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The "Chrysler Unit"
A Clarification on Zounds Sales Strategy and Some Industry Statistics
Zounds Hearing
A Clarification on Zounds Sales Strategy and Some Industry Statistics
Zounds Hearing
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Thursday, April 26, 2007
The "Chrysler Unit"
Business pundit Steve Hannaford needed a new term to describe the value of today's billion-dollar-plus mergers and acquisitions. The disaster that is DaimlerChrysler has given Steve just what he needed:How Many Chryslers?
Truly the Daimler-Benz purchase of US-automaker Chrysler in 1998 was a stupefying disaster. Through the alchemy of its business acumen, Daimler management transmuted the value of Chrysler from an estimated $40 billion to a value of, to judge from the current bidding, around $5 billion, give or take a few hundred million.
[...]But some good can come out of the merger. Based on what seems to be the approximate price of the company, we will describe big mergers and acquisitions henceforth in terms of Chrysler unit, that is to say, in $5 billion increments. For example:
- AstraZeneca bought MedImmune for three Chryslers ($15 billion).
- The latest bidding for ABN Amro has raised the price of the bank to nearly 20 Chryslers.
- Nestle bought Gerber for a little over one Chrysler.
- Spanish bank Banco Bilbao Vizcaya bought an Alabama bank chain for almost two Chryslers.
- State Street Bank bought IFS for bit less than a Chrysler.
Posted by: 
Terry Frazier at 8:37 PM
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Categories: Business & Finance
Terry Frazier at 8:37 PM
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Monday, April 9, 2007
A Clarification on Zounds Sales Strategy and Some Industry Statistics
A few weeks back I was in the office on Saturday when my phone rang. On the other end was a fellow named Jay Turner, VP of Marketing for Zounds. Like any good marketing VP, Jay had been following web traffic on Zounds and came across my blog entries. As I said previously, I have no direct relationship with the company and no one there knew who I was. Even though I have a small investment, it is as part of a limited partnership and my name appears nowhere in the Zounds' records. So Jay had been looking around my blog trying to figure out who I was and why I was interested.We had a nice conversation and Jay offered some statistics to clarify points raised in the earlier discussion. What follows are quotes from a follow-up e-mail Jay sent me. I have not independently verified these numbers but I have no reason to doubt them. Zounds did extensive market research before launch and has an advisory board that consists of medical professionals from both the ENT and audiologist fields. Further, 2006 sales statistics published in The Hearing Review show 2.37 million hearing aids sold in the US, so Jay's number of 7%=150,000 is conservative.
Per our conversation, industry research indicates 7% of hearing aids in the US (150,000 units annually) are sold through Ear, Nose, and Throat (ENT) Physicians that employ Audiologists. They buy high-end hearing aids for $1250 wholesale from the Big 6 manufacturers and mark them up to $2500 to $4000 per aid, or 2X to 3X. This same wholesale/retail pricing is used in the independent Audiologist/Hearing Instrument Specialist (HIS) channel.So, my hypothetical assertion of paying a referral fee is misleading. Zounds sells to physicians just as all other major hearing aid suppliers.
Zounds provides excellent patient care through licensed Audiologist/Hearing Instrument Specialists, the best technology, and affordable prices to fixed income seniors through Primary Care Physicians (PCPs) and ENTs. Zounds sells the product and diagnostic/fitting service at wholesale (no referral fee, no Medicare/Medicaid reiumbursement, no Stark law conflicts, etc) and the PCP/ENT marks them up to MSRP $999 per aid, making far less, but for many still appealing, mark-up than the Big 6/ENT/Audiologist/HIS business model. There is nothing illegal or unethical about Zounds distribution strategy. Yes, Zounds technology, distribution, price point, and consumer marketing will be disruptive. Unfortunately, there is a lot of misinformation and emotional reaction to Zounds' business model. Overall, Zounds is trying to provide a better product, service, and price to the millions of people who suffer from hearing loss.
Another point Jay made in our conversation is that 10%-15% of high-end hearing aids are returned. This is not far off the number quoted by Tom Shearman (5%-10%) for all hearing aids. I would expect return rates for $2,000-$4,000 items to be somewhat higher.
And so the experiment continues. I remain a believer in the Zounds technology and approach, but the market will decide if it's ultimately the right approach. The fact that there is a great deal of emotion and misinformation regarding both the company and the product supports my belief that this is a fundamental disruption for an industry that is ripe for change.
Posted by: Terry Frazier at 4:44 PM
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Categories: Business & Finance, Health and Fitness, Technology
Terry Frazier at 4:44 PM
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Sunday, March 11, 2007
Zounds Hearing
My recent post on Zounds Hearing has drawn an active comment thread, including opinions from someone in the hearing aid business. Specifically, there has been a lot of discussion of Zounds' intent to sell their product via family physicians, and whether or not this constitutes a conflict of interest or otherwise makes things worse for consumers. It's good to have a participant who appears to know the industry. If you've got an interest, for whatever reason, you might want to take a look.Disclaimer: I don't speak for Zounds. I have no direct relationship with the company.
Posted by: Terry Frazier at 8:28 PM
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Categories: Business & Finance, Health and Fitness
Terry Frazier at 8:28 PM
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