Company: Oticon, Inc.
Contact: Gordon Wilson, VP of Marketing
Location: Somerset, NJ
Industry: Manufacturing (B2C)
Annual revenue: $960,000,000
Number of employees: 350
The hearing aid industry for years has suffered from an image problem. Potential buyers were reluctant to buy hearing aids because the devices were perceived as ugly and only for elderly people. As a result, just 23% of those who needed hearing aids actually bought them. Denmark-based Oticon, like other manufacturers, faced a lack of market penetration.
In 2004, the company undertook extensive market research aimed at people with hearing loss who had opted not to buy a hearing aid. The research tried to identify the attributes of an ideal hearing aid and under what circumstances people would buy one. Oticon set out to use the latest technology to build a hearing aid that would address many of the concerns highlighted by the market research.
Two years later the company introduced the new device, which had a different look and fit from prior generations of hearing aids. The related marketing materials used younger-looking models wearing the small hearing in colorful designs. The new approach has paid off. In 18 months on the market, the new Delta hearing aid has helped Oticon nearly double the industry average in terms of the proportion of first-time hearing-aid buyers.
Prior to 2006, Oticon's US sales—like those of its rivals—were stagnant, and its market penetration hadn't budged in years. The average age of the first-time buyer for all manufacturers was 69.
But hearing loss affects a large population of varying ages, and Oticon knew that it was leaving potential sales on the table because many suffering from hearing loss didn't want an unattractive hearing aid in their ear. However, it wasn't until the company conducted high-level market research that Oticon realized exactly what it was up against in terms of attitudes about hearing aids.
The research, begun in 2004, concentrated on those with a noticeable hearing loss who opted not to wear hearing aids. Researchers asked many pointed questions about why subjects decided not to wear the devices.
"We realized that the stigma (surrounding hearing aids) was more deeply felt than we had allowed ourselves to believe," said Gordon Wilson, Oticon's vice-president of marketing. "Some people felt that wearing a hearing aid was like wearing a glaring sign that said I am broken, I am not ideal. For some, the hearing aid had a very negative product connotation—and as a result, they would only get them when they were desperate to hear."
Oticon decided it needed a very different sales approach to reach a wider audience and also change the hearing aid's image. The company had already begun redesigning its hearing aid when it launched its market research in 2004; now it used that research, as well as the latest technology, to finalize the design of the new device.
In March 2006 it launched what it called the Delta "personal hearing device." The Delta, so named after its triangular housing that contains the microphones and signal-processing electronics, is designed for people in their late 40s or older who don't want their hearing aids to be visible; the tiny over-the-ear device can be hard to detect if users keep their hair over their ears.
To show that the Delta could be hip, its interchangeable outer casing is available in a dozen colors, from "sunset orange" to "racing green" to "leopard skin." The hearing aid has no buttons to adjust and offers an instant fit: A patient could walk into an audiologist office and walk out with the Delta the same day, after a personalized computer program is loaded onto the device. The instant fit was a direct response to consumer concerns, Wilson said.
Still, this new approach at selling needed participation from audiologists, who had to be trained in using the product and explaining its benefits. Here, Oticon ran into some surprising resistance from some hearing professionals who were used to traditional hearing aids that often required a much longer lead time.
"The notion of an instant fit became a radical proposition for hearing care professionals. Some embraced it and others were not comfortable with it," said Wilson.
Furthermore, some audiologists were reluctant to follow the Oticon marketing plan of offering a free trial of the Delta, which the company deemed necessary for success. "We needed to share our research that showed people who were hesitant about hearing aids might buy them if they could get a risk-free trial."
In an effort to reach even more potential buyers, Oticon launched what Wilson described as "ageless marketing." Some print ads showed images of an egg with a Delta hearing aid coming out, or an oyster shell opening with a Delta inside, and the tagline, "Your new life starts now." Also, Oticon brochures featured middle-aged, attractive models wearing the Deltas. The campaign broke all stereotypical notions of the typical hearing aid user.
"Our industry had never used such imagery," Wilson said. "We feel these ads touch a bigger audience (than traditional hearing aid wearers)," he said.
The ads and the risk-free trials were effective in creating the type of buzz that typically isn't linked to hearing aids. Six months after the Delta was introduced, The New York Times style section wrote about the devices under the headline, "The hearing aid as fashion statement."
Oticon has captured a much larger share of the first-time buyer segment, suggesting that its campaign has been successful in attracting those who in the past would not have bought a hearing aid. About 73% of Delta sales are to first-time buyers, compared with the industry average of 39%.
This is an especially significant statistic, Wilson noted, considering that 60% of the entire market is replacement sales, and customers tend to replace their hearing aids with the same brand as before. Prior to introducing the Delta, Oticon's share of first-time buyers was close to the industry average.
Oticon's overall US sales are up, too, although Wilson wouldn't say by how much.
- Do qualitative market research. Don't depend on existing industry research if you are facing stagnant sales, advises Wilson. The hearing-aid industry had much market research available, but only after Oticon ordered specific qualitative research did it get the results it needed to advance its marketing and increase sales.
- Change your product if necessary—don't expect your customer to change. "People wouldn't change their view of hearing aids—we had to change our product. I've been in this business for 17 years, and it was easy to lose sight of that," Wilson said.
- Changing your product requires educating your distributors as well as the public. All of Oticon's effort to remake its image wouldn't have been effective without the help of its "retailers"—the audiologists who sell hearing aids. They had to be educated about the new advantages of the product and at times pushed in a new sales direction, such as emphasizing the stylish look of the Delta as much as the instrument's efficiency. Oticon supplied modern brochures, shared the costs of advertisements, and (when necessary) even gave them advice on how to modernize their waiting rooms.
Note: Annual revenues cited are from global operations; the number of employees cited is for Oticon's US subsidiary.