Elasticity and Hearing Aids
Over 30 million people in the United States experience hearing loss, but just over 7 million choose to use hearing aids. In other words, less than one-quarter of potential candidates for hearing aids use them. There are several reasons why so few people who would benefit from hearing aids do not use them, including the stigma that is sometimes attached to people who wear them. But the price of hearing aids is an important factor, too. Hearing aid prices vary but can range from $2,000 to $4,000 each. Many private health insurers do not pay for hearing aids and neither does Medicare. (Medicare is a federal medical insurance program primarily for the U.S. citizens 65 and older). Therefore, many people must pay for hearing aids out of their own pockets.
Would firms increase their revenue if they were to lower hearing aid prices? Evaluate the situation by doing a critical analysis?
A growing healthcare problem in the U.S. is the number of Americans currently suffering from various cases of hearing difficulties with a large percentage of the retired, semi-retired, and even productive citizens experiencing hearing difficulties with various studies showing that this percentage of the population will continue to increase over time. Fortunately, while there has yet to be an actual cure to prevent gradual hearing loss there are other options available for individuals that are undergoing this type of ordeal. While it is not a 100% effective solution to solving hearing problems, a hearing aid is a device that can at least lessen the burden such individuals are facing by allowing them to hear to an extent various voices and sounds in the external environment. Unfortunately, for many individuals, the use of such a device is seen as a substandard way of actually resolving their issue since unlike the use of glasses for people with eye-related problems hearing aids are notoriously inefficient and at times cannot function in the way their users need them to. This view on the sub-standard functionality of hearing aids acts as a negative selling point for the companies that make them which creates a distinct form of “buyer’s reluctance” for the people that need a hearing aid but balk at the high cost of owning one. It is due to this that a viable solution must be created to improve the sales capacity of the hearing aid industry to continue to be seen as a viable solution for people suffering from various causes of hearing difficulties.
Lowering the Price
The problem in this particular case is that even though demand for hearing aids continues to drop due to opinions regarding their supposed deficiencies their prices have continued to remain at the same level. In cases where demand has continued to decrease it is not surprising for companies to lower prices to create demand for the product. While the idea of lowering the price is a positive one in light of the possible increase in sales that it may cause there are still various other factors to take into consideration. For example, despite the lowering of prices, public opinion may still cause demand to remain largely static as such marketing plays a pivotal role in this case in changing the perception of the public towards this particular product.
Product innovation is also another factor that must be taken into consideration; the fact is companies usually attempt to innovate their products in light of consumer opinion both for and against it. As such misconceptions about its use and its price will change over time depending on the number of innovation companies employ to improve a product towards a sufficient enough level that will cause consumers to want to buy it. One factor to take note of is that when creating a specific type of product for a particular niche market the unique needs of various consumers must be taken into consideration since hearing deficiencies may vary and as such a variety of different product types may have to be created or even customized depending on each person’s individual need. Lowering the prices should not be considered the best solution to create demand for a particular product. The fact is if a particular type of product is not sufficient enough to meet a customer’s needs then it is unlikely they will buy it no matter how low the price may be.
Apart from actually lowering prices, another method that can be utilized is to educate potential buyers on the various amenities and facets of using a hearing aid and its potential impact on their life. The fact is having a hearing aid, despite its insufficiencies, is still a far better temporary solution to their auditory problems as compared to deafly trying to understand what people are trying to say to them. One of the inherent difficulties hearing aid companies face is the inherent social stigma attached to the use and operation of various hearing aids. It has already been mentioned that the implication of social stigma is above the issue of purchase and poor market reception. The fact is most people do not want to appear as if they require hearing aids due to the social connotation that comes with their use. As such, based on the careful market analysis it can be said that manufacturers should attempt to pursue a higher standard of psycho-social research to come up with a marketing campaign that is devoted to erasing the level of social stigma for users of hearing aids. Also, the marketing campaign should take note of the need for proper public relations ethics to give potential buyers false hopes that the use of a hearing aid will fully resolve their hearing problems.
There are currently several market theories available to help resolve the issue of poor market reception of hearing aids among its target users. However, there should be a critical analysis between price indices and consideration of buyer’s behavior apart from the various equations and variables used in such theories. There must be a certain degree of sensitivity to the issues behind consumer reluctance in buying hearing aids and it must be determined whether they are psychological, social, or. It is only through this particular method that firms will be able to understand the factors behind consumer behavior in their particular niche market. Based on the given examples it must be noted that serious market analysis is required before it is assumed that price variability is a stand-alone solution to the predicament various hearing aid manufacturers are experiencing.
What must be taken into consideration is the fact that a regular consumer still considers product innovations, unique features, and a certain degree of efficiency as a necessity in purchases of this type. While lowering prices can be considered an attractive option especially when taking into consideration the recent economic crisis the fact remains that product innovation, assurance of quality, and effectiveness as a result of innovation remains to be the most potent market solution in any given situation.
Evaluate different possible strategies that companies could implement to gain a sound position among their competitors in this hearing aids market. Use relevant theoretical concepts discussed in chapters
The current hearing aid industry is said to be inelastic because most of the products it has for sale lack any options or features in the design of the product that they are selling. The thing is though the market percentage a particular product controls is inherently dependent on the level of innovation and change the product undertakes to modernizes itself and meet the needs of various consumers. What must be understood is that consumer buying behavior is considered to be rational, as such; they would choose to patronize a particular product depending upon its inherent usefulness for them. Consumers will not buy a product that is outdated and does not fulfill its purpose reliably. It must be noted that while price variability is considered to be one method of being competitive in the current market another method that must be taken into consideration is selectively targeting particular consumers within a general market. What must be understood is that those price indices are not the only deciding factors to be used to become competitive, rather, aspects related to targeting specific sections within the market through market segmentation and market analysis are also viable methods firms can use to carve out their market niche. This particular strategy can only be attained through a proper and accurate SWOT analysis that examines the best possible route the company can undertake.
Market Strategies
Effective strategies in increasing consumer patronage of a particular product require identifying the connection between the standard value of a particular product and its inherent capacity to attract consumers to purchase it. An examination of the current product mix in the market of hearing aids shows that while having lower prices does place a firm at an advantage it is also advantageous for the company to introduce new features and innovations to entice users and buyers to purchase their products and advertise the products as having such features thus gaining a distinct market advantage through consumer patronage. Utilizing this particular strategy will maximize the growth potential of the company and will hopefully be enough for it to attain a certain degree of leadership in the market.
What must be taken into consideration is the fact that gaining a sound and comfortable position is no easy task as it takes a lot of hard work and patience. Based on this, what must be done is to consistently analyze target consumers and determine the implications and sustainability of the product upon consumption, and to see what further improvements can be utilized to increase product acceptability and increase the company’s market share. As such, in this particular case what is needed is a creative and definitive market research approach to establish a certain degree of rapport among consumers resulting in consumer-driven information improving innovations on the product itself. While lowering the price of a product is at times an effective solution to inciting market demand it is just one of the solutions that are possible however it is a strategy that is not effective in the long run given the different variables of the market and the social behavior of the target consumer.
Recommendation
For all forms of market competition, the need for proper SWOT analysis is integral in being able to make the proper production and business decisions. On the other hand, the use of focused research is in a way a method of being guided through various tried and tested steps and factors that will help a company handle all possible situations even in cases where the market remains stiff and uncontrollable. Certain principles such as those of managerial economics can also be utilized due to their various concepts about economics, tools used in understanding business concepts, and techniques in creating a definitive understanding of the various processes involved in the decision-making process. Such concepts can be seen incorporated into various theories such as the theory of the firm, the theory of consumer behavior, and the theory of market structure and pricing. It can be assumed that profit maximization for a firm will naturally follow when competing with other companies gets into the right mode of market potentiality.
What economic conditions are relevant in managerial decision-making and how they are related to the typical types of risk faced by a firm?
Economic conditions
In essence, the managerial decision-making process all boils down to what the present economic condition is and what decisions have to be made for the company to continue to operate. The decisions made by managers dictate the future of the firm and as such what managers decide on based on the relevant data gathered will result in what course of action the firm will take in light of the changes in the business conditions the firm finds itself in. Based on this it is important to take note of the various economic conditions that firms find themselves in since the type of conditions dictates the disadvantage that such companies may encounter as a result of daily business operations. Issues such as market structure, conditions of supply and demand, technology, government regulations, international dimensions, future conditions, and macroeconomic factors have to be taken into consideration when making business decisions due to their impact on how a firm is supposed to operate. Another factor to take note of is the concept of profit maximization and how it is vulnerable to certain restrictions encountered by the firm such as supply insufficiency, machinery, contractual clauses and liabilities, and laws and government policies. Business managers when planning operations have to consider several factors not only in the short-term but also in the long-term due to the various implications such decisions have on the firm itself. Such decisions often involve evaluating various external environmental factors that limit the ability of the firm to act.
On a case by case basis, managers on occasion experience situations that limit their capacity to successfully maintain the proper operations of production facilities as a result of external environmental conditions such as a distinct lack of resources or changes in market intensification. Other limitations come in the form of internal conditions such as a lack of product innovation and proper expansion of facilities which limits the choices and abilities of managers to deal with particular production requirements. Certain contractual obligations also restrict managerial decisions when it comes to daily operations, this can come in the form of labor contracts which can constrain a manager’s flexibility in worker scheduling and work assignment or it can come in form of contractual obligations with certain firms wherein a certain operational process must be followed when producing a certain product.
Lastly, restrictions in the form of state laws and regulations in the form of proper manufacturing processes have to be observed which further limits the flexibility of managers when it comes to making particular decisions. These particular restrictions can constrain managerial decisions when it comes to the rate and method of production and type of marketing activities associated with the company due to the possible penalties incurred should they be violated. The concept of perfect competition wherein production capacity and supply perfectly matches demand is an idealized version of the current market structure which in reality is composed of varying degrees of supply and demand where there is no such thing as being able to perfectly match supply to demand. What must be understood is that in a capitalist based system direct competition is often the norm with various competitors trying to offer the same type of supply to consumers with innovation and the ability to adapt being ranked among the most necessary abilities a company must possess. This particular system considers that the market structure is aggressive with a distinct product mix and versatility in the market. It also assumes that consumers are rational and that they would make rational choices in their buying behavior. For example, in cases where consumers are presented with the same type of product, consumers would often choose to pick the product that is considerably cheaper yet maintains the same quality due to their propensity to act on rational choices
When a good number of trade participants prevail, this follows through a significant effect on the revenue as the idea that the population of buyers or sellers cannot make such a significant effect and therefore will not hurt the price control in any given condition. Finally, resources and materials have already become a staple in most competitive business as agricultural products do. This, in conclusion, closes the arguments about having a perfect economic condition regardless of any situation.
Analyze the effects of the law of diminishing returns to a modern-day business. Why this law is considered a short-run phenomenon? Use appropriate examples
It can be stated that the law of diminishing returns has short-term successes however does result in long-term losses. In the field of analyzing consumer behavior marginal utility is described as an add-on, namely, it is the additional form of satisfaction that a consumer /hotel guest can get from the use/consumption of an added portion of a particular good or service. It must be noted though that while total utility increases with the overall level of quality, at some point due to the continuous consumption of a particular product or use of a type of service the overall yield will result in smaller and smaller levels of additional utility towards the consumption. To illustrate this point one can imagine a person buying a scoop of dark chocolate ice cream at an ice cream store due to the hot and humid weather. While initially the total utility and marginal utility are equal if the person were to go back and kept on buying the same product to stay cold the total utility would increase due to the consumption however the marginal utility would decrease over time as a result of the continuous consumption of the same product In business, it is a matter of theories between labor and capital and how things go at hand with the aspects of demand and supply. This is based on the notion that continuous consumption of the same product would eventually cause a person to get tired of consuming it thus the added value continues to decrease throughout consumption.
One good example that can be given is the problem of overproduction in the industry of cars and other automobiles. Various car manufacturers are apparently under the notion that to effectively ensure continued demand they must produce more each time the demand for cars increase. Unfortunately, this strategy does not take into account lulls in consumer buying behavior when during recessions the economic condition worsens which results in consumer reluctance to purchase vehicles. Based on this it can be stated that strategies involving production should always take into consideration outside factors before committing to a particular production strategy.
It must be noted that the theory of consumer behavior is an examination of what influences a consumer’s choice in a particular product or service, should a consumer be presented with the same service with both being within budget constraints and prices the choice is usually left up to consumer preference. On the other hand, if a choice is beyond budget constraints, price level and is considered to be an irrational choice preference is no longer included in the decision making process. Thus in terms of understanding consumer behavior preference should not be considered the sole deciding factor in understanding consumer behavior rather a combination of rational behavior, preference, budget constraints, and price must always be taken into consideration to understand how consumer behavior towards a particular product or service works.
It must be noted that during economic recessions it is important to establish the practicality in operations rather than a focus on diminishing returns which are not within the ideal conservative macroeconomic future that a country needs during a time of financial constraint. Based on this it can be argued that excesses in times of recession and various unscrupulous economic postulations regarding what particular practices to employ are unhealthy for the continued sustainable development of a country during a recession. On the other hand, it can be stated that given enough market analysis and putting more confidence behind product development and technological innovation, all doubts about this particular economic principle will, in turn, come out advantageous for the full recovery of the economic force. It must be noted though that the allocation of resources must be critically scrutinized in regular operations so as not to receive more losses than the expected outcomes. It must be stated that in times of economic uncertainty firms should not bank too much on economic principles that have no material and realistic basis but rather should take a conservative approach when the time calls for it and an expansive innovative approach when the time is right.
References
Amyn M. Ambani, “Impact of Elasticity of Demand on Price in the Hearing Aid Market,” 2007. Web.