What is the Price Markup on Hearing Aids
Posted by CENTURY HEARING
What is the Price Markup on Hearing Aids Price Markup on hearing aids is the difference between the cost of a hearing aid and its selling price. A markup is added onto the total cost incurred by the hearing aid manufacturer in order to create a profit. The total cost reflects the total amount of both fixed and variable expenses to produce and distribute a product. Markup can be expressed as a fixed amount or as a percentage of the total cost or selling price.
One example of markup in the hearing aid world comes from a previous post regarding the Hearing Planet Review, see http://centuryhearingaids.com/blog/hearing-planet-how-does-hearing-planet-work, I made the suggestion (educated guess) that Hearing Planet, owned by Sonova, which sells Phonak and Unitron, is able to mark up hearing aids, and sell them at nearly a 5 to 10 times cost. The was an educated guess based upon what Sonova sells their hearing aids to the Veterans Administration for - see here: phonakpricestoVA.
What we know as fact is the price that Sonova, (owner of Hearing Planet) sells their hearing aids to to the VA. That is published - public information. The Government, we the people, require this of all Government vendors.
Sonova, sells their Phonak Receiver in the Canals, top of the line RIC or RITE hearing aids, to the VA for $368 to $382. The Government gets great prices for sure, but Sonova (Phonak and Hearing Planet) still needs to make a profit selling to VA, (because Sonova is a for profit business) so lets say the markup is only $100. That is only a 1.3 times markup to the VA. That puts the top of the line Phonaks costs at $268 to $282 per hearing aid. But to the Hearing Planet customer, the price a Hearing Planet customer would pay is between $2799 to $2899 for a top of the line RIC, so that is 10 times - or 100% markup.
Take another example....Costco. From a New York Times article, The Costco CEO, Jim Sinegal, said one of his cardinal rules is that "no branded item can be marked up by more than 14 percent, and no private-label item by more than 15 percent". If that is true for the hearing aids they sell, That would mean the two RICs they sell for $1899 minus the 15% markup is the Cost of Goods for 2 hearing aids to Costco is $1600 or the hearing aid manufacturer charges costco $800 per hearing aid. This sounds incredibly high, I do not think Jim Sinegal's cardinal rule applies to hearing aids in this case.
Take one more example. mdhearingaid.com, I do not work for mdhearingaid.com so these are all educated guesses, based on conversations with consultants and research. It looks like the hearing aid mdhearingaid.com buys come from Alibaba.com. I know of a high level consultant that was going to work for mdhearingaid.com that mentioned he was going to work for a company that sold over 100,000 hearing aids in 2013. I am going to guess this is mdhearingaid.com based on their adspend - yes this is something marketing guys can figure out online. Anyway, That is a lot of hearing aids. So, finding this hearing aid on Alibaba, talking to the mfg in China on text chat, and they also publish volume discount pricing, mdhearingaid.com maybe be able to get each hearing aid at a cost of $40 to $80 per unit. mdhearingaid.com sells one unit at $179 and the other $299. That is a 4.5 times markup to 3.75 times markup.
So Price Markup on hearing aids can range from 15% to 100% or 1 times to 10 times markup, depending on where you purchase. Remember, A markup is added onto the total cost incurred by the hearing aid manufacturer in order to create a profit. Each supplier, Hearing Planet, Phonak, Costco, mdhearingaid, and Century Hearing Aids, each is a completely different business model. And each company has its own cost structure to market and sell hearing aids at a profit.
One example of markup in the hearing aid world comes from a previous post regarding the Hearing Planet Review, see http://centuryhearingaids.com/blog/hearing-planet-how-does-hearing-planet-work, I made the suggestion (educated guess) that Hearing Planet, owned by Sonova, which sells Phonak and Unitron, is able to mark up hearing aids, and sell them at nearly a 5 to 10 times cost. The was an educated guess based upon what Sonova sells their hearing aids to the Veterans Administration for - see here: phonakpricestoVA.
What we know as fact is the price that Sonova, (owner of Hearing Planet) sells their hearing aids to to the VA. That is published - public information. The Government, we the people, require this of all Government vendors.
Sonova, sells their Phonak Receiver in the Canals, top of the line RIC or RITE hearing aids, to the VA for $368 to $382. The Government gets great prices for sure, but Sonova (Phonak and Hearing Planet) still needs to make a profit selling to VA, (because Sonova is a for profit business) so lets say the markup is only $100. That is only a 1.3 times markup to the VA. That puts the top of the line Phonaks costs at $268 to $282 per hearing aid. But to the Hearing Planet customer, the price a Hearing Planet customer would pay is between $2799 to $2899 for a top of the line RIC, so that is 10 times - or 100% markup.
Take another example....Costco. From a New York Times article, The Costco CEO, Jim Sinegal, said one of his cardinal rules is that "no branded item can be marked up by more than 14 percent, and no private-label item by more than 15 percent". If that is true for the hearing aids they sell, That would mean the two RICs they sell for $1899 minus the 15% markup is the Cost of Goods for 2 hearing aids to Costco is $1600 or the hearing aid manufacturer charges costco $800 per hearing aid. This sounds incredibly high, I do not think Jim Sinegal's cardinal rule applies to hearing aids in this case.
Take one more example. mdhearingaid.com, I do not work for mdhearingaid.com so these are all educated guesses, based on conversations with consultants and research. It looks like the hearing aid mdhearingaid.com buys come from Alibaba.com. I know of a high level consultant that was going to work for mdhearingaid.com that mentioned he was going to work for a company that sold over 100,000 hearing aids in 2013. I am going to guess this is mdhearingaid.com based on their adspend - yes this is something marketing guys can figure out online. Anyway, That is a lot of hearing aids. So, finding this hearing aid on Alibaba, talking to the mfg in China on text chat, and they also publish volume discount pricing, mdhearingaid.com maybe be able to get each hearing aid at a cost of $40 to $80 per unit. mdhearingaid.com sells one unit at $179 and the other $299. That is a 4.5 times markup to 3.75 times markup.
So Price Markup on hearing aids can range from 15% to 100% or 1 times to 10 times markup, depending on where you purchase. Remember, A markup is added onto the total cost incurred by the hearing aid manufacturer in order to create a profit. Each supplier, Hearing Planet, Phonak, Costco, mdhearingaid, and Century Hearing Aids, each is a completely different business model. And each company has its own cost structure to market and sell hearing aids at a profit.
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