ensure each patient understands the situation, and how and why the treatment
is proceeding in a certain direction, it leads to a high-quality perception. Take the time to demonstrate products as necessary. Patients respond to personal demonstrations of what can be done for them. While these are all time-consuming activities, it builds differentiation, word-of-mouth referrals, referral sources, and ultimately creates better business results.
Some of these tips may seem obvious, but there are others unique to a specific practice and location known to the practice manager. Ultimately, deciding on a competitive strategy is about making tradeoffs: what should we do versus what should we not do. Without tradeoffs there would be no need for choice and thus no need for strategy.9
Citation for this article: Traynor RM. Competing in the new era of hearing healthcare, Part 1: Developing a strong competitive strategy. Hearing Review. 2019;26(9):20-23.
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Traynor RM. Survival strategies in a competitive hearing healthcare market: Part II. Three methods for developing a global and local strategic plan in our dynamic industry. Hearing Review. 2018;25(8):14-18.
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