Hands-Free Laws Drive Plantronics' Plans

By Joseph Palenchar -- TWICE, 11/5/2001

Santa Cruz, Calif. — More consumers than ever are buying headsets with wireless phone purchases, but Plantronics wants to further accelerate the attachment rate with a promotional program in New York state, where drivers as of Nov. 1 are prohibited from talking without a hands-free accessory.

Plantronics president Ken Kannappan said the company intends to replicate the program in other states or metro areas that enact similar legislation. The next promotion might begin next year in Dade County, Fla., where lawmakers combined a hands-free requirement with a prohibition on dialing while driving. The restrictions go into effect in September 2002.

Attachment rates have been rising because of public awareness of headset safety benefits, Kannappan said. Public awareness, in turn, has been driven by hands-free laws enacted by New York state and local communities and by news coverage of legislation pending in more than 30 states, Kannappan said. "Almost every retailer is expanding space for these products" to capitalize on the awareness, he added.

Three to four years ago, he said, the attachment rate of purchased headsets was about 2 percent to 3 percent per handset, but it now averages around 20 percent to 24 percent, with some retailers averaging even higher rates, he said. These rates don't include the free, low-quality earbuds packaged today with most phones. Consumers are often dissatisfied with those earbuds, he said, because of poor voice quality, which requires users to hold the omnidirectional microphone in front of their mouths to be understood.

To drive wireless users into stores in New York state for step-up headsets, Plantronics has launched an educational promotion with the theme "Use your head. Use your headset." The promotion focuses on the benefits of headsets in general and Plantronics models in particular.

The promotion includes billboards, radio spots, taxi-top ads, onscreen movie-theater slides, and in-store training complemented by Plantronics personnel who staff headset stations in some retail locations, Kannappan said.

To further expand its share of the hands-free market, the company has entered into the earbud market to complement its boom-type headsets. The company's first earbud model, shipping since the summer, retails for $30 with higher performance and durability than other earbuds, Kannappan said. "The microphone housing amplifies the higher frequencies that let you distinguish words better by making it easier to pick out consonants," he explained.

Plantronics' boom-type headsets, however, deliver the best performance because the microphone is closer to the mouth, and they add noise-canceling technology, he pointed out. "The majority of people who purchase wireless-phone headsets [of any brand] are buying the boom type," he noted.

Bluetooth blahs: For now, Kanneppan isn't factoring cord-cutting Bluetooth technology into the company's growth forecasts. Because few wireless phones incorporate Bluetooth, Plantronics is indefinitely postponing the commercial launch of its first Bluetooth headset.

The company's Bluetooth headset was shown at February's wireless show, where a spokesman said the company planned in July to ship to carriers and later to retailers. Now, however, Kannappan said the device won't ship at all this year. "We never planned to introduce it until the market was ready," he explained, and the market isn't ready because a number of cellphone manufacturers have postponed shipments of Bluetooth-equipped phones. "We could offer [add-on] Bluetooth modules for phones, but the purchase price will go up" from a previously announced suggested retail of $149, he noted.

Plantronics entered the wireless-phone headset market four years ago and this year has achieved a year-to-date 60-percent sales share through retailers and more than 50 percent in units, said Kannappan, citing NPD Intelect statistics. Although the statistics exclude carrier stores, he said, "We think we're in the lead position in carrier stores."

The company has no plans to offer installed hands-free car kits because, he said, "it's almost impossible to offer the same level of quality in an installed system," given the distance of an installed microphone from a user's mouth.

In another development, Plantronics said it plans this fall to significantly expand its PC-headset lineup with 10 new SKUs priced from $9.95 to $30 at 50-point margins. The company already offers seven SKUs from $29 to $120.