Contact Lens Profitability

The Future of Contact Lens Profitability

By Thomas F. Steiner

Director of Market Research,
Review of Optometric Business

SYNOPSIS

Many ODs perceive contact lenses as a low-priced, low-margin commodity, but they overlook the real valued asset: the contact lens patient over the long-term.

ACTION POINTS

COMPUTE PATIENT VALUE. Acknowledge the higher long-term value of contact lens patients vs. eyeglasses-only patients.
PRESENT NEW TECHNOLOGY. More patients can be fit with CLs than in the past.
DISPENSE PREMIUM CLS. Innovative products command higher prices.

Since disposable lenses came to dominate contact lens dispensing in the 1990s, a frequently heard concern of independent ODs is that contact lenses are no longer profitable. Disposables appeared to make contact lenses a commodity, a branded package-good, conveniently available at low prices on the Internet or at big box retailers. Many ODs remain pessimistic about the future profitability of contact lenses in their practices.

While it’s true that contact lens profit margins declined after disposable lenses became dominant, the financial contribution of contact lenses in typical practices actually increased due to two market factors: First, contact lens penetration grew; and, second, the annual amount spent per wearer increased.

In recent years, the contact lens market share of independent ODs has grown modestly, despite commercial competition, and there has been no decline in independents’ capture rate of patients’ contact lens purchases.

Looking ahead, there is no evidence supporting the proposition that independents will be less competitive in the contact lens arena or that contact lens revenue growth will not continue. Consider these factors:

•    A VALUED RELATIONSHIP. Most patients put a high value on a long-term relationship with their eye doctor, who over time gains a deep understanding of patients’ personal needs and preferences. Independents are best positioned to provide a continuity of care and earn the enduring loyalty of patients. Patients expect and trust the product recommendations they receive from ODs. Patients of independents are willing to pay a premium for products to nurture a long-term relationship. Commercial providers are more focused on today’s product transactions. These market dynamics are not changing.

•    EMPHASIS ON EYEGLASSES. Most optical retailers will continue to devote most management attention to selling eyeglasses, their main competitive arena.

•    INDEPENDENTS FLOURISH. There is no evidence that the buying power advantage of large optical retail chains is increasing, squeezing out independents. The contact lens manufacturers have a large stake in keeping independents in the game, because independents are critical to new product adoption, which is vital to continued manufacturer success. Most OD opinion leaders are independents.

•    TECHNOLOGY DRIVES MARKET. The 43-year trend of steady growth in contact lens penetration is highly likely to continue as new technology appears and maturing generations of contact lens wearers continue to wear lenses after the onset of presbyopia. The likely aging of the contact lens wearing population will work to the advantage of independents, who have a larger share of their patient populations among mature adults.

•    NEW PRODUCTS BRING PREMIUM PRICES. New contact lens technologies will command premium prices, as they always have. Currently, the rapid growth in daily replacement lens penetration is accelerating the long-term trend of increased annual consumption per contact lens wearer.

There is little support for a conclusion that independents should de-emphasize contact lenses in the years ahead. In fact, there is a strong case that contact lenses should receive increased focus from ODs because they are an increasingly attractive vision care option to the American public.

Thomas F. Steiner is Director of Market Research for Review of Optometric Business. To reach him: tnlsteiner@comcast.net

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