b.cognosco

I can't speak for Zounds nor do I have any direct relationship with the company.

Are you in the hearing aid business? The website clearly states that all Zounds hearing aids are fitted and sold by licensed audiologists, just like everyone else's hearing aids.

Since there are no details about the professional program on the Zounds site I have to assume your "major concerns" came from somewhere else. A competitor maybe? I'm sure Zounds will explain the program if you bother to ask. They were happy to explain it to me.

If you want to assert negative things you should do so based on fact, not innuendo. I don't normally edit comments so I'll give you a few days to respond here. But I will remove your post if you can't back it up.

As for ugly, you're welcome to point me to your idea of a pretty hearing aid.

Thanks for the comments

- twf

I am in the hearing aid business. I do very well and do not feel threatened by Zounds. There is more than enough business to go around and one competitor isn't going to make or break me.

I have been hoping for years that someone would come and change the business. I do NOT have a problem with their retail model - I do, however, have a problem with doctor kickbacks. I think we need to reduce conflict-of-interest issues with docs, not create more.

I do not claim to know everything about this company - but I know know people who have been to seminars, I know people who have been apprached by them to invest money, and I know an employee. From the information I have, I would be concerned about the approach they are taking with their "Zounds Medical Offices"...oh, and I do think the aids are ugly.

Tom

JS

But 'JS' saying that Zounds is not giving kickbacks because they are selling to the doctor, who then gives it back to a Zounds employee to fit - that is ridiculous. If anything, that argument makes me more suspicious.

As a correction Terry, they do not fit custom hearing aids in 45 minutes. They fit stock, off-the-shelf aids. As far as their technology, I have a hard time believing they have discovered such great technology that Phonak, Seimens, and their large R&Ds couldn't develop. I know they play audio demonstrations that supposedly prove their quality, but that doesn't do it for me. I have been in this business long enough to know that marketing often trumps engineering. I also have seen many 'flash-in-the-pan' companies come in like this and be gone in 3 years...time will tell with Zounds.

This may be hard for you to believe, but I do not feel threatened by Zounds. They might do very well, and my business will be fine. If the industry goes through changes, many of us will have to adapt - just like any other industry. Like I said, there is more than enough business to go around. There are over 20 million people with a hearing loss that don't wear hearing aids!

I would love to see more people fit and I do not mind a change in the industry...I just want it to move in the right direction. I personally think commissions to doctors and over-the-counter hearing aids are the wrong direction.

TShearman

Where do you get these numbers? I don't know any practices that carry those numbers.

If everyones markup is 80%, then why do so many HA business pop up and go out of business within a few years?

My return rate is 5%. I know others in the business - 5%-10% is typical for a good practice.

Its difficult to even have a discussion when comments like that are bring made. I don't think any person making those comments has any experience in the industry.

Disclaimer: I don't speak for Zounds. I have no direct relationship with the company.

1. “Conflict of Interest”.

It seems to me that any business relationship has an inherent conflict of interest. Therefore, I think that we should only prohibit conflicts of interest that hurt the consumer, are particularly subject to abuse and for which the consumer has little recourse. Maybe I’m missing something, but I see little difference between the doctor and the independent audiologist who both assesses whether someone needs a hearing aid, then sells it to them. There is no evidence that either situation harms the patient and in both cases, tort law provides ample recourse for the patient.

Of course, I can imagine that audiologists aren’t too happy about the doctors infringing on their turf. This is understandable, but it should be noted that increased competition usually benefits the consumers. (1)

2. “It’s Ugly”

Since beauty is a very subjective concept, especially with inanimate objects, let’s stipulate for purposes of discussion that “ugly” is a reasonably objective criteria and that the Zounds unit is indeed “ugly”. This still leaves us with the issue of the extent to which appearance is an important criteria for hearing aids. I suspect that, like most things, users of hearing aids will pay a premium for “pretty” hearing aids. However, I suspect that this premium is far less than thousands of dollars. And if the “ugly” hearing aid works a lot better than the “pretty” one, I doubt that reasonable consumers will pay *any* beauty premium.

Now, there are some physical characteristics that might really matter. Comfort is one. On that count, the Zounds units should be more comfortable, simply because of the foam insert and the fact that they are not as tight-fitting as current high end hearing aids. Size is another factor that may matter to the current generation of users, who seem kinda vain about the whole hearing aid thing. I don’t have any idea of how conspicuous the Zounds unit is compared to competitors.

3. “Off the Shelf”

Indeed, the Zounds unit is not custom fitted, unlike almost all of its competitors. But then, my computer and truck are both “off the shelf” as well. Yet they work just fine. So what’s up with that?

Well, the answer, as Adam Smith told us, is that most gadgets don’t *need* to be custom made and custom fitted. And mass production allows gadgets to be sold for a fraction of their cost if handmade. Mass production also generally turns out products of more consistent quality compared with custom made.

So the question is whether custom fitting really improves the quality of the current hearing aids. According to my (admittedly limited) knowledge, the answer is “no”. As I understand it, current hearing aids are custom fitted because a tight (and uncomfortable) seal is required to minimize feedback. Since Zounds cancels feedback electronically, there is no need for a tight fit – and no benefit in performance or in patient comfort. And this allows Zounds units to be mass produced, sold “off the shelf” and fitted in 45 minutes. At, as Adam Smith would have predicted, a far lower per unit cost to the patient.

So let’s not make a virtue out of necessity.

(1) Full disclosure. I am a lawyer and venture capitalist who has an investment in Zounds. So any of my *opinions* should be judged with that bias in mind.

As a lawyer, I am a member of a profession that jealously guards its professional monopoly, as much as doctors and presumably audiologists do. My profession has been under some assault by competitors, but since we control the courts, we’ve weathered the storm better than most. I can sympathize with audiologists – they don’t prescribe medicine and would probably appreciate it if doctors would avoid selling hearing aids. If it makes them feel any better, doctors are under pressure as well.

However, I think we should avoid overplaying the “good of the consumer” line. I seriously doubt that professional monopolies produce a net benefit to anyone except the professional. At best, I think that they provide a more consistent product at a far higher cost. While some might be willing to pay that higher cost, the professional monopoly denies them that choice. And at worst, the professional monopoly merely drives the cost of services up.

So know one has ever heard me defend my profession’s monopoly on any grounds but personal self-interest. Other professionals might be well advised to avoid the “for the good of the consumer” defense of their professional monopoly. In this day and age, where information access is almost universal, such obviously self-serving claims make us look bad. And since the argument, at the end of the day, is “the customer/patient/client is too stupid to choose”, I’m not sure how persuasive the customer/patient/client will find the argument.

Unfortunately, to paraphrase a Monty Python skit, “it’s our only line”.

Depending on how you define "markup", I suspect that the percentage is defensible, if we're discussing retail sales of hearing aids by audiologists. However, if there are better numbers out there, I'd be interested.

My understanding is that there is a very high rate of consumer disatisfaction with hearing aids, which may be what was intended, rather than the actual return rate.

> Where do you get these numbers? I don't know any practices that carry those numbers.

What are the numbers that you've heard?

> If everyones markup is 80%, then why do so > many HA business pop up and go out of > business within a few years?

There are many factors that influence whether a business succeeds, including markup. Indeed, the presence of high markups may be one of the factors that cause these businesses to go out of business, especially if those selling the hearing aids are required to adhere to a pricing schedule.

> My return rate is 5%. I know others in the business - 5%-10% is typical for a good practice.

Assuming that you mean "net profit", then I'd say that this statement does not necessarily conflict with the claim of 80% margins. After all, as a lawyer, you could say I have a 99% "markup" on paper documents I provide to clients. Really, this is my "gross profit". But my *net profit* is lower than 99%. Although as a service provider, my net profit percentage is much higher than I'd expect with someone who sells inventory. What is the "markup" on hearing aids, in your experience?

In any case, I see nothing inherently wrong with any particular markup. I don't think that profit is a moral issue. Of course, someone who enjoys high profits may be biased against competing products that might well end those high profits. Fortunately, as long as we stick with facts and logic, such bias will have little effect even if it exists.

But it is a business issue. If a superior product appears that costs 1/3 the cost of competing products, then the higher priced products -- and those who sell them -- have some serious problems. In a market economy, I think that it's unwise to battle technological change. If I were an audiologist, I'd seriously investigate the new product. If it's anywhere near as good as the company says, I'd start trying to sell it myself.

> Its difficult to even have a discussion when comments like that are bring made. I don't think any person making those comments has any experience in the industry.

Well, I know that *I* don't have any experience in the industry (I didn't make the post you replied to). However, I would be interested in what those numbers average.