I am convinced there must be one Book or Training Manual thats used in College Business Class, or in a MBA Program on PRICING. I haven't read Peter Drucker,so how would I know.
Here goes:
A Manufacturer of almost anything, has to establish, usually, a consistent price at which he offers for sale, whatever it is they are selling.
In most instances, there is some basis, such as actual cost of manufacturing and distribution costs, including Advertising and Sales Costs.
A Burden is established and then a desired Return On Investment is established and then the Product is floated or introduced to determine the effectiveness of the Pricing.
Competition and Market Acceptance in the end, determines what the final pricing will be.
In the Hearing Aid Industry, especially when Digitial Signal Processing was introduced, a Trial Balloon was sent out, and evidently, the Pricing Scheme worked.
There are about 2 Million Hearing Aids manufactured and sold each year.
We know that about 400,000 are sold to the Veterans Administration.
Probably at least another 400,000 are sold through some form of Welfare or Medicaid.
Lets assume another 400,000 are paid for by 3rd Party Pay, such as Employers,or Past Employers.
That means that only about 800,000 are sold on the open market through Retail Channels of some type.
Since 3 of the 4 Channels of Distribution, really don't care about the costs, and especially since Hearing Aids have been promoted and associated as Medical Devices, and since anything considered Medical has been accepted with outlandish pricing, the product as a Hearing Aid Medical Device has been priced at levels unimagined just a few years ago.
For some reason, all HearingAid Manufacturers,and they all think alike, use the Term: Retail Price as the Starting Point in the Sale of their Products.
Usually Retail Price or List Price, is the Final Price that the Consumer pays.
The List Prices I have seen in the Hearing Aid Industry, have to be established after some kind of a Dream or Spiritual Experience, because they make no sense.
I have seen Price Sheets reflecting List Prices of over $2,200 Dollars, per each aid.
One Reason for such unrealistic pricing, maybe for the purpose of controlling and restricting their Distribution.
Whereas, it may be Illegal to Restrict the Sale of their Products, it is not Illegal to sell at different Price Levels or Discounts.
For example, if there is an Individual or Retail Chain that the Manufacturers don't want to sell, by only making their Products available to them at List Price, or with a minimum discount, they are in effect Discriminating and Controlling their Distribution.
They may not want to sell their Products to Certain People for Marketing Reasons.
In the Hearing Aid Industry, the Manufacturers may not want to sell COSTCO OR WAL-MARTor Surf City Hearing Aids, because they are Discount Type Retailers.
Some Hearing Aid Brands may only want to make their Products available through Otologists or ENT Offices for Cache Purposes and don't want Competition from Discount Retailers.
Some HearingAid Manufacturers may only want their Products sold through Audiologists Offices.
Medical Doctors Offices and Audiologists Offices, who are both Notorious for the Prices they Charge, don't want the Same Brand Competition from Discount Retailers or Hearing Aid Dispensers Offices, where Prices are known to be much cheaper, usually about half as expensive.
By having such High List Prices, the Manufacturers can affect their Distribution by Controling the Discount Provided to their Customers.
For example, if they really don't want to sell a particular Retail Office, they may provide their Products at either only List Price to that Office, or perhaps with a 5% Discount from their List Price.
Such Hearing Aid Office would probably then choose not to buy that Product because they couldn't be competitive with other Dispensing Offices that are receiving a 50% Discount on the same Product, or why would they buy that Product at List Price, when they could buy another Brand at a 50% Discount and either enjoy bigger Profits or have greater flexibilities in Marketing the Product.
There is really no difference in Hearing Aids, regardless of who they are assembled by, but some times, for whatever reason, usually Advertising Claims, the Consumers think some Manufacturers or Brands have more Cache than others, and so want a specified Brand.
In the Manufacturing or Assembling of Hearing Aids today, as compared with 10 years ago, the only cost difference is in the Circuit or DSP CHIP.
The Case or Shell Cost is the Same.
The Microphone Cost is the Same.
The Receiver Cost is the Same.
The Labor Cost is the Same.
The Customer Service Cost is the Same.
They now have Technical or Software Fitting Personnel Costs that they didn't have before, but they don't have as many Customer Service Personnel, and they don't need as many Technical Repair Personnel, since there are less problems and modifications as a result of Digital Signal Processing, and there are a lot less returns.
All in All, the Profits, AT ALL LEVELS OF MANUFACTURING AND DISTRIBUTION, ARE MUCH,MUCH,GREATER THAN EVER BEFORE.
THE PROFIT STRUCTURES ARE UNBELIEVABLE.
How the Consumers have accepted the New Pricing Structures in the Acquisition of Hearing Aids is unbelievable.
What is interesting is that now all the HearingAid Manufacturers are Introducing and Releasing, what they call Entry Level Products, meaning they are available at much lower prices.
They realize that most People will not pay more for a Hearing Aid than an iPhone or iPod, or a HD Television, and they shouldn't.
The Downside is, that some Hearing Aid Offices are selling the Entry Level Products at the Premium Product Price Levels, since the Consumers don't know the difference.
Even the Entry Level Products have Programmable Features, just not as many.
This is one of the reasons that Consumers should either become better educated in the Difference in Models of Hearing Aids, since there is no difference in the Brands, or probably more Important, THEY SHOULD ONLY DO BUSINESS WITH THOSE PEOPLE THEY TRUST.
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