Last updated on Jul 17, 2018
Greg: Our guest this week on CT Small Business Tool Kit is Dr. Sreekant Cherukuri. He is a Board Certified Ear, Nose and Throat Physician and he’s also the founder of MDHearingAid. In the next few minutes, we’ll learn about the entrepreneurial journey that led to this product and the kind of reviews it’s already getting. Sreekant, thanks very much for being with us.
Dr. Cherukuri: Thanks for having me.
Greg: Let’s start with how you even got onto this track. It all started with some loud music from what I understand.
Dr. Cherukuri: Two ways we got into this business. One is I used to be a DJ and anyone that’s been to a nightclub knows they’re pretty loud, but what’s even louder is what the DJ is listening to while he’s cuing up the next song. That has to be louder than … at least closer to the ear than what he is hearing in the other ear, so that the music can be transmitted in a smooth fashion. I, personally, have had some hearing loss in my left ear since my twenties. More applicable to the business was the fact that as an Ear, Nose and Throat Doctor, we’re the gatekeepers for patients that have hearing problems or ear problems.
What I learned very quickly in my practice is when we identified when people were trouble hearing, couldn’t communicate with their spouse or hear their grandchildren or even at work, they were having trouble with the meetings or the large rooms or hearing their boss.
When we tested their hearing and find out they had a hearing loss, we’d recommend a hearing aid, similar to how if you had a vision loss, you’d recommend glasses. Most people would not get the hearing aid and it was then I realized that Medicare and most insurance companies weren’t covering the cost and the cost could be in the many thousands of dollars.
Kind of a personal experience with hearing loss, patient concern for them not being treated or helped, kind of drives me to figure out why are hearing aids so expensive and can we develop a high-quality, low-cost alternative.
Greg: How did you go from concept to reality on this?
Dr. Cherukuri: Kind of in a nutshell, when you open up a hearing aid, there’s not that many components. Really, the aha moment was when the first iPhone came out in 2007 or ’08. There’s a company that opened up the iPhone to kind of estimate the cost of the components and then they could make some analysts’ estimates on what they felt Apple was going to profit and then circulate that to their financial people.
The cost of the iPhone was somewhere in that neighborhood of $135 of component cost. That’s when I realized that if we can develop a much simpler product, which is a hearing aid, and it has about four or five things in it, you know … battery, microphone, receiver, chip, things like that.
We can make a hearing aid and our first model we were able to make and retail for under $200. Just for reference, the typical hearing aid average cost in America is $2,000 and that’s for one. Most people need two. Hearing aids can get up to $5,000, $6,000, $7,000 a pair out of pocket cost. We were able to create hearing aids. Our first model was under $400 a pair.
We wanted to then go a little bit more sophisticated with our second model, the MDHearingAid AIR, which is an all digital model with many features found on the high-priced items. That one is about $650 a pair or $350 for one. We’ve had extreme success with these products because they work really well.
They are FDA approved, we use only the top quality components from hearing aid manufacturers. We deliver the product direct to the consumer, so it comes shipped to their house for a forty-five day in-home trial. We offer the after sales support with Licensed Instrument Dispensers, Audiologists and Physicians. We’re able to provide what’s actually a very highly needed service in the US market.
Greg: As you put some analysis into what you’ve done and as you survey the competition, is this sizable price gap a result of the others charging more than they need to or have you just found a way to produce these hearing aids that’s far cheaper than the way the others do without compromising quality?
Dr. Cherukuri: It’s mostly in the distribution channels. The traditional hearing aid, even a $5,000 hearing aid, has no more than $300 of components in it, but the way hearing aids are dispensed traditionally in the United States is the manufacturer will make it, they’ll sell it to the dispenser, which can be an Audiologist or a Hearing Aid Dispenser and there’s often up to a five times mark-up there.
A $300 hearing aid becomes $1,500 to the Audiologist. The Audiologist or the Dispenser has to pay their overhead and take care of their business needs as well. There’s a mark-up there of anywhere from one hundred percent or more. That’s how you end up from $300 to $3,000 very quickly.
Obviously, what we did is we created a hearing aid that goes direct to consumers, so some of the mark-ups are not there. We’ve also made it very lean, meaning we don’t have the very expensive features or the high-priced features in there to keep the costs low. Something else we’ve done, which is very novel, is we have empowered the user to make all the adjustments in terms of the program setting, which is the sound output setting.
As well, as the volume dial allows them to tailor the hearing aid output to their particular environmental or personal needs. All of these things put together, you end up with a hearing aid that’s very highly-effective. Really high user satisfaction rates, even higher than brick and mortar settings, and up to ninety percent reduction in cost.
Greg: Based on the Amazon reviews, you were getting four and a half out of five stars in a huge percentage of those, better than seventy-five percent gave you five out of five stars. What’s the key to making sure folks cannot only hear with your hearing aid, but that it sounds as natural as possible, rather than some of mechanical sound?
Dr. Cherukuri: That’s a great question. I want to address one thing. We used to be on Amazon, but Amazon stopped selling hearing aids because they are medical devices.
Dr. Cherukuri: To find our product, you have to go MDHearingAid.com. Amazon sells this other category, which is called sound amplifiers, which are non-medical devices that are meant to boost sound. They are not nearly at the quality or the ability to help as our products. Now back to your question.
Once there’s nerve damage, unfortunately, you never hear normally and maybe that’s where one of the reasons hearing aids get a bad rap or people don’t really want them, is you’re paying $5,000 for a product that at the best it can do with a damaged nerve is only pretty good.
Whereas we think the common analogy, I even made it earlier, is glasses and hearing aids, but glasses are most of the time working with people with normal functioning retinas, but they’re just having to reflect the object to the right part of the retina so you see twenty-twenty.
It’s important for people to understand, once there’s nerve damage in hearing, you can never hear twenty-twenty so to speak, so that’s one kind of knock against hearing aids in general. What we’ve seen at our price point, it’s a much more comfortable purchase. People are hearing things they never thought they could hear again because they were priced out of the hearing aid market.
Yes, it does take three weeks for the brain to get used to the new sounds of hearing aids, but once you go through that acclimation process, it’s effortless hearing just like you used to hear probably ten to twenty years ago.
Greg: We’re talking with Dr. Sreekant Cherukuri and his MDHearingAids. Dr. Cherukuri, with the success you’ve found not only with the quality of the hearing aids, but the pricing here, how much competition are you seeing from others who are trying to flood your part of the market here who have figured out what you’re doing so well?
Dr. Cherukuri: That’s a great question. Two things we’ve seen. There’s a lot of competition in the market. One thing that separates us of all the competitors that I know, we are the only one that manufacturers our own hearing aids.
Every one else buys a hearing aid from a manufacturer, whether it’s a domestic or international or Chinese manufacturer, for example, and then just changes the name. That’s called private labeling. They just resell another person’s hearing aids.
We control the process from start to finish, that’s why we’ve had such high-quality. We have unique features and we’ve had really, really high patient satisfaction. In terms of the other competition, the brick and mortar competition, what’s interesting is we started in 2009. We monitor brick and mortar competitors, advertisements and things like that.
What we’ve seen is what we expected to see. The brick and mortar pricing is coming down to compete with the online pricing, very similar to what might have happened with Best Buy and Amazon and things like that.
We’re seeing a lot more aggressive pricing and really appropriately so because the customers have been priced out of the market by in large on the brick and mortar side. We’re seeing people like Costco are coming in with some value offerings. Even the stand-alone audiology dispensers are at least offering things in the sub-$1,000 price point.
Now none of them are really offering anything at our prices because we have products at $199, $349 and $549, so I haven’t seen that level of price contracture yet, but it’s certainly an evolving market.
Greg: Very quickly, Doctor, outside of the technology and the competition aspect of it, just in terms of starting and running a business. What do you see as some of the smartest moves you’ve made and maybe a thing or two that you wish you would have done a little differently?
Dr. Cherukuri: The one thing I started the business all about is the goal was to help my patients. I had to have a product that I would recommend to my patients that I was proud of. What that did, that simple thing, allowed us to make sure the products we’ve developed and put on the market was very, very high-quality.
Then, really it wasn’t much more than the word of mouth and some advertising and people really looking for this product, having a great experience with it. Then also we have one hundred percent highest level of customer service, so if it doesn’t work for them, we work with them to try to see if it’s something simple or it may not suit their needs. There’s always the money back guarantee.
Even the people that return our products are some of our biggest advocates. They’ll tell their friends and family, so we’ve had a lot of word of mouth referral. The summary to your question is treat the customer like you’d want to be treated yourself. Obviously, if you have a great product, which you should, you can stand by it and you could put your name on it and be proud of it.
Greg: For more information on the product, head to MDHearingAid.com. Dr. Cherukuri, it’s a fantastic story and it sounds like a fantastic product as well. Thanks very much for your time today.
Dr. Cherukuri: Thank you.
Greg: Dr. Sreekant Cherukuri is a Certified Ear, Nose and Throat Physician and he is the founder of MDHearingAids. Again, MDHearingAid.com. I’m Greg [Corumbus 00:11:15] reporting for CT Small Business Tool Kit.
Narrator: Thanks for joining us on CT Small Business Tool Kit. Be sure to visit our website, CT.WoltersKluwer.com and follow @CT Corporation on Twitter. We’ll see you next time on CT Small Business Tool Kit.