Even I don't always agree with my opinion

 

Who’s Your Customer?

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Posted February 16, 2013 by jim young in Business

Photo by Dider (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], via Wikimedia Commons

– jim young

In a capitalist society, the price of most items is determined by the laws of supply and demand.

The supplier wants to sell any given item at the highest possible price to maximize profits.

But if the price is too high there will be no demand.

So to a great extent one could say the “sell price is largely determined by the customer”.

In most cases the relationship between a supplier and customer is one-to-one.

But when it comes to some essential items such as medical provisions or prescriptions, determining who the customer really is becomes somewhat more complicated.

Recently I had to purchase a new set of hearing aids.

The supplier, the hearing aid company, has to deal with not one but, 3 customers – the Ontario Government who subsidizes the cost of my hearing aids through our provincial health care, my insurance company which will also pay a portion of the cost and the end user – me.

The hearing aids I require are on sale at $1,500 off.

The Ontario Government will pay $1,000 towards my hearing aids.

My insurance company will kick in another $1,000.

So the total cost to me is just $1,000.

I guess I should consider myself lucky that I only have to pay $1,000 for a pair of hearing aids that allegedly, are worth $4,500.

Instead – I feel like I’m being taken advantage of and I don’t know why the Ontario Government and my Insurance Company are not likewise outraged.

I can’t believe the electronics involved in a pair of hearing aids can be that much more sophisticated than an iPod that I might spend $200 on. (The iPod also has many visual graphics that my hearing aids do not.)

I can appreciate there are research costs (although Apple too has research costs), the wages of medical technicians involved (although Apple too has some pretty high-tech experts on staff) and programming to my specific needs that are all included in the price of hearing aids.

But I still can’t help but believe that $4,500 for the price of Hearing Aids is more than a bit excessive.

I think the very fact that they are offered at $1,500 off, supports my theory.

Anything that can be sold at $1,500 off without bankrupting the seller is grossly overpriced from the start.

As a customer I should complain – but to who?

Just as the hearing aid company has to contend with 3 customers, I too have 3 suppliers to contend with.

As a taxpayer I am effectively a customer of the Ontario Government who is supposed to be operating on my behalf.

Whether or not I pay the premiums directly or my employer pays them on my behalf as a benefit for my employment, the bottom line is that makes me the insurance company’s customer as well.

I should really be in the driver’s seat here and yet I seem to be at the mercy of all three.

Why doesn’t the insurance company complain about the outrageous prices? Wouldn’t it also be in their best interest to have to pay less?

Instead, they seem content to pass these costs onto their customer (me) through premium rates.

Why doesn’t the Ontario Government complain about the outrageous prices? Wouldn’t it also be in their best interest to have to pay less?

We need only look at the inefficient bureaucracy of any government run organization to realize they aren’t really that concerned with costs. It is easier instead for them to just pass these costs onto their customer (me again) as well.

While it may appear that the insurance company and the government are chipping in to help me with the cost of my hearing aids all they are really doing is putting the money in my front pocket while taking it out of my back pocket.

If they were doing their jobs, the laws of supply and demand would dictate a much lower market price for hearing aids.

To be fair, let’s suppose a good pair of hearing aids, costs twice the price of a $200 iPod – $400.

And they’re not on sale – the total cost is $400. (That’s a far cry from $4,500!)

The government could subsidize just $150 for the hearing aids and save themselves $850. These savings could be passed onto the government’s customers by lowering taxes.

The insurance company could pay another $150 and likewise benefit from an $850 savings. Their savings could be passed onto their customers in the form of lower premiums.

And of course I would benefit as well with substantial savings of $900.

(And with all that extra money to spend I could go out and buy an iPod for each of my grandchildren thereby boosting the economy which benefits everyone.)

Unfortunately the hearing aid company has no incentive to reduce their prices to a more realistic level as long as their 3 customers are content with the status quo.

If Apple wants to sell more iPods – all they have to do is lower their price and their market grows exponentially.

People that don’t have iPods will buy them. People that do have iPods will buy new ones.

But if the hearing aid company lowers their price – there is not going to be a sudden influx in the demand for hearing aids.

At any given time there is a finite number of people that are in the market for hearing aids and that is not going to change just because the price of hearing aids drops.

And because it’s an essential commodity, the hearing aid company knows they have me caught between a rock and a hard place.

They are also aware that (unlike me) most people are not going to complain. The average person will accept these outrageous prices in the belief that the government and the insurance company are footling the bulk of the bill.

They have been duped into thinking they are getting a great deal.

I am not suggesting that the hearing aid companies should not be permitted to make a “fair” profit but it seems to me that gouging people that are at their mercy for essential items required to improve their quality of life is not morally acceptable.

Maybe I should forget the hearing aids altogether and just purchase an iPod for myself.

I’d rather listen to my music than hear what most people have to say anyway.

– 30 –


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