BECOMING US-MARKET LEADERS: �OUR SUGGESTED STRATEGY

Team members:��Alessandro Giuseppe Gallo�Konstantin Hennes�Marco Sterni�Allegra Tavani

US-Market�Overview

Market

Positioning

Market Segment Analysis

Amplifon Growth Initiative

Financials

Agenda

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US-MARKET

Overview

© Amplifon S.p.A.

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General Information

Largest market in the world (revenue $8 billion)

10% of population with hearing disabilities (38 million people)

Only 34% of those who could use a hearing aid own one

Overall, around 19.000 licensed hearing professionals

40%

Population and Hearing loss prevalence

States with the most percentage of people with hearing loss prevalence:

• West Virginia (6,6%)
• Maine (5,4%)
• New Mexico (5%)

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The map shows the combination of hearing loss prevalence with the total number of populations

• Understanding of the number of potential customers of Amplifon.

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40%

Penetration

Reasons why people with hearing disabilities choose not to get treated with a hearing device.

• Penetration rate is a big challenge

• Baby Boomer generation continues to reach age 65; Of those 65+ now eligible for Medicare, 30-50% of them are at risk of hearing issues.
• number of comorbidities (add link) associated with hearing loss

These two factors is making people realize that the need of hearing care is high

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40%

US Hearing aids market Growth

Given these factors US Hearing Aids Market to Reach USD 5,85 Billion in 2029

Set to gain momentum from the increasing adoption of artificial intelligence (AI) in these devices.

• Patients nowadays are moving towards them because of their ability to provide novel and personalized services.

The market is bifurcated into two kinds of products: hearing implants and hearing devices.

• Hearing devices segment generated the largest US Hearing Aids Market share.

Favourable regulatory and reimbursement policies are set to propel the US Hearing Aids Market growth

• FDA Reauthorization Act (2017) 🡪 Greater public affordability and accessibility with OTC hearing aids.

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Competition

© Amplifon S.p.A.

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Company with a very large base allows the company to sell high-quality product at a low profit margin.

Global leaders in the manufacturing stage of the sector.

They are considering to verticalize and directly enter in retailing.

This would allow them to offer products at a lower price than the retailers. However, they’re not as specialized as them in providing premium services that results from decades of investment in R&D.

MARKET POSITIONING

• R&D of HA is highly regulated and limits the distribution of products through various distribution channels (e.g., online market).

• In 2017, a new law allowed federal health agencies to create OTC devices that can be sold without licensed professionals.

• Demographic trends show that the oldest people are the principal user base that requires the aids the most.

• The Fourth Digital Revolution allows HAs to interact with devices such as smartphones.

• The HC retail can accumulate customer data to offer a complete experience of the products.

• Regular scrutiny made by environmental agencies is adding operation costs to Amplifon as it must adapt to the usage of renewable sources of energy for its retailing activity.

• IPRs protection is essential to promote economic prosperity and to foster innovation.

• Data protection laws are critical as data protection has emerged as a critical privacy issue in recent years, and in 2022 at least 15 states are preparing to consider data privacy legislations.

• Growth in inequalities after Covid 19 could negatively impact consumer spending, making people choose for cheaper alternatives, such as Costco.

• The current surge in inflation lowers the willingness to spend money, making people less keen to acquire HA products in the next 2-3 years.

• Growing concerns on health make people keener to visit a specialist and ask for consultations.

T

Technological

S

Social

E

Economic

P

Political

E

Environmental

L

Legal

• In the industry, brand identity is crucial for customers’ choices.

• Retailers able to spread R&D costs over more stores should exploit their size to differentiate their offerings from competitors.

PORTER’S FIVE FORCES

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• Brand recognition;
• Company’s size joint with the implementation of digital technologies: data accumulation for customization of services;
• Greater investments in R&D to innovate at a faster pace than the competitors;
• Proprietary system.

• Reliance on manufacturers.

• Increasing population +65;
• Increasing Hearing aid penetration rates;
• AI allows product innovation;
• Acquisition of small competitors.

• Manufacturers might become competitors;
• Regulations permitting OTC online selling;
• Competitors dealing with insurance companies;
• Market fragmentation.

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MARKET SEGMENT ANALYSIS

Price-Seeker Segment

© Amplifon S.p.A.

Costco only major player in the market with a strong market position

NOT A FIT FOR AMPLIFON AS:

Entry would dilute the differentiaton strategy

Entering a market with a sole major competitor would be too resource intensive

Market characterized by customers searching for deals and not needing a lot of service

Growing segment with potential for customers also to look into Premium or OTC

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Medical Seeker Segment

© Amplifon S.p.A.

Segment is losing weight as consumers are looking more towards Insurances

Consumers seeking to treat medical conditions driven by brand trust & service

NOT A FIT FOR AMPLIFON AS:

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Do-It-Yourself

© Amplifon S.p.A.

Actual medical benefit is secondary.

NOT A FIT FOR AMPLIFON AS:

Acquisition of small companies in the OTC market is not feasible.

As a retailer, its product margin would be very low

No achievement of a sustainable business strategy over time.

Consumers who want to be in control, mainly driven by the price convenience of the hearing aid and not interested in premium services.

New FDA-Regulation should greatly impact this segment and increase its importancy

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Insurance

© Amplifon S.p.A.

Coverage of hearing aids will increase in the future

Segment is going to become very important if the current political trend continues

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Segment slowly recovering from the Covid-Impact

IT IS A FIT FOR AMPLIFON AS:

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Customers highly influenced by payor/ benefit administrator in their decision

Segment increasing in size as political support & hearing aid coverage increases

Premium Retail Shoppers

© Amplifon S.p.A.

IT IS A FIT FOR AMPLIFON FOR:

Amplifon‘s customer-centric approach

Investment in high technology only possible by big companies as Amplifon

The need for the retail sector of dedicated investments gives Amplifon a higher power than manufacturers’ which struggle in doing such investments

Customers are interested in a superior customer experience and excellent services

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Devices characterized by high technological features

Suppliers play a relevant role

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AMPLIFON GROWTH INITIATIVE

How to become leader in the premium segment? How to increase in share?

© Amplifon S.p.A.

INCREASE IN SIZE

IMPROVE EXISTING �STORES‘ PERFORMANCES

Acquisition of smallest retailers to exploit their customer base but also their expertise (targeted ones are audiologists).

Amplifon Shopping Mall Initiative to open stores in shopping malls and exploit the higher revenues per store.

Store traffic could be increased through the shopping malls stores and changing the audience perception of Amplifon.

Productivity could be increased thanks to the Algorithm management

For further details…

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…About the increase in size

RETAIL PARKS

SHOPPING MALLS

Acquisition of further 25 stores �in 2022

Acquisition of 50 stores each year �from 2023 to 2026

Opening 25 stores in 2022

Opening 50 stores each year �from 2023 to 2026

IN 2022 THE ACQUISITION ARE REQUIRED IN BOTH THE CASES TO IMPLEMENT THE INNOVATION THAT WE WILL SUGGEST TO IMPROVE PRODUCTIVITY: AFTER FIRST RESULTS FRANCHISEES COULD LOWER THE COSTS

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and the acquisition Targets

© Amplifon S.p.A.

(selection based on data related to population and number of people with hearing disabilities in the States in which they are operating)

California based company operating 12 Stores in the State with the highest number of people suffering from hearing disabilities.

Texas based companies operating 13 Stores in total in the state with the 2nd highest number of people suffering from hearing disabilities.

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…About the Amplifon Shopping Mall Initiative

© Amplifon S.p.A.

Why Shopping Malls?

Shopping malls are extremely popular in the US: 18 billion customers a year. �The most popular one alone attracts 52 million customers a year.

Popular also with the generation +65: on average visit a shopping mall more than 12 times in a year: perfect for frequent visits to the aid provider.

Visitors of a shopping mall on average spend around 135 minutes on a visit: perfect timing for a free hearing consulting.

Amplifon is also actually doing it in Australia: results show higher revenues per store.

moreover

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and the possible partners

© Amplifon S.p.A.

Seeking Cooperation

The majority of shopping malls are owned by an exclusive group of companies �who could act as a decisive strategic partner.

Use these partnerships in order to open stores in shopping malls in the most relevant States.

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How to improve performances?

© Amplifon S.p.A.

INCREASE STORE TRAFFIC

INCREASE PRODUCTIVITY

Defining a different retailer: Amplifon as a Tech company and not only as a Med

Exploiting Percolata‘s algorithm management

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…About the traffic: re-inventing the way the brand is perceived

© Amplifon S.p.A.

The implementation of digital technologies allows the customers to have a 360˚

experience, making them always connected.

The brand becomes associated with connectiveness thanks to the progressive digitalization.

More awareness is emphasised on hearing problems and people have the need to always be connected to the real and digital worlds.

People will be keener to opt for an up-to-date brand capable of making them feel integrated in every aspect of the social and working lives.

How?

e.g. is it possible to let the consumers try, within the stores, the way the Amplifon App interact with a TV, the way it allows to listen to a specific direction or to delete the noises (in this case it could be possible to test that feature in the crowded shopping malls).

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…About the productivity: automating managers’ role

© Amplifon S.p.A.

Installing sensors in shops to measure the volume and type of flowing in and out customers; combining these data with sales per employee finding the final productivity.

Percolata‘s algorithm builds profiles per employees: when do they work well? Do they act better when paired with particular colleagues and worse with others?

Weather, traffic and other signals that help forecasting customer footfall.

Schedules with the best employees’ allocation.

How to implement it?

First year implementation in 50% of the stores as a test phase, if succesfull roll-out across all stores.

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FINANCIALS

Main numbers and results

© Amplifon S.p.A.

Increase in stores

Increase in revenues (M)

Increase in market share

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Methodology: 1^st step

© Amplifon S.p.A.

We derived an average measure for the revenues per store in US and, applying a 10% growth rate year by year, it has been highlighted the increase in revenues that would derive from opening 450 stores in RPs.

Growth rate at a 10% depends on two assumptions: �- first, that the pace for the increase in revenues per store from 2019 to 2021, which accounts at a 5% and that depends on the sole acquisitions made; �- second, that the other 5% depends on the improvement that we suggested with respect to the increase in store traffic and in productivity

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Methodology: 2^nd step

© Amplifon S.p.A.

We derived the revenues per store in Australia and also the revenues per store related to the BayAudio stops in shopping malls exploiting Amplifon’s Financial Statements and press releases.

Fundamental for our analysis was a benchmark for possible Amplifon’s performances in shopping malls: �that’s why we took into account BayAudio ones.

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Methodology: 3^rd step

© Amplifon S.p.A.

Discounting the revenues per store of BayAudio at a 10% rate and weighting the increase in revenues with respect to the decision to balance the opening of shops in Retail Parks and Shopping Malls, we were able to justify the mentioned results.

…for further information have a look at the excel and word documents that we will attach!

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Q&A

THANKS FOR �THE ATTENTION