No consumer product is more ubiquitous than the earbud. Unfortunately for the youth of the world, hearing impairment is a closely-associated byproduct. According to a recent report, one in five Americans in their 30s and 40s are now hearing-impaired, and more teenagers than ever are suffering hearing loss. Couple that trend with the painful reality of an aging baby boomer generation, and you’ve got a major emerging market for another technology: hearing aids.
But hearing aids are expensive—from $1,800 to $6,800 a pair, according to a recent Consumer Reports review—and bizarrely are not covered by most health insurance. Cost is largely to blame for the fact that only 25 percent of the 35 million people in the U.S. who suffer hearing loss own hearing aids. A secondary reason is the product’s less-than-glamorous image.
It all spells “opportunity for disruption,” according to Patrick Freuler, a 33-year-old MIT-trained engineer. While investigating healthcare opportunities for Bain Capital after graduate school, Freuler observed that in the hearing aids industry, “The only thing available was the Rolls Royce, not a Honda that gets you from point A to B just as well.” He realized that hearing aid users in his own family—an aunt and his 102-year-old grandmother—were “paying an abhorrent amount of money for a product that was not more complex than a mobile phone but cost six times more than an iPad.” Considering that the disposable income for the emerging youthful market is far less than that of the traditional hearing aid consumer, Freuler says he knew that costs would have to come down.
Even beyond the price barrier, Freuler says, with the industry’s conventional sales approach—whereby audiologists place orders and adjust the instruments in their clinics for patients—the approximately 13,000 audiologists in the U.S. can’t possibly meet the demands of an unserved 26 million hearing-impaired customers.
His conclusion: “the industry needs to change like analogous industries, such as contact lenses and eyewear.” Freuler believed that if he could cut out the middleman—the clinician—he could offer affordable hearing aids, reach a wider market, and perhaps even change the image of hearing aids, making them acceptable, if not an in-demand accessory, for a new generation of users.
So in June 2012 he launched Audicus, an e-commerce site that sells (and programs) designer hearing aids directly to consumers. Audicus boasts prices 70 percent less than audiologist retailers. The same hearing aid technology that goes for $2,000 in the clinic runs between $500 and $600 at Audicus, Freuler says.
While his five-person company doesn’t share precise numbers, Freuler says Audicus has already saved its customers more than $3 million in hearing aid costs and is responsible for “north of 1,800 better-hearing ears.” His business has “put the whole concept of buying hearing aids on its head,” he says.
And yet, Freuler doesn’t see his operation undercutting audiologists’ revenue. Instead, he says, he’s reaching an untapped market—more than 70 percent of his customers are first-time hearing-aid buyers—while also increasing awareness about hearing impairment. The effect could be to generate even more business for audiologists, he suggests. Plus, he says, “There will always be those people who are more comfortable staring a clinician in the eye and have the funds to pay for it.”
That’s not to say Audicus doesn’t strive to offer the same personal touch that a doctor would. Freuler shares an anecdote about a truck driver who lost his job upon failing a hearing test. A typical $4,000 set of hearing aids was out of reach for the man, but the $1,000 set he found online at Audicus.com seemed affordable. After getting the equipment, the trucker told an Audicus rep it worked, but he was still worried about passing his next hearing test. So, Freuler says, “our audiologist talked him through what kind of testing would be done, and we sent him a series of online training exercises to help him prepare. He got his job back.”
Freuler says stories like those are what keep him passionate about the business. “We have a ton of anecdotal evidence of peoples’ family lives and work environments improving substantially because they can now follow every conversation,” he says. “There are a lot of warm and fuzzy moments.”
As for stigma, Freuler says the newest hearing aid models are very small and are worn deep inside the ear canal. “They look less like a medical device than a consumer electronics product. That’s the first change that is going to drive broader adoption.” The second, he says, will be wireless and Bluetooth integration. “Once the technology moves down this road—smaller, less conspicuous, and with more features like Bluetooth—hearing aids will be more commonly accepted among younger generations,” he says.
What’s next for Audicus? By being “very capital efficient” and experiencing a “remarkable growth trajectory” in one year, Freuler says that without any funding the company was sustainable within months of launch. Now he’s looking to raise financing to accelerate his growth over the next 12 months.