Todayâ€™s Eye Care Consumer

Today’s Eye Care Consumer

Today’s Eye Care Consumer (Practice Administration–Marketing (external and internal))

The purpose of this module is to develop an understanding of the changes taking place in the attitudes and purchase behavior of American consumers, as they impact the optical retail market and optometric practice. The student will achieve a deeper appreciation of the demographic, economic and social trends shaping demand for optical products. The perspective achieved will enable the student to be more effective in presenting and recommending eye wear to patients and in managing the product selection made available to patients.

Behavioral objectives:

ContentsSlide 4 Patient Expectations of Eye Doctors

Slide 5 Private Practice O.D. Sources of Revenue

Slide 6 U.S. Household Spending: 2005

Slide 7 Mass Affluence

Slide 8 Spending by Household Income Quintiles: 2005

Slide 9 Discretionary Income

Slide 10 American Household Profile

Slide 11 What Defines Patient “Need”?

Slide 12 Traditional Product Segmentation

Slide 13 Mass Affluence Product Segmentation

Slide 14 Traditional vs. Mass Affluence Eye Wear Market

Slide 15 Consumer Trends

Slide 16 Internet Penetration

Slide 17 Increasing Demand for Convenience

Slide 18 Women Control Consumption Decisions

Slide 19 Optical Market Fact

Slide 20 Dysfunctional Eye Care Providers

Slide 21 Summary and Implications

Slide 22 Further Reading

Patient Expectations of Eye Doctors

• Perform thorough diagnosis of ocular health and vision correction requirements

• Be up-to-date with latest medical and product knowledge

• Provide recommendations on products that will best satisfy refractive needs and provide quality of vision, convenience, comfort and appearance

Presenter

Presentation Notes

Optometrists usually perceive their patients in terms of the patient’s refractive need or ocular condition and less often view patients as consumers of complex products offering psychic benefits beyond simple vision correction. The medical aspects of optometry are critical to satisfying patient needs, but form only a part of what patients seek as they visit a practice. Surveys and focus groups show that patients expect their eye doctor to make a thorough and competent diagnosis of their condition and to be medically up-to-date. But this is generally not the basis on which patients differentiate one provider from the next or upon which their loyalty to a practice is based. Patients seek an eye doctor who develops a deep understanding of their vision needs in the context of their daily activities and interpersonal relations, and who makes appropriate recommendations about eye wear.

Product sales account for nearly 2/3 of eye care practice revenue

Understanding consumer attitudes and buying habits is necessary to optimize the retail side of optometric practice

38%

62%

Professional fees

Product sales

PRIVATE PRACTICE O.D. SOURCES OF REVENUE

Source: MBA Practice Profile

Presenter

Presentation Notes

Too often, eye care professionals focus almost exclusively on the medical side of practice, concentrating on the refractive requirement of patients. But the real business of optometric practice is providing eye wear that satisfies both the refractive and emotional needs of patients.

Vision care accounts for less than one-half of one percent of household budgets

Total expenditures $49,638Food away from home $2,668Alcoholic beverages $457Entertainment $2,698Personal care products/services $588Healthcare $2,853Vision care $202 0.4% of household budget

(includes purchases paid by insurance)

U.S. HOUSEHOLD SPENDING: 2007 (average household)

Source: U.S. Bureau of Labor Statistics, Jobson Medical Information

Presenter

Presentation Notes

The average household in the U.S. spends over $49,000 per year for a vast array of goods and services, many competing with each other for the consumer dollar. Vision care is a relatively minor component of most household budgets. The average U.S. household spends just $202 per year for eye care, a small share of the healthcare budget. The average household spends more than twice as much for alcoholic beverages than for eye care, and three times more for other personal care products and services. Some optometrists base fees and product recommendations on their perception that patient eye care budgets are strained and not expandable. In reality, consumers place a high value on quality of vision and most will pay more for eye care of higher perceived value and performance.

“Mass Affluence” …

…an accurate characterization of today’s consumer market

Presenter

Presentation Notes

The U.S. consumer market has been re-shaped by continued growth in real incomes that has enabled a majority of U.S. households to purchase amenities and maintain a lifestyle once available only to the top 5%. Today’s consumer market has been characterized as one of “mass affluence”. Today a majority of households have income sufficiently high to purchase goods and services beyond the necessities of life. The portion of the population who can be regarded as affluent, by any historical standard, is growing far faster than lower income groups. Affluent consumers account for a disproportionate share of spending in nearly every product and service sector and their preferences dictate the direction of most new product development.

Top 40% of wage earners account for 62% of household spending

20%8%

20%

17%

20%

23%

20%39%

13%

20%

Household Quintiles

SPENDING BY HOUSEHOLD INCOME QUINTILES: 2006

Consumer Expenditures

100%

Average Household

IncomeAverage Annual

Expenditure

100%

$96,752

$57,285

$42,447

$31,150

$20,471

$158,388

$72,460

$46,213

$27,419

$10,534

$91,297+

$57,944–91,296

$36,070–57,943

$19,301–36,069

$0-19,300

Top income

Median income

Bottom income

Source: U.S. Bureau of Labor Statistics

Presenter

Presentation Notes

This graph shows that the 40% of households with incomes above $57,000 annually - - who can be regarded as affluent households - - account for 62% of all consumer expenditures. The 20% of households with incomes above $91,000, account for 39% of consumer spending. It is the affluent households that are the primary target audience for most sellers of goods and services today.

PERCENTAGE OF DISCRETIONARY INCOME BY AGE OF HOUSEHOLD HEAD

40%

17%

13%

30%

Discretionary Income

Definition: income left over after life’s essentials (food, shelter, clothing, transport, medical care) are paid

• 60 million households have discretionary income (51%)

• Average amount of discretionary income is $22,000

• 82% of discretionary income controlled by households with income of $100,000+

• 45-54 year olds have highest amounts of discretionary income

35-49

Under 35

50-64

65+

Source: The Conference Board, 2005

Half of U.S. households have discretionary income

Presenter

Presentation Notes

Discretionary income is defined as that left over after life’s essentials are provided. 60 million U.S. households have discretionary income, and the average amount available is $22,000. Most discretionary income is held by households with income above $100,000, concentrated in households led by people 35-64 years of age. Within the eye care market, prime consumers are affluent households headed by people 45 years of age or older, able to afford high performance products and a high degree of personalized service.

AMERICAN HOUSEHOLD PROFILE (percentage of households)

4%

6%

22%

44%

25%

100%

• Often lower discretionary income, higher food, shelter and transport expense

• Empty nesters in peak earning years have high discretionary income

• Young couples often have dual income and high discretionary income

• Higher share of income devoted to personal indulgence and personal care

• High interest in personal appearance among young singles and divorced women

Traditional Families:Husband/wife/1+ children

Husband/wife only

Single person 1+ children

Single person only

Other

Smaller households have large amounts of discretionary income

Source: U.S. Census Bureau

Presenter

Presentation Notes

The composition of American households changed dramatically during the 20th century. The traditional family unit, composed of husband and wife and dependent children, has declined to just 25% of all household units. One and two member households have grown rapidly. The spending priorities of different household units vary. Traditional family units spend a large share of income on raising children and are less likely to have discretionary income. Smaller household units, free from the financial burden of raising children, spend more in personal care and personal indulgence. They are often able to shift the household budget to satisfy whatever need they deem important.

There is no precise definition of necessity

Whatever is important to the consumer is a necessity

What Defines Patient “Need”?

Presenter

Presentation Notes

In today’s affluent marketplace, the definition of consumer need has shifted. Need once was defined as essential to life. Today the only meaningful definition of need is whatever the individual consumer regards as important. Nearly everyone has the ability to adjust the household budget to satisfy what is personally valued. It is fruitless for eye care providers to pre-judge patient eye wear needs on some basic functional standard. Such stereotyping is sure to result in lower patient satisfaction and lower practice revenue.

Traditional Product Segmentation (mid 20th century)

• Geared to broad middle class preference; conformity/popularity was valued

• Moderate price• Functional emphasis and little

experiential benefit

• Geared to top 1-2% of market• Price point 3 to 5 times higher than

mass market products• Distinctive, showy appearance

demonstrating conspicuous consumption

• Prestige conferring and exclusive

“Mass” products

“Luxury” products

Presenter

Presentation Notes

During the mid 20th century post war era, most consumer markets were composed of two segments - - a mass market, usually encompassing 75% of purchases, geared to the broad middle class and a “luxury” market geared to the whims of the very top of the income pyramid. Luxury products were designed to confer exclusive status on their buyers through their very high prices and conspicuous appearance. The vast increases in discretionary income that have occurred over the past 30 years and the creation of mass affluence has changed consumer markets. Luxury goods have declined in importance, replaced by a new category of high performance products.

Mass Affluence Product Segmentation (early 21st century)

• Mature technology and long-term market leaders

• Moderate and declining prices• Walmart mainstays• Provide basic functionality with compromises to

keep cost low• Flat, declining demand

• Significantly enhanced functionality• Sophisticated design• Save consumers time• Self-expressive and ego-gratifying• Strong experiential benefits• Within means of top half of incomes• Price point 1.5 to 2 times basic products• Rapidly increasing demand

“Basic” products

“High Performance”

products

Presenter

Presentation Notes

In today’s mass affluence marketplace, two broad product segments exist in many categories, including eye wear. Basic products are those providing essential functionality, often goods designed dozens of years ago to satisfy middle class demand for function and low cost. In most categories, such products face declining demand today. The emergent segment in many product categories are high performance products. These provide significantly enhanced functionality, convenience and enable consumers to express their taste and sophistication.

Traditional/ “Basic”/”Mass” Eye Wear Market

• Consumer owns one pair of glasses– Basic unbranded frame, less than

$125 per pair– Presbyopic correction for near and

far

Mass Affluence/ “High Performance”

Eye Wear Market

• Consumer owns multiple pairs for specialized uses

– Change frames style with wardrobe– Glasses for avocations, work– Glasses for indoors, outdoors– Progressive lenses

• Brands and style are significant motivators

SPECTACLES

CONTACT LENSES

• Single vision spherical• Daily wear re-usable lenses

• Silicone hydrogel lenses• Daily disposables• Multifocals• Disposable torics

Presenter

Presentation Notes

The re-shaping of consumer demand caused by mass affluence is impacting the eyeglass and contact lens markets.

Consumer Trends• Incomes and occupations are less reliable predictors

of consumer’s willingness to trade-up to higher performance products than in the past– With more discretionary income consumers have an ability to

apportion spending to satisfy their personal priorities• As households have become smaller and the

proportion of traditional family units decreasing, adults spend more for personal gratification, less for child-rearing

• As educational attainment and foreign travel have grown, consumer tastes have become more sophisticated

Internet usage continues to grow

73%70%

44%

50%

58% 59%

69% 68% 69%

30%35%40%45%50%55%60%65%70%75%80%

2000 2001 2002 2003 2004 2005 2006 2007 2008Source: Internet World Stats

U.S. INTERNET PENETRATION (percentage of U.S. adults using)

2006 USAGE BY AGE

18-29 88%

30-49 84%

50-64 71%

65+ 32%

Presenter

Presentation Notes

Adult usage of the internet continues to grow. It has become an important source of consumer information about goods and services and an important channel of dialogue between businesses and consumers. Few businesses can afford to ignore this information medium.

Increasing Demand for Convenience

• As incomes grow, the time available to buy and consume does not

• Time is perceptually and economically more valuable to today’s consumer

• Time-saving convenience is a benefit increasing numbers of consumers seek in products and services

Presenter

Presentation Notes

Consumer demand for convenience in the products and services they buy has steadily grown over the past 50 years, driven by increasing household incomes. The growing demand for convenience has affected eye care, increasing demand for one-hour glasses, daily disposable lenses, 30 day soft lenses and convenient eye care locations such as mass merchandisers.

Women make most household consumption decisions

• 85% of women over 18 are the principal shopper in their household

• 90% of married women are principal shoppers

• 80% of consumer goods purchases are made or influenced by women

Source: Treasure Hunt: Inside the Mind of the New Consumer, Michael J. Silverstein

Presenter

Presentation Notes

In most product and service categories, women are the dominant purchase influencers. The same is true in eye care. Female household heads most often determine where other family members will obtain eye care. Adult females account for two thirds of contact lens purchases and 57% of glasses purchases.

Optical Market Fact

Eye wear competes with apparel, entertainment, consumer electronics, house

wares, furnishings, toys and hundreds of other products and services for the discretionary

consumer dollar.

Presenter

Presentation Notes

Astute retailers understand that they compete for a finite amount of consumer discretionary dollars. They compete not only with other retailers offering a similar product mix, but with retailers in totally different product categories. The same is true for eye wear. Eye care providers compete for a share of the consumer discretionary dollar. To capture the business it is necessary to convey the life-improving value of the products provided.

Dysfunctional Eye Care Process

• Eye care professionals often fail to recommend higher performance products

– Base recommendation on functional benefits of visual acuity and ocular health only

– Stereotype consumers interests/ability to pay

– Fear patient “sticker shock”

Implications for Eye Care Practitioners• Optometric practice success often has much to do with retailing

success–providing the products consumers want

• Gear the products prescribed to the needs and wants of the growing affluent market– Account for dominant and increasing share of consumer spending– Define preferences for tomorrow’s market-leading products– Early presbyopes are the most affluent group

• Gear the office process to the needs and desires of women

• When recommending products, go beyond consideration of refractive needs; satisfying other needs is more emotionally gratifying to consumers– Convenience– Personal appearance– Style, sophistication

– Superior performance/quality of vision– Comfort

Further Reading

• Mass Affluence, Nunes and Johnson, 2004

• The Experience Economy, Pine and Gilmore, 1999

• Treasure Hunt, Silverstein, 2006

• Trading Up, Silverstein and Fiske, 2005

• Category Killers, Spector, 2005

This presentation was developed by Practice Advancement Associates

on behalf of the Management & Business AcademyTM

Documents

Todayâ€™s Eye Care Consumer