1. MarkeTrak V Hearing Aid Industry Market Tracking Survey Sergei Kochkin, Ph.D. Knowles Electronics, Inc. June 1999

2. MarkeTrak Topics Demographic indices & trends Customer satisfaction revisited Hearing aids in the drawer Subjective benefit

3. Demographic Indices National family opinion panel –80,000 households –13,492 hearing-impaired households Detailed questionnaire 2,720 hearing aid owners. Response rate 83% No new survey to non-owners in MarkeTrak V.

4. Hearing Aid Market Penetration

5. Hearing-impaired User & Non-user Population

6. Hearing Loss Population by Age Group Owners versus Non-owners

7. Clinton Announcement Spurred Baby Boomer Potential Market Growth Clinton news release 10/97. Survey taken 11/97. Age 45-54 hearing loss growth =23% $60k growth =35% Some college growth = 30%

8. Physician Screening for Hearing Loss During Physical Exam HIA Targeting with Physicians

9. Binaural Penetration Trend

10. Hearing Instrument Fittings by Perceived Profession

11. Hearing Instrument Fittings by Source of Distribution (1997) Perhaps one to watch

12. Third-party Payment Trend

13. Average Retail Price to Consumer +24%+11%+30%+12%

14. Age of Hearing Instrument Mean age of instruments: 1991 = 3.1 yrs 1994 = 3.7 yrs 1997 = 3.8 yrs

15. First Time User Rate FDA/FTC Eddie Albert Ads

16. Factors Influencing New First Time Users to Purchase Factors less than 10% mentions: –Free HA (7%) –Price (6%) –Ad-magazine (5%) –HL Literature (3%) –Boss/co-worker (3%) –Newspaper (2%) –Direct mail (2%) –Ad - TV (1.5%)

17. Physician Recommendation Trends 1989 - HIA advertising to physician. Current initiatives: –Mfg. screening kit –BHI - physician handbook –BHI - Academy of Family Physicians –AAA Best Practice Family doctor (Positive) ENT (Negative)

18. Key Trends Negative trends –hearing aid penetration Static trends –hearing screenings by physicians –distribution penetration –Binaural penetration

19. Key Trends Positive trends –third party payment –first time users –repeat purchase –retail price (??) –Clinton - motivation of Baby Boomers 1 million new potential customers

20. Customer Satisfaction Revisited

21. Topics Trends 1991-1997 (1-5 years old) Segmentation (1-5 years old) Publishing of new research norms (3-12 months old) Hearing aids in the drawer (total)

22. Method MarkeTrak Survey –4 behavioral items (hours, repurchase) –1 Quality of life –Likert Satisfaction Scale 8 Product features 12 Performance/value 13 Listening situations 6 dispenser attributes –Modified APHAB (21 point scale = 5%)

23. Customer Satisfaction by Age of Hearing Instrument

24. Amount of Time Spent Counseling New Users of Hearing Instruments

25. Customer Satisfaction as a Function of Time Spent with New Users

26. Multiple Environmental Listening Utility (MELU) is Critical to Satisfying Consumers

27. Perceptions of Benefit as a Function of Multiple Environment Listening Utility (MELU)

28. Quantifiable Client Oriented Scale of Improvement (COSI) MarkeTrak measures satisfaction in 13 listening situations (5 point scale). –Very Satisfied (+2) to very dissatisfied (-2) Also Importance of hearing in these 13 listening situations (0-3 point scale) –Not important (0) to very important (3) Score = Satisfaction x importance Total score = Sum (all situations x need)/Total possible score

29. Quantifiable COSI - Strong Predictor of Perception of Benefit

30. U.S. Customer Satisfaction Trends No significant differences (H.A. 1-5 years.)

31. U.S. Customer Satisfaction New Hearing Instruments (<1 year) Declines (+5%) –Battery life –Adjust. V.C. –Value ($$/performance) Gains (+5%) –Visibility –Localization –Outdoors –Place worship –Telephone –Post fitting service

32. Customer Satisfaction Trends MarkeTrak V significantly higher than: –MarkeTrak IV (1994) : 23 of 33 items (p<.01) –MarkeTrak III (1991): 4 of 33 items (p<.01)

33. Customer Satisfaction Trends Key improvements (1997 vs.1991 & 1994): –Outdoor enjoyment –Phone usage –Value –Explain care of hearing aids Visibility ratings are lower than in 1991

34. The introduction of CICs Probably Caused Post-purchase Cognitive Dissonance with Visibility of Instrument

35. Satisfaction Segmentation by type of hearing loss by style of hearing aid Programmable/non-programmable Telecoil Hearing aids without volume controls New user versus repeat user Binaural versus monaural

36. Overall satisfaction by Style of Hearing Aid

37. Satisfaction by Style of Hearing Aid CIC rated superior on 15 attributes. –Visibility –Comfort with loud sounds –Listening situations (7 of 13) Telephone, Outdoors, workplace, Groups, restaurant CIC rated lower on battery life, V.C. –34% w/o a V.C. want one

38. Satisfaction by Style of Hearing Aid BTE rated significantly lower: –Ability to hear soft sounds –Difficult listening situations –Tell direction of sounds BTE rated higher –Hours worn –Battery life Are lower ratings due to degree of loss?

39. Customer Satisfaction by Perceived Level of Hearing Loss

40. Mild loss significantly lower on 13 attributes –Quality of life –Likelihood of repurchase/recommend HA –Wearing of aids –Perception of benefit –One-on-one communication

41. Customer Satisfaction by Perceived Level of Hearing Loss Profound lower on 15 attributes: –Perceived benefit –Fit and comfort –Ability to hear soft sounds –Localization –Whistling/feedback –Nearly all listening situations Yet, they give the highest overall rating.

42. What about the volume control? 9% report they have none. 37% want one. Big differences on satisfaction. Should make sure consumer can live without a volume control.

43. The Binaural Advantage (Rated higher on 15 attributes)

44. The Telecoil Advantage (Rated higher on 8 attributes)

45. The Programmable Advantage (Rated higher on 37 attributes)

46. New Users More likely to be Dissatisfied with Their Experience 54% overall satisfaction new users –versus 63% for repeat users New users rate 16 items lower –Quality of life (-21) –Recommend hearing aids (-12) –Repurchase, reliability (-10) –Battery life (-8) New users rate 5 items higher –Able to hear soft sounds (+10), Large group (+7)

47. Key Findings Modest improvements since 1991 Major improvements since 1994 Strong advantage in favor of –Programmable –Telecoil –Binaural –CIC Mild hearing loss & new users less satisfied

48. Key Findings CIC introduction - probable negative impact on larger instrument satisfaction. Lack of a VC could depress satisfaction for some segments of users. Importance of: –Counseling time spent with consumer –Multiple environmental listening utility (MELU) –Volume control to some users of CICs

49. Hearing Aids in the Drawer

50. Methodology Consumers who own a hearing aid but NEVER wear it = hearing aid in the drawer. Hearing aids in drawer = 16.2% respondents. Told to explain why non-use in MarkeTrak survey. Received 348 letters. Content coding yielded 567 comments.

51. Hearing Aids in the Drawer are Related to Age of the Instrument

52. 907,120 Customers do not Use Their Hearing Instruments 325,000 1-4 years

53. Reasons for Non-Use Poor benefit (30%) - 268,507

54. Reasons for Non-Use Poor Benefit I threw it away it was worthless to me I dont see much difference with them. I feel I was sold one under false pretense. Dont feel I really needed one There is no improvement in my hearing with the aids. Where there is a slight improvement in my hearing, it is minimal.

55. Reasons for Non-Use Poor Benefit I dont wear the aids at all. The problems appears to be clarity of words. Volume is OK but I cant distinguish words I have not been able to wear the H.A. since the day I received it. It was made wrong and the Company said there was nothing wrong with it.

56. Reasons for Non-Use Poor Benefit It is not worth the trouble or expense for the small difference in hearing. I wish I had my money back. _____ aims at taking old peoples money for little value. All the aids do is amplify the sound that I cant discriminate with an aid in the ear.

57. Reasons for Non-Use Poor Benefit When ______sold me the H.A., I was confident it would help me hear better. When I received it and wore it every day, it did not make my hearing any better. So, I dont wear the HA and feel like I wasted my money. I tried to return it and the person did not seem to want to help me. I am quite dissatisfied with the whole experience.

58. Reasons for Non-Use Poor Benefit I cant hear high pitch sounds with the behind the ear model. H.A.s amplify everything but human voices which is what you need to hear. ____plugs are not worth the price.

59. Reasons for Non-Use #1. Poor benefit (30%) - 268,507 #2. Background noise (25%) - 229,383

60. Reasons for Non-Use Background Noise I will not wear my H.A. because it increases background noise. And therefore, after a while I get a headache and get somewhat nervous. It catches all the sound on the road, TV, etc at the same time. Background noise is distracting.

61. Reasons for Non-Use Background Noise H.A.s dont work when there is a lot of background noise. This is when you need them to work. Background noise really drives him crazy. My problem is with background noise. All my H.A.s do is amplify so they are of little help.

62. Reasons for Non-Use Background Noise I dont wear my H.A. because I need it at a dance, restaurants, and large groups. All the H.A. does is increase all sound including background sounds. No help. Sudden loud noise is a killer. H.A. amplify other sounds so much that I actually feel pain.

63. Reasons for Non-Use Background Noise If someone drops a spoon on the table it is like a rifle going off. Hate them. They dont work for me. All sounds are amplified. Never knew there were so many. I cant adjust the H.A. constantly to every noise.

64. Reasons for Non-Use #1. Poor benefit (30%) - 268,507 #2. Background noise (25%) - 229,383 #3. Fit & Comfort (19%) - 169,431

65. Reasons for Non-Use Fit & Comfort My hearing aids are too big for my ears. It is uncomfortable and my wife says I dont listen to her anyway. It hurts my ears. I do not like the feel of it in my ear.

66. Reasons for Non-Use Fit & Comfort I dont wear my H.A. because they plug up my ears and feel uncomfortable. My H.A. has the tendency to fall out when I am working hard in hot weather. Its hard to keep it in my ear. I travel for business a lot and cant risk it falling out of my ear.

67. Reasons for Non-Use #1. Poor benefit (30%) - 268,507 #2. Background noise (25%) - 229,383 #3. Fit & Comfort (19%) - 169,431 #4. Negative side effects (11%) - 99,048

68. Ears that hurt Too much pressure in the ears Blisters in ears Rashes in ears Itching ears Dizzy Nervous Reasons for Non-Use Negative Side-effects

69. Ears that sweat Builds up wax in inner ear Headache Hair gets caught in hearing aid Infections in ear Problems chewing or swallowing Plugs up ears Reasons for Non-Use Negative Side-effects

70. Reasons for Non-Use #1. Poor benefit (30%) - 268,507 #2. Background noise (25%) - 229,383 #3. Fit & Comfort (19%) - 169,431 #4. Negative side effects (11%) - 99,048 #5. Price & cost (10%) - 93,839

71. Reasons for Non-Use Price & Cost I bought the H.A. when I was teaching. I had trouble hearing students questions. Since retiring I have stopped using them. They were costing too much for what good I was able to get from them. Programmable H.A. would be desirable but they cost too much.

72. Reasons for Non-Use Price & Cost My current H.A. are broken & I am unable to afford the cost of a replacement. They are too old for service. The expense of owning and maintaining are too great. HMO does not cover for HA. Price is high.

73. Reasons for Non-Use Price & Cost I enjoyed my H.A., but they burned up in a house fire and I cant afford another one. I wish an aid would be developed to allow us to hear natural sound and an aid with a reasonable price. If I could afford it, I would buy a different brand.

74. Reasons for Non-Use Price & Cost My H.A. was never dependable. Taking it in for an adjustment was only a headache as it never performed very long. Had to be looked at again. The last time I had trouble, the office wanted to send it to _____ at $200 & just to check it, plus another $200 to repair it.

75. Reasons for Non-Use #1. Poor benefit (30%) - 268,507 #2. Background noise (25%) - 229,383 #3. Fit & Comfort (19%) - 169,431 #4. Negative side effects (11%) - 99,048 #5. Price & cost (10%) - 93,839 #6. Dont need help (8%) - 72,987

76. I work and live alone and do not need the aid most of the time. I had an operation on my right ear and I can hear better again. I dont talk to anyone during the day. Reasons for Non-Use Dont Need Help

77. I can hear most everything without H.A.s I feel I was sold under false pretense. I dont feel I really needed one. Dont wear very often since my hearing loss is only 35 degrees.

78. Reasons for Non-Use #1. Poor benefit (30%) - 268,507 #2. Background noise (25%) - 229,383 #3. Fit & Comfort (19%) - 169,431 #4. Negative side effects (11%) - 99,048 #5. Price & cost (10%) - 93,839 #6. Dont need help (8%) - 72,987 #7. Broke or does not work (8%) - 68,814

79. Reasons for Non-Use Broke or does not Work After a year, the H.A. is down. I cant afford to repair them. Because it doesnt work. ______ refused to do anything. The man that sold it to me has been fired. It does not work right.

80. Reasons for Non-Use Broke or does not Work I dont wear it because after the warranty expired it got broken. It would cost $1,200 to replace it, so I quit wearing it. The housing is currently broken and will have to be glued back together. This is the fourth time it has broken.

81. Reasons for Non-Use Broke or does not Work It seems as if the aids were in the shop for repair more than in my ear. They are still not adjusted correctly for my comfort level. The cost of the repairs were too much. It is easier to go without them and have everyone speak louder. I have 2 H.A.s that dont work. It costs $200 a piece cash to have them fixed.

82. Reasons for Non-Use #8. Sound quality (6%) - 57,329

83. Reasons for Non-Use Sound Quality Never got true sound clarity I wanted Uncomfortable sound Sound of crickets Unnatural Distorted Slight hiss Tinny Picks up wind

84. Reasons for Non-Use Sound Quality Chewing and swallowing noise Poor fidelity Cant stand sound of my voice Hollow sound Aversiveness of sounds (running water, sharp sounds)

85. Reasons for Non-Use #8. Sound quality (6%) - 57,329 #9. Wont wear - unspecified (6%) - 57,556 #10. Volume control adjust. (5%) - 44,314

86. I have trouble adjusting the sound. Hard to adjust. Every time the phone rings I have to adjust the volume. They need adjusting, because the background noises are annoying. Reasons for Non-Use Volume Control Adjustments

87. They are a bother having to turn up & down too often. The volume never stays at setting. I cant adjust H.A. constantly to every noise.

88. Reasons for Non-Use #8. Sound quality (6%) - 57,329 #9. Wont wear - unspecified (6%) - 57,556 #10. Volume control adjust. (5%) - 44,314 #11. Whistling & feedback (4%) - 39,100 #12. Nuisance / hassle (4%) -38,371 #13. Poor service (3%) - 28,673 #14. High frequency Loss (3%) - 26,067

89. Reasons for Non-Use #15. Stigma of wearing (3%) - 26,037 #16. Profound hearing loss (3%) - 23,460 #17. Work in limited situations (3%)-23,460 #18. Uncomfortably loud (2%) - 27,114 #19. Battery life (2%) - 19,186

90. Reasons for Non-Use 1% or less of mentions Does not work on phone Monaural aids inadequate Expectations not met Has Tinnitus Manual dexterity Forget to use Family pressure Feels like ear plugs Poor directivity Low gain Lost hearing aids Ear wax problem Rare social user

91. Key Findings 907k inactive hearing aid owners Key reasons: –Poor benefit –Background noise –Fit and comfort –Cost –Negative side effects –Hearing aids broke

92. MarkeTrak V - Conclusions Significant opportunities for improvement. Encouraging positive trends. Huge opportunity still waiting to be tapped. Need to find new marketing methods to reach Baby Boomers.