How long have you been using your primary hearing aid manufacturer?
Five years? A decade? Forever?
It is typical for independent audiology businesses to remain with their primary suppliers year after year. At face value, it is easy to understand why. Supplier migration is uncertain and comes with perceived hassle and risk, including:
- The challenge of learning new device technology and competently fitting patients.
- Smoke and mirrors pricing with overly complex discount pricing and associated incentive schemes that make it hard to compare ‘like-for-like’ pricing. Many owners stay with what they know for fear of being ripped off, or of securing poorer terms in any new deal or relationship.
Furthermore, strong relationships with key contacts at the incumbent manufacturer can make contemplating a move feel disloyal.
Yet failing to review current supplier agreements in-depth and failing to take the time to get informed about what else is out there will almost certainly mean that you are missing out on a more competitive deal and costing your business a substantial amount of money.
The Normal Negative Catalysts for change
In the world of private hearing aid dispensing, owners have historically shown reluctance to switch their hearing aid supplier unless they have experienced repeated dissatisfaction in at least one of the main catalysts for switching:
- Perceived quality of the brand’s products i.e. technology lag/gap with other suppliers.
- Reliability of the products.
- Comfort/fit on the patient.
- Customer service.
Short-term pricing incentives, such as those offered when a new product is launched, can encourage owners to switch for a limited time period. Many owners, however, appear to be reluctant to consider a more permanent change to this new supplier, just being happy to take advantage of the limited-offer pricing without looking at the long term benefits this new supplier could bring.
You reap what you S.O.W.
Today, with the technological and feature gap between the main hearing aid brands being arguably the narrowest it has ever been, dispensers need to begin to look more closely at their options and contemplate the benefits of changing supplier, without the need of a negative stimulus.
Although, playing devil’s advocate – it could be argued that if this technological and feature gap between brands is so narrow, where is the incentive to switch and what is to be gained?
These questions are particularly relevant today when increasing acceptance of the benefits of hearing aids among end users/consumers is generating unprecedented levels of demand. With the dispenser, for the most part, determining which brand to dispense (where perhaps the best indicator of their brand preference will be their personal evaluations of hearing aid brands and subsequently entrenched brand attitudes), the end-user is becoming ever more reliant on the dispenser to guide their decision making.
So, have we now reached a state where the dispenser’s perception becomes the end user’s reality? If so, why should a dispenser who is happy with their current supplier look at alternative options?
To start with, by simply accepting that what has worked for you in the past is still your best option, you are potentially ignoring the benefits that might arise from considering alternative suppliers, which may include:
- Improved customer service.
- Better product training.
- Stronger marketing support.
- Improved prices giving better margins.
- Compelling new product story that makes a higher-end sale easier (think about the historical impact of Oticon’s Delta and more recently Starkey’s Livio AI).
- Greater customer satisfaction.
In addition, if you are setting out your plans for the next five years and these include contemplating your own exit strategy, you will benefit from ensuring your supplier arrangement is optimised to maximise the attraction of your business to a potential successor or buyer.
Maybe now is a good time to ask yourself some searching questions:
What is it about my current supplier that is so valuable that I won’t look at switching?
This is a challenging place to start. Does your supplier really know about your business and take an interest in what you are trying to achieve or are they focused on unit sales targets and SOW? How frequently does your supplier talk to you about how you are doing and what your plans are before they ask about the units you are buying? What skills does your supplier representative have to understand your business intentions? What value do they add to your business?
How will I manage new software and hearing aid features so that my confidence in front of end-users isn’t affected?
Switching to a new supplier isn’t as simple as just buying new products. You will need to invest time and effort into becoming proficient with the new fitting software and the hearing aid features but this shouldn’t stop you looking at alternatives. You are a skilled professional who wants to offer your customers the best you can and regularly assessing alternative product options is a commitment you should be selling to your customers, not trying to hide from them!
Won’t my existing customers want me to continue to dispense the products they already use?
‘Brand tone’ is used by suppliers to create brand loyalty for fear an end-user will be reluctant to ‘lose their sound’ when switching to another brand on renewal. Now think this one through logically. With the average time period for renewing hearing aids in the private sector between three and four years, each manufacturer will have updated their processing platform, technological features, audiology and possibly even hearing aid styles at least twice if not more at this time. To all intents and purposes, you are already dispensing a new product! Don’t let this red herring stop you from taking care of your needs as a business owner.
If I threaten to switch my supplier on price, will my existing supplier increase their discount?
Quite possibly – which would be a good thing. Audiology Business Central recently did exactly this for one of our customers, achieving a significant improvement in price discount, just by taking them into a proper negotiation dialogue and being prepared to threaten intent to change – and genuinely being prepared to go through with it – if improved terms were not given.
This was a great result – and our client was delighted – but it MUST be viewed in context. Price is a strong motivator (on the basis that lower supplier prices increase your margins) but should actually play a less important role in supplier selection than you might think. All manufacturers offer good discounts against list price, but it is the end price you pay that is most important, not the highest level of discount. In addition, pricing negotiations with manufacturers should be based around future potential and not today’s volumes. If a supplier is seriously interested in supporting your business, then they should be prepared to ‘invest’ in better margins for you from the outset in return for higher volumes in the future.
When my SOW reduces after I switch supplier, will I have to pay a penalty to the current supplier?
This depends on whether you have a bona fide supply agreement in place with enforceable penalty clauses. With only five hearing aid suppliers battling for increased ‘Share Of Wallet’ among fewer than 250 independent dispensers, it would be short-sighted of a supplier to penalise a dispenser for switching just because it is “in the agreement” – you’re hardly likely to go back to them again and as we know, the independent sector is small and reputation is everything!
Why would switching suppliers make my business more attractive to a potential buyer?
If you are looking to plan and execute an exit from your business, you need to optimise all aspects of your business as much as possible. Looking at existing supply arrangements and their associated levels of commitment might tie a prospective purchaser into an arrangement they are not keen on. By considering alternative suppliers, you would be able to minimise or even remove altogether any supplier restrictions and penalty clauses to improve the attraction of your business.
I want to invest in and grow my business, how might switching suppliers support this?
All suppliers want to win business from their competitors and by presenting an attractive growth proposition to the main suppliers, you will generate interest in terms of investment in return for future commitment. Lending money has never been so easy and, with 0% interest rates widely available, so cheap. The manufacturers will look keenly at the potential to support well thought through and realistic business plans that demonstrate genuine prospects for growth with an investment or loan in return for a guaranteed SOW arrangement.
How do I manage my existing supplier when they know I am thinking of switching suppliers?
Your current supplier should be committed to optimising the relationship they have with you. No manufacturer has a ‘right’ to be your incumbent supplier and there is always the danger of ‘Relationship Fatigue’ creeping in. Make your existing supplier works as hard for their money as you do for yours. Keep them on their toes. If they are the best supplier for you, then they will shine through when you consider the offerings of their competitors. If they raise any objections to you looking at alternative suppliers, then maybe you should question if they really are the right supplier for you?
If I switch suppliers, I’ll lose the benefits of the Partnership Programme with my current supplier.
Supplier Partnership Programmes promote benefits to their members in return for price discounts, but often with minimum SOW conditions. Ask yourself how many of these Partnership Programme benefits you actually use and whether you could source them elsewhere with only a minimum effort or better delivery? Remember, there is no such thing as a free lunch. Ultimately you are paying for these benefits through the prices you are charged. Whether it is VAT advice, recruitment support, general business consultancy, marketing support or lead generation (amongst others), there is nothing proprietary about these programme benefits, so they might well appear more attractive than any benefit you actually derive from them – and you are tied into a Partnership Programme.
I am interested in switching suppliers, how can I be sure I am making the best-informed decision?
One option is to run a competitive process, whereby all potential suppliers are invited to submit a proposal based on a brief developed by you as the client. The initial submissions from the suppliers will determine a shortlist of potential suppliers. This is then followed up by the submission of more detailed proposals. You then meet with the prospective suppliers and decide who is the best fit for your business against a set of clearly defined criteria.
Running a competitive process is a great idea with obvious benefits. There is a downside, however, because it can be time-consuming to generate the documentation and chase responses. Audiology Business Central can support you to run a competitive process by taking the leg work out of the exercise and ensuring all the suppliers are working on a level playing field to support your decision making.
So, what’s stopping you from giving Audiology Business Central a call to talk through how you might benefit from a professional supplier review? It’s easy as ABC, simply call Dominic Watson or Ben Colman today on 0161 929 8389.
An abridged version of this article will be published in the February edition of Audio Infos magazine