Phonak, having seen the July 2013 expansion of GN ReSound’s Minnesota facility to handle Costco’s business, wants a piece of the pie and is joining them and Rexton in selling deeply discounted premium hearing aids to the 500+ dispensing locations throughout the United States starting April 1st.
It appears to us that this has been in the works since at least mid-2013, as Phonak drastically expanded their US production by moving it out of their Warrenville IL headquarters into a nearby new factory in Aurora, with production having started in January.
The following is a verbatim comment by C. Scot Frink on a post in the LinkedIn Hearing Aid Professionals group on Phonak’s decision to sell their devices through Costco. Scot is President & Audiologist at Salem Audiology Clinic in Oregon, which primarily dispenses Phonak hearing aids. He is a second generation hearing aid professional; and was the regional sales director for Phonak from 1999 through 2001.
I’ve got details. I found out early last week and have been fishing for information. I was asked to not share any information until after yesterday. Well, here we are. What I’m about to reveal will be easy to find out soon enough, so why not tell you all now before misinformation starts to take over.
Needless to say, I’m seriously pissed. I have been a big Phonak account since the mid 1990s and love their products. This to me is a serious betrayal, as it was when ReSound did it in the 1990s and then again in the mid 2000s.
Starting April 1, Costco will start selling a Phonak “Premium” product. This means it is classified with the their top-of-the-line. It will be a proprietary product, not exactly the same as their currently flagship product, the Q90. It will have most of the same features, the only confirmed exception is that it will not have a tinnitus noise generator as some of the Q90 products do since Costco at this point doesn’t want to delve into tinnitus management.
Price will be $1,349 per aid, which is only slightly more than what my invoice cost is. They are calling it “Brio” (not absolutely sure about the spelling, but the sound of the name is the same). Kind of a bastardization of the name “Bolero”, which is the name for their current standard BTE line. Just like it is a bastardization of the relationship I have had with them.
For Phonak and all the other manufacturers who sell to Costco, answer me this: Why the hell should I buy your product when you sell it to me for only slightly less (and sometimes more, depending on company) than what Costco is retailing it for? How can I compete against that? Good service? Been there, done that, still trying.
In our area, Costco fitters are usually pretty good. I’ve found them well trained, ethical, and for sure concerned about the needs of the patient. Do we do a better job than they do? Absolutely, and primarily because we have the flexibility as an independent to bend our own rules to meet the patients needs as compared to someone who has to follow strict corporate rules. But being better at service and flexibility isn’t enough when price is the number one issue patients ask about. Sure, we can educate them on the difference and how we can offer more, but when it comes down to it, especially in this economy. money talks. People walk.
Back when ReSound first entered Costco, we had many people return their hearing aids they had recently purchased when they found out Costco was offering “the same thing,” even though it wasn’t the same thing (it was a trimmer-based product rather than a programmable like the good old BT2s and ED3s). But no matter how you explained it to the patient, they didn’t get it.
Phonak can expect a lot of Hell over the next few months, based on my experience of what ReSound went through. They can expect and increase in returned from the non-Costcos and non-VA offices, and for a lot of reasons. The first is the one I gave above. Another are resentful practice owners like myself who, over the serious bad taste this is leaving, will send everything back that they can. Third will be fitters who even have patients in process who will switch the patient to a different manufacturer just because they are so pissed at Phonak. I’ve seen it happen before, and not [sic] it will happen again.
But Phonak and Sonova had to know this going into it. They have probably done the math and decide it was still worth pissing off their loyal customers because of the units they’ll get from Costco. When it comes down to it, it’s all about the almighty buck.
(More coming, as I’ve almost exceed the post length limit)
Scot continues in the next comment:
The source I spoke with at Phonak gave a lot of reasons for going into Costco that were not financially motivated, but it’s all B.S. According to the source, they did research and found that Costco buyers are, on average, younger than those that would come to my office, so their motivation was to help more people who have hearing loss at a younger age. Bull. Their motivation was to get a piece of that pie. If Costco was helping people find help at an earlier age, why not let ReSound and Rexton continue to fill that role? [Editor: Emphasis added]
By Phonak going into Costco, it doesn’t increase the number of people Costco is helping, it only changes the mix of what they’re selling. Costco only has so many people fitting hearing aids, and they only have so many hours in the day. Only Costco can change how many people they are helping, by increasing the number of outlets they have.
Phonak going into Costco does not increase the number of people being fit with hearing aids. It only takes business away from me. And my business away from them.
Phonak is owned by Sonova, which also owns Unitron and Advanced Bionics; GN ReSound is owned by GN Stor Nord, which also owns Beltone and Jabra; while Rexton is owned by Siemens, which also is the primary supplier to Miracle Ear.
Correction: Amplifon is an independent company listed on an Italian stock exchange; while although Hansaton is a privately owned company, they share a technological partnership with Siemens SAT.
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