Bluetooth’s Success

The Economist writes:

This success, after its rocky start, is due to a combination of factors, says Stuart Carlaw, an analyst at ABI Research. In many countries Bluetooth’s fortunes were boosted by new legislation banning the use of mobile phones without a hands-free kit while driving. This prompted many people to buy Bluetooth headsets. Several carmakers, led by Audi, also began to incorporate microphones and speakers, capable of connecting to a handset via Bluetooth, into their vehicles.

As consumers became more aware of Bluetooth and began to ask for it, handset-makers started to include it as a means of differentiating their products and increasing their margins. Adding a Bluetooth chip to a phone now costs very littlearound $2, says Mr Carlaw, down from $20 in 2001but allows the manufacturer to increase the price of the handset by far more, and opens up a new market for high-margin accessories. Finally, operators began offering Bluetooth headsets (typically end-of-line products that cost very little) as incentives to new customers. Again, the perceived value of the headset is far higher than its cost to the operator, so this increases margins.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.