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Consumers Embrace Two-Handset Bundles

By Greg Scoblete -- TWICE, 5/5/2003

NEW YORK — Multi-handset cordless-phone systems sold with two handsets in the box have been a big hit with consumers, but it's not certain whether packages of three or more handsets will ever be a hit in the United States, cordless-phone suppliers say.

Suppliers have increasingly turned to two-handset packages to promote the multi-handset concept and increase average selling prices. The two-handset bundles, they note, give the large majority of consumers what they want, even though many cordless phone systems can support up to nine handsets — one for every room in the house, and then some.

"In recent focus group discussions regarding multi-handsets, consumers did not mention the need to bundle more than two handsets," noted Donna Silbert, VTech's product management and marketing VP.

"The consumer has spoken. They don't need more than two handsets," said Eldon Chuck, Atlinks marketing VP.

Two-handset bundles have been a big hit with consumers, said Kerry Cooper, director of marketing, Southwestern Bell. "Bundling is the way to go," Cooper added.

A benefit to packaging a second handset in the box is avoiding consumer confusion. Uniden CEO Al Silverberg pointed out that consumers can get confused about matching accessory handsets to their expandable system. Packing an additional handset in the box familiarizes them with the procedure and alleviates the retailer from having to sell the concept or devote dwindling shelf space to accessory handsets.

"I think retailers are coming to realize they want it all in one box," Silverberg said.

Silverberg said internal research led the company to offer two-handset packages. "We've seen our customers go out and get one additional handset after buying the base," he said.

At VTech, "Generally speaking, we sell one extra handset for every two bases," said Silbert. "That being said, some of our retailers sell handsets at a much higher level. For example, the consumer electronics and office superstores have almost a one-for-one attach rate on extra handsets to bases," she said.

As a result, Silbert noted that two-handset bundles are selling "extremely well." And Uniden's Silverberg said the bundled SKUs at his company are selling better than the single units through the first quarter of this year.

Uniden offers four two-handset bundles of 2.4GHz DSS multi-handset phones, two SKUs of 2.4GHz analog bundles, and two 900MHz analog SKUs. The lineup reflects an emphasis on giving what 70 percent of consumers say they want, Silverberg said.

"We've been really surprised with the success of the two 900MHz SKUs that ship with an additional handset," Silverberg said, referring to the DXAI388-2 and DXI386-2 models. They retail for a suggested $99 and $79, respectively, and "they've injected some life back into the frequency."

Wayne Borg, Panasonic's telecommunications product manager, found that through the beginning of 2003, his company was selling about one additional handset for every two base units sold. Panasonic is offering two 2.4GHz DSS SKUs, the TG2352 and 2382, with an additional handset in the box for suggested retails of $199.95 and $179.95, respectively.

Companies that package two handsets in a box include VTech, Panasonic, Southwestern Bell, Uniden, U.S. Electronics (under the XAct brand) and Wave Industries (Olympia brand).

Whether bundles deliver incremental sales that would not have otherwise occurred is an open question, but they have driven up the average selling price (ASP) for phones, which is something retailers welcome.

"While they may not get that extra accessory sale, they do get higher ASPs for a single box," Silverberg said.

"It's easier for consumers to get the concept of expandability when it's in one box," said Brad Pittmon, Vtech's cordless product manager. His company offers the VT00-2421 2.4GHz DSS phone system, expandable up to four handsets.

To make expandable systems more attractive to consumers, manufacturers have sought to pack more features into them. Uniden, VTech and Panasonic, for instance, have a handset-to-handset radio feature which works independent of the base unit.

"Our products give the consumer the ability to use both phones at once and allowing intercom utilization between handsets," said VTech's Silbert. "This truly gives our consumers a telephone 'system' for their home."

Another strategy for boosting accessory-handset sales is tailoring handsets for individual rooms in the house rather than providing one consistent design for all handsets within a line. Atlinks adopted this strategy for its GE-branded phones.

"You have to give them a reason to buy these extra phones," said Southwestern's Cooper. "From all our research, we've seen that people have about four phones in their house, and when they're shopping, they're only looking to replace one or two units. You need a compelling offer."

As the cost of cordless technology falls, the door is open for triple and quad bundles, said Paul Murphy, CEO of Elite Industrial Holdings (Olympia-brand phones). "Already in Europe, people are buying three-packs, so we see a real opportunity there in the future," Murphy said.

VTech's Silbert, however, doubts whether customers will see the value in a three-handset bundle. "We do not feel that these three handset bundles will become popular with traditional retailers due to the much higher price point and the lower percentage of consumers looking for them," she said.

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