Description
Using the case “ClearSounds Harmony – A Breakeven and Pricing Strategy Analysis”, to answer question 2Question 2 :Identify which brand achieves the highest annual profitability per unit sold. Which brand has the highest annual profitability per customer? Answer these questions from the perspective of ClearSounds and HCPs separately and comment on any differences.(Assume 52 weeks/year and full compliance on recommended replacement frequency for all brands for your calculations)
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ClearSounds Harmony
– A Breakeven and Pricing Strategy Analysis
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This case has been crafted expressly for pedagogical discussions and should not be interpreted as an endorsement,
a primary data source, or a representation of effective or ineffective managerial practices. While the narrative draws
inspiration from real-life events, it does not mirror any specific situation at an existing organization. Any similarities
to actual individuals or entities are purely coincidental.
Copyright © 2023. No segment of this material may be reproduced, stored in a retrieval system, used in a
spreadsheet, or disseminated in any medium—be it electronic, mechanical, photocopying, recording, or any other—
without the express consent of the author.
Page 1 of 3
BRIEF CASES
The global hearing aid industry in the mid-1980s was burgeoning, experiencing a growth rate of
nearly 7% annually. Valued at several billion dollars, the market was driven by an aging
population and rapid technological advancements that made hearing aids more effective and
user-friendly. Yet, with this growth came the increasing demand for hearing aid batteries, a
critical component ensuring device functionality.
ClearSounds, a pioneer in the auditory market, had been in the business for over three decades
by 1987. Founded in the 1950s by visionary entrepreneur, Lucinda Harmon, the company had
garnered a reputation for innovation and reliability. Over the years, Lucinda’s management
team, including CTO Dr. Robert Lark and COO Natalie Verne, had steered the company through
multiple industry shifts, always keeping the user’s needs at the forefront. This dynamic trio
recognized the dual challenges of ensuring long-lasting power solutions for hearing aids while
addressing the growing environmental concerns tied to battery disposal.
Consumers of the era were starting to become increasingly environmentally conscious. As
hearing aids became more commonplace, so did the discarded batteries, leading to significant
waste. Many users, especially those from the younger demographic who had early-onset
hearing issues, voiced concerns about the environmental footprint of these essential devices.
They sought solutions that would be both practical for their auditory needs and sustainable for
the planet.
Background of ClearSounds
ClearSounds was a leader in the hearing aid battery market, with a recognized focus on research
and development to innovate power solutions that meet the evolving needs of consumers. The
company’s products, particularly batteries, reach end-users through a network of Hearing Care
Professionals (HCPs) who provide personalized care and ensure the suitability of batteries to
users’ devices and lifestyles. ClearSounds entered this market years back with the introduction
of their brand HearClear Pro, which was sold to HCPs at $6.00 per unit, bringing ClearSounds a
profit of $2.00 per unit. These HCPs were instrumental, offering personalized care, suggesting
suitable hearing solutions, and ensuring end users received batteries that perfectly matched
their devices and lifestyles. End users purchased each unit at $8.00.
However, with an increasing consumer demand for more sustainable solutions following the
launch of HearClear Pro, ClearSounds’ R&D division, under the leadership of Dr. Robert Lark,
CTO, had embarked on a mission to amplify both the longevity and environmental efficiency of
their products. This had led to the birth of EcoTune, a battery variant intended to replace
HearClear Pro. EcoTune’s main attraction was its consistent power output, guaranteeing optimal
performance of hearing aids throughout its life. However, despite its enhanced hearing quality,
EcoTune required battery replacement every week, a shorter lifespan nevertheless compared to
the four-week battery life of HearClear Pro. Dr. Lark ensured that the manufacturing cost for
EcoTune was at $3.50 per unit making it lower than that of HearClear Pro. ClearSounds
strategically positioned EcoTune at $5.00 per unit for HCPs, the same price as HearClear Pro.
HCPs priced it at $7.00 per unit for end users.
Page 2 of 3
BRIEF CASES
Introduction of One Day HearClear
Acknowledging that the market’s shift towards sustainability was accelerating, driven by an
environmentally conscious consumer base, particularly younger users with early-onset hearing
issues, ClearSounds faced the imperative to innovate further. These consumers, increasingly
aware of the environmental impact of discarded batteries, demanded solutions that not only
met their auditory needs but were also sustainable for the planet.
ClearSounds’ relentless pursuit of innovation took a significant leap with the introduction of the
daily disposable One Day HearClear battery. At first glance, the concept of a disposable, dailyuse battery seemed counterintuitive from an environmental standpoint, but ClearSounds had a
visionary approach. One Day HearClear was meticulously engineered to minimize
environmental impact. Unlike traditional batteries composed of materials that took years to
decompose, One Day HearClear used biodegradable components, ensuring a significantly
shorter breakdown period post-use and substantially reducing the long-term waste footprint. Its
battery incorporates a unique, smart-chip technology that optimizes energy use based on the
hearing aid’s output requirements, adjusting power delivery in real-time for various
environments. This innovation, while enhancing battery efficiency and user experience,
introduces a learning curve for consumers unfamiliar with smart technology in hearing aids.
Furthermore, the specialized biodegradable material used in the battery requires specific
disposal methods to ensure environmental benefits. Additionally, the environmentally friendly
composition of the battery necessitates particular disposal practices to achieve its green
benefits. The challenge was whether consumers would believe and switch.
One Day HearClear necessitated a pricing model that encouraged its adoption while reflecting
its value. The production process of One Day HearClear was also more sustainable, consuming
less energy and water compared to its predecessors. Manufacturing cost efficiencies allowed
ClearSounds to produce each battery at just $0.50 per unit. These were then sold to HCPs at
$1.15 per unit, who then priced it at $1.58 per unit for end users. Dr. Lark asked the marketing
team to analyze and compare the profitability of all offerings to manage their marketing plans
better for the next year. This step is critical for identifying the leading brand in profitability
among HearClear Pro, HearClear EcoTune, and One Day HearClear.
1. Analyze the potential market success of the new brand One Day HearClear. Would
consumers switch readily from their current options?
2. Identify which brand achieves the highest annual profitability per unit sold. Which brand
has the highest annual profitability per customer? Answer these questions from the
perspective of ClearSounds and HCPs separately and comment on any differences.
(Assume 52 weeks/year and full compliance on recommended replacement frequency
for all brands for your calculations)
3. Evaluate the merits of investing an additional $2 million to enhance sales of the One Day
HearClear brand. How many new customers are needed for breakeven?
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BRIEF CASES
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