Determining Hearing Aid 'Market Share'

Question

How large of a population should you have per audiologist in order to have good market share and to be reasonably profitable? i.e. One audiologist per every so many thousand people living in a particular area. We are a university clinic in a small town.

Answer

When I have the opportunity to consult with practice owners, the question of "market share" often comes up. I prefer to redirect the question to one of "market penetration". That has always been a problem within the industry - the inability to increase market penetration beyond the historic levels of approximately 20%, meaning only one in five people with hearing loss actually wearing hearing aids.

So using that as a beginning point, here's some of the math you may want to think about:

• Total population in your marketplace over 65 (or 55, if you prefer)
  
• Divide by three (the number of people over 65 with hearing loss)
  
• Divide by five (the avg. 20% market penetration)
  
• Equals total number in target audience

There is a variable in the equation we just established, however. This represents the total number of current users in your marketplace. Industry figures show approximately 40% of all hearing aids sold each year are to new users, which represents new sales opportunities.

It's hard to assume your share of those opportunities however, because of the other, more established practices there are in your marketplace.

Now estimate the number of units/month, times the ASP (Average Selling Price), for a figure that represents gross revenues. Subtract from that figure all the fixed costs associated with your business.

• Now factor in cost of goods.
  
• Now subtract marketing expenses.

As a start-up, it's likely you'll need to exceed the "gold standard" of 10% of gross revenues a typical marketing budget represents. In fact, depending on individual marketplace conditions, you may need to come close to doubling that, if only in the short term.

At the end of this exercise, if you can feel reasonably confident about reaching your sales goals, then success may well be yours.

Don Marsh is an independent Marketing Consultant who works with practice owners across the country. He may be reached at: 858-792-6553 or by e-mail at: dmarsh2@san.rr.com.