Influence of Pricing Strategy on Adopting Amplification – guest post by Amyn Amlani

It has been 23 years since the percentage of hearing aids dispensed to inexperienced (i.e., first-time) users of this technology reached a minimum of 50% in the United States, as reported in MarkeTrak VIII (Kochkin, 2009).  Since 1989, hearing aids dispensed to inexperienced users have ranged from 29% (in 1994) to 40.5% (in 1991), with an average of 36%. These data suggest that for every one device adopted by an inexperienced user, nearly two devices are adopted by experienced users. Reasons for these skewed results have been lacking in the literature.

Recently, the pricing strategy employed within the market was identified as a casual factor leading to the decline in adoption rate for inexperienced users (Amlani, Taylor, & Weinberg, 2011; Amlani & Taylor, 2012). Specifically, our research has shown that experienced users were willing to pay an average retail price of $1531 for a hearing aid and professional service presented in a bundled format (i.e., where the fee of the technology and professional service is presented as a single price), while inexperienced users were willing to pay an average retail price of $1204 for the same product and services (Figure 1, below). When the same hearing aid and professional service displayed in the bundled format were shown in an unbundled format, experienced users were willing to pay a mean retail price of $1855 and their inexperienced counterparts were willing to pay a mean retail price of $1840. Interestingly, the motivation behind the increase in willingness-to-pay in the unbundled approach differs between groups: that is, experienced listeners were willing to pay more for the technological aspects, while inexperienced listeners were willing to pay more for rehabilitative services.

Figure 1. Influence of experience with amplification on mean willingness-to-pay across pricing strategies. Adopted from Amlani et al (2011).

To validate the results from our previous work, data collection is presently underway on a new cohort of inexperienced and experienced users of amplification technology. In this study, subjects are shown the price of the same hearing aid using three different pricing strategies: pure price bundled, partial price bundled, and price unbundled (Figure 2).

Figure 2. Hypothetical example of bundled and unbundled pricing strategies for the same hearing aid. Adopted from Amlani et al (2011).

As part of the study, subjects are asked to rank order (1= most preferred; 3 = least preferred) the three pricing strategies shown in Figure 2.  To date, preliminary results indicate that both experienced and inexperienced users strongly prefer the unbundled format. In addition, preliminary results indicate that inexperienced users perceive considerable satisfaction in their purchase decision—measured using value (i.e., perceived performance for the price paid)—in the product and services provided in the unbundled pricing format (Figure 3), despite the fact that this sample does not own or use a hearing aid.

Figure 3. Influence of pricing strategy on mean ranking of value across hearing aid experience (Amlani, Unpublished).

Thus far, our efforts indicate that the type of pricing strategy influences the value-based (i.e., needs and expectations) features and services provided for both experienced and inexperienced users. For inexperienced users, the traditional bundled approach has and continues to create a negative perception of value-based benefit—especially with respect to rehabilitative services—ultimately leading to a decrease in purchase intent. The unbundled approach—which discloses the technological aspects of amplification and service benefits provided by the dispenser—creates a more positive value-based perception, and will improve purchase intent for both experienced and inexperienced users.

Amyn M. Amlani, Ph.D., is an Associate Professor on the faculty of the Department of Speech and Hearing Sciences, University of North Texas. Dr. Amlani holds the B.A. degree in Communication Disorders from the University of the Pacific, the M.S. degree in Audiology from Purdue University, and the Ph.D. degree in Audiology from Michigan State University. His research interests include the influence of hearing aid technology on speech and music, and economic and marketing trends within the hearing aid industry.

References

Amlani AM & Taylor B. (2012). Three known factors that impede hearing aid adoption rates. Hearing Review, 19(5), 28-37.

Amlani AM, Taylor B, & Weinberg T. (2011). Increasing hearing aid adoption rates through value-based advertising and price unbundling. Hearing Review, 18(13), 10, 12, 16-17.

Kochkin S. (2009). MarkeTrak VIII: 25-year trends in the hearing health market. Hearing Review, 16(11): 12-31.