June 1, 2020

Reshaping our Future: A Fresh Perspective on COVID and Beyond – Part 1

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Context for today's presentation

• The nature of the crisis as it relates to the hearing healthcare industry

• Learnings from global retailers

• The key areas every business needs to address

• Translating those imperatives to the private practice

Sonova Boston Consulting Group

Jason Mayer Tom Lang Christine Jones

VP Corporate

Development

Nate Shenck Bob Lavoie

VP Commercial

Sales

VP Marketing VP Audiology Managing

Director and

Senior Partner

Managing

Director and

Senior Partner

Jeff Dickenson

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The crisis: Health related or economic?

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Comparing COVID-19 to economic shocks of the past

Most commentators expect any recession to last <12 months

2007 crash reached -50% and

took 4 years to recover

Dow Jones Performance

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Spend on most non-essential retail in US has decreased, with DIY only category seeing sustained growth in past few weeks

-90

-60

-30

0

30

3/18 3/25

Weekly YoY change in sales vs. Dec-Jan avg.

2/12 2/19 2/26 3/4 3/11 4/1

In immediate term, non-

essential goods sales

growth decreased or

flatlined

DIY sales more resistant

to crisis as some stores

remain open and time-

at-home increases

Sales growth of all other

non-essential goods

continue to decrease as

consumers focus on

essential goods

Apparel and Accessories

Beauty

Home

Department Stores

Fitness

Hobby

Health & Wellness

Electronics

DIY

Note: Only includes non-essential retail (excludes travel, transportation, restaurants, away from home entertainment, etc.) Source: BCG Marketing, Sales, and Pricing; BCG GAMMA; Earnest Research; BCG analysis

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Non-essential retailers are likely to remain disadvantaged even as overall consumer spending rebounds

Source: BCG COVID-19 Consumer Sentiment Survey, March 13–16, 2020 (N = 1,831 China; 2,345 US; 2,787 UK; 2,521 France; 2,206 Italy), unweighted; representative within ±3% of census/national demographics.; Note: Question text: “How do you expect your spend to change in the next 6 months across the following areas?" Excludes categories with N <~100.; 1. Winners and losers were defined as up to the top 10 categories in which 20% or more of respondents plan either to increase or to reduce their spending over the next six months. ; 2. Includes leisure travel (41%) and business travel (39%).

Top winners

Public transportation

Athletic equipment

Gambling

Women's clothing

Luxury/fashion

Travel

Tobacco/ smoking

Home decor

Toys and games

Electronics/appliances

Top categories where respondents are likely to spend more in next 6 months

Top losersTop categories where respondents are likely to spend less in next 6 months

Education

Savings

Preventive health care

Household care

Fresh and organic foods

Vitamins/

supplements

US US

Represents non-

essential retailRepresents

essential retail

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Our industry has so far been resilient to financial shocks

1. Defined as wholesale revenueSource: Analyst Reports; BCG interviews

Global sales1

($B)

Impact from 2008 global financial crisis

3.53.9

4.24.6 4.7 4.9 5.1 5.1 5.2 5.4 5.6

5.9 6.16.4 6.6

6.9

20052004 20092006 2007 2008 20122010 2011 2013 2014 2015 2016 2017 2018 2019

+4-5%

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2008-2009 industry figures in the US

20092008

Impact from 2008 global financial crisis

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A resilient industry

In ordinary times, the 6% increase in hearing aid sales during the first three quarters of 2009

over last year would seem respectable. However, these are not ordinary times.

Last summer the nation's economy became mired in its worst downturn since the Great

Depression. Among the lowlights have been four consecutive quarters of decline in GDP, a near

meltdown in the financial markets, a 53% drop in the Dow between October 2007 and March

2009, plunging home prices, and an unprecedented number of home foreclosures.

The unemployment rate rose to 10.2% in October, the highest since 1983. Consumer confidence

remains low, and many industries continue to see sales plummet. For example, sales of new

cars and other passenger vehicles dropped by 18% in 2008 and are expected to decline by

another 20% to 25% by year's end.

Against this backdrop of hard times, the latest statistical report from the Hearing Industries

Association (HIA) looks remarkably good. As of September 30, net domestic unit sales by

manufacturers for the year were at an all-time high of 1,956,821, up 6.07% from that date last

year. Third-quarter results were especially good, 8.75% ahead of 2008

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Hearing care is an essential service

Rogin says it's that, despite what has often been said, they are not

generally discretionary purchases. “In most cases they have been putting off the decision

(to buy hearing aids) for as long as they could”. “They turn to amplification as a final

resort when they absolutely need it.”

“Once people go through the typical 7 years of denial and actually accept that they

need the devices, many then view them as a health-related (or independent-living)

requirement as opposed to a discretionary spending item”.

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Conclusions

1. Hearing care is an essential business

2. At the macro level, our industry is relatively unaffected by

economic crises

3. A recession caused by a pandemic cannot be expected to

impact our business like previous economic crises

→ We must shift our attention from the economy & focus

on the healthcare aspect instead!

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Consumer retail behavior expected to change across crisis phases

Flatten Fight Future

HC system

capacity

Re-start Vaccine/treatment

Critical care

patients

Interventions

InterventionsInterventions

Economic

activity

2-3 months 12 – 24 months

Consumers panic and focus on stock

piling grocery and health items,

switch to eCommerce for most

non-essential buying

Consumers adapt to new behaviors

and spending increases, but not to

pre-crisis levels as consumers adjust

to new economic environment

Consumer spending returns to pre-

crisis levels with global rebound not

expected before 2021

Current focus for business leaders

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Learnings from global retailers

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Why look broadly to inform how to reopen hearing instrument stores?

‒ There will be pent up demand for hearing instruments (estimate 70% of potential first-time

hearing instrument customers delayed purchase due to COVID-191)

‒ Customers have been adapting to the new norms of essential retailers and communicating with

non-essential retailers

‒ Risk of permanent shift of customers to 'store-less' online retailers (e.g., Eargo, Lively, Audicus,

NuHeara)

‒ Customers and employees will be cautious about reentering stores

‒ Significant opportunity to bring customers back to stores and capture pent up demand

1. BCG survey of 1,067 hearing instrument customers and prospective customers from April 2020

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~70% Considerers and Lapsers reporting delayed hearing aid purchase due to COVID-19

11%

69% 67%

12%

26% 28%

74%

6%

Current Users

Impact

on H

A p

urc

hase

3% 5%

LapsersConsiderers

How has COVID-19 impacted how soon you expect to buy your next set of hearing aid(s)?

Total n = 1067; excludes respondents who said they stopped considering purchase of hearing aids before COVID-19 1. Considerers and Lapsers were not given “dark red” answer choice Note: A Lapser used to have hearing aids, but no longer does. A Current User currently uses hearing aids. A Considerer is considering buying hearing aidsSource: BCG Hearing Aid Customer Survey-Apr 2020; BCG analysis

n = 904 n = 127 n = 36

Sped up my purchase: I plan to buy earlier than I was before COVID

Delayed my purchase: I’m now not sure if/when I will buy1

No change or not sure

Delayed my purchase: I plan to buy later than I was before COVID

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Procedures dropped ~60% due to COVID-19 of which ~80% of volume drop linked to delays

Avg. -60%

77%

17%

Ophthal-

mology

-84%

86%

-47%

14%

83%

Derm-

atological

Urological

Procedures

76%91%

9%

16%

Neuro-

surgery

(incl. Spine)

-66%

82%

18%

Otolaryng-

ology (Ear,

Nose,

Throat)

84%

24%

Pediatric

26%

Cardio-

thoracic &

Inter-

ventional

Cardio-logy

-54%

81%75%

19%

-62%

Ortho-

pedic /

Trauma-

tology

-58%

25%

Peripheral

Vascular

Procedures

74% 82%

-63%

18%

% of decline

linked to delays

(80% avg)

Neuro-

radiology

procedures

67%

33%

General/GI

% of decline

linked to

permanent

cancellations

80%

Aesthetic

& Plastic

Obstetrics

and Gyne-

cological

-62% -61%

-51%-45%

-39%

23%

20%-76%

Note: 13 procedure groups were sub-divided into 63 sub-procedures; respondents were allowed to provide input on multiple sub-procedure groupsFollow up survey question: "What percentage of the reduced number of procedures is due to a delay vs. a permanent cancellation? (total answer = 100%) Source: BCG COVID-19 survey (298 total respondents -> 1,465 responses), April 2020

n = 76 n = 80 n = 90 n = 48 n = 145 n = 144 n = 246 n = 120 n = 105 n = 196 n = 85 n = 90 n = 40

What impact do you expect on number of procedures in short-term (1-3 months) vs. pre-COVID?

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Best-in-class retailers have focused on five key areas over the course of the crisis

‒ Clear communication

of safety guidelines

(e.g., signage on

doors, email

instructions)

‒ Support customer

purchases (e.g.,

extend return policies)

Customer Health &

Safety

Employee

Wellbeing

Product

Management

Marketing and

E-CommerceManaging cash

‒ Enhance employee

training on safety

and cleaning

‒ Explore new ways of

working

‒ Relax absentee

policies

‒ Re-assure

customers of product

availability (e.g., video

to customers)

‒ Update in-store

offerings to meet

customer demand

‒ Increase online

volume with targeted

marketing and

promotions

‒ Embrace new digital

platforms to engage

consumers (e.g., live

stream events, virtual

backdrops)

Lin Qingxuan –

Chinese

cosmetics retailer

‒ Engage in rent

forgiveness

negotiations

‒ Review payment

terms

‒ Prioritize revenue

generating activities

‒ Develop multiple

scenarios for

financial plan

Source: BCG analysis

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Case study: CVS MinuteClinic focused on patient and employee safety

Key takeaways

‒ Clear communication of

safety protocols to reassure

patients

‒ Leverage remote patient

interactions where possible

‒ Reinforce employee

trainings on safety

Leveraging Digital and online

tools to engage with patients

Increased safety measures to

protect customers and staff

Source: CVS website https://www.cvs.com/minuteclinic

‒ Appointments required for all visits

‒ Patients wait in vehicles until

provider texts or calls them in

‒ In-person visits limited to essential

services (e.g., no travel health or

camp physicals)

‒ Offering telehealth visits to all

patients

‒ Requiring all appointments

scheduled online

‒ Website provides clear information

on services available

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Case study: Alcon supporting eye care practice customers in effort to engage patients digitally

Key takeaways

‒ Forces at play to dis-

intermediate patients and

their eye care professional

‒ Digital solution offers

convenience while not

compromising on eye

health

‒ In the age of COVID, these

platforms maintain practice

revenue for existing

prescriptions and

relationships

How MARLO helps practices

overcome COVID challengesWhat is MARLO

‒ Online portal for

patients to reorder

contact lenses

‒ Lenses delivered to

patient's home

‒ Helps doctors and

patients stay

connected between

visits

Source: MARLO website https://meetmarlo.com/

‒ Practitioners maintaining patient

relationships through Digital

platform

‒ Enables reorders from existing

prescriptions without requiring

office visit

‒ Prevents loss of patients to online

retailers

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Patient's looking to providers to proactively communicate before rescheduling procedures

Which factor is most critical for you to reschedule your procedure?

As soon as social distancing and stay-at-home orders

have been relaxed by authorities

As soon as the provider is willing to see me

As soon as the provider’s location has been certified to be

free of COVID-19

11%

When I feel confident that the COVID-19 peak has passed

When I feel comfortable with the provider’s COVID-19 procedures

When I am personally ready

As soon as I can afford it / feel more certain about my financial situation

As soon as I am able to secure safe transportation between home

and the provider’s location

As soon as my family feels comfortable with me rescheduling

26%

24%

12%

12%

9%

2%

2%

2%

Source: BCG patient sentiment survey. April 2020. N=964Note: Respondents include only insured patients undergoing surgical procedures or diagnostic tests from across the US

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Staff and patient health screenings, robust sanitization among top safety protocols to give patients confidence to reschedule

Which protocols would make you feel more comfortable rescheduling your in-person care event, if your

provider were to implement them?

3.0

3.2

3.2

3.6

3.8

4.9

5.2

Strict limitation and/or spatial isolation of the number of patients

allowed at any given time

Virtual or telehealth care options for my treatment needs

Regular COVID-19 screening for all doctors and staff

No penalties for cancellations/rescheduled visits

COVID-19 screening for all patients before treatment

Improved disinfection/sterilization practices

No wait times upon arrival to the facility

Average ranking (1-9, 1=high)

Priority action

steps for providers

Source: BCG patient sentiment survey. April 2020. N=964Note: Respondents include only insured patients undergoing surgical procedures or diagnostic tests from across the US

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Key areas every practice owner needs to address

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Actions to reopen that every retailer should start immediately…

Non-exhaustive

Launch patient

engagement efforts

(calls, emails) to

stimulate demand

Reassess budgets &

manage for cash

Proactively model and

prepare for multiple

financial scenarios

Pro

tec

t yo

ur

Pe

op

le

Re

vit

alize

de

man

d

Open with the right

hours at the right

locations

Ramp-up online,

telehealth offering &

capabilities

Aggressively manage

inventory, assess supply

chain stability

Store Ops & DigitalMarketing, Merchandising, & Logistics Finance

Support the needs of

the community

Leadership

Key action to consider

Assign COVID response

lead (if applicable)

Update health &

safety protocols

Explore new ways of

working

Regularly communicate

with stakeholders and

patients

Source: BCG analysis

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Areas to focus on

Leadership

Marketing Operations

Sales & Finance

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Two-tiered checklist for employers

Checklist of how any employer should help

create a "New Normal" to fight COVID-19

Proposed mitigation actions that should be

applied broadly as the impact of phasing in

operations is assessed

List of practices observed around the world

to mitigate risk

Considerations will vary in relevance by

sector and operation; those feasible &

relevant should be implemented

Baseline recommendations Additional considerations

Employers have strong incentive to meet (and exceed where/when appropriate) baseline

recommendations as adverse public health outcomes could result in more stringent restrictions

and/or a return to "Stay Home, Stay Healthy"

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Operations

COVID Team Lead

• Review regulations weekly

• Manage all in-clinic modifications

• Responsible for staff protocols

• Train staff to ensure universal compliance

• Maintain PPE supplies

Protocols

• Use of masks, disinfectants, hand sanitizing

• Minimize direct contact (handling of devices)

• Minimize time in procedure rooms, maximize ventilation

• Place furniture for social distancing

Scheduling

• Offer remote consults when appropriate

• Curbside care for HA servicing

• Schedule to minimize any waiting room time

• Schedule 30 mins spacing in booth utilization

• Perform intakes on the phone

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Sales & Finance

Maximize Cash

• Develop projections to plan for worst & best case scenarios

• Pursue govt assistance programs – PPP, EIDL, etc.

• Prioritize revenue collections – both managed care and private pay

Prioritize New Revenue Generation

• Adjust operations to minimize zero revenue chair time

• New technology to existing patients, tested not treated, trial completion

• Accessories, improved technology levels

Invest in High ROI Activities

• Provide training for all customer facing staff to maximize their effectiveness

• Improve front office calls to minimize no-show rate, improve adoption rates, shorten repurchase cycles

• Revisit best practice at each stage of the patient journey

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Marketing

Get ready

• Understand your patients/prospects

• Define the Service Delivery Models

• Online store, extend solution portfolio

Communicate

• Reach out and inform:

• Your availability, shop hours

• Your safety measures

• Your service delivery models

• YOU CARE

Learn and Scale

• Start learning with known customers before reaching out to new ones

• Be strict on delivering what you promise, build TRUST

• Generate additional traffic through lead generation activities

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Leadership

People

• Make sure your team knows you care about them and communicate constantly

• Set new goals, ensure clarity of ownership and hold daily huddles

• Engage them in the solutions, leverage the collective brain power

Process

• Leverage the flywheel, set up KPIs to monitor each area

• Communicate results frequently, treat shortfalls as learning opportunities

• Take time to work on the business rather than in it so you can observe and adapt as you go

Purpose

• Set the vision, (ADKAR), communicate the (new) priorities and reinforce the why

• Safety, hygiene & patient confidence

• Profitability and sustainability

• Set expectations – prepare the team for a series of changes over coming months

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Summary and next steps

Be inspired

• Focus on the healthcare aspect of the crisis, not the economy

• Take inspiration from the market leaders in other sectors

Lead the change

• Communicate 'the why' both to your team and your patients

• Recognize & celebrate progress as frequently as possible

Use the flywheel

• Develop your plan around the 4 key areas

• Start small, and leverage the team

Thank you