Cell Phones Are, Like, Cool

How can carriers make themselves trendy enough to capture the market that could drive penetration through the roof?

Go anywhere young people are, and it's a good bet you'll find wireless phones. You're just as likely to see teenagers racking up wireless minutes while breezing through the mall as you are to see business executives checking their voice mail while waiting for a flight. Of the nation's 31.6 million teens, 33% already own a wireless phone and 87% say wireless is “in,” according to Teenage Research Unlimited (TRU) (www.teenageresearch.com).

This year, according to the Yankee Group, wireless penetration in the youth market should equal overall U.S. penetration at 44% (www.yankeegroup.com). The revenue to be had from this market is incredible. In 2000, American teens spent $155 billion, or an average of $84 per week, according to TRU.

The situation sounds perfect, yet most top carriers in the United States have been tardy in thinking about younger consumers, according to Knox Bricken, Yankee Group wireless analyst. The few carriers that have targeted this segment are reaping its rewards. Bricken identified Cincinnati Bell Wireless (www.cbwireless.com), Leap Wireless (www.leapwireless.com) and Powertel (www.powertel.com) as early leaders in the youth space.

“Those carriers always recognized that they were niche carriers, and they were going to have to appeal to alternative market segments,” Bricken said.

With youth adoption on the rise, national carriers have begun to buzz about this market. Greg Roberts, Cingular (www.cingular.com) director of marketing and national promotions, said that, judging from the Yankee Group's youth-penetration forecasts, Cingular has to position itself for the youth market “because when you get the customer at that age, you have a high probability that you will keep them in the franchise for a number of years afterward.”

So what will separate hip carriers from the losers?

Let's Hear It for Prepaid

Some national carriers have begun to market toward youth without refining their products, creating an insatiable demand.

“Many of the national carriers send mixed messages to consumers, claiming they want to target youth customers but requiring credit checks and high up-front payments that make the product unattainable for the youth segment,” Bricken said in her report, Will Wireless Carriers Have Success with Generation Y-erless?

Although carriers might be inclined to start a youth initiative with marketing, that's jumping the gun.

“If you're looking to be cool, you better start with a product long before you get to the message,” said Jack Cassidy, Cincinnati Bell president & COO. “No matter how cool your message is, if your product can't get to the under-21 market because you require contracts or a credit check, by definition you aren't cool.”

Prepaid, then, is essential to pull in the youth market. Prepaid has a stigma, though, as an open door to high churn and unreliable revenue. Yet prepaid has proved its merit with i-wireless (www.i-ontheweb.com) from Cincinnati Bell Wireless. Launched in October 1999, i-wireless targets 14- to 19-year-olds and has reached 5.5% penetration of the carrier's 2.3 million POPs, Cassidy said. Subscribers pay 35¢ for peak minutes and 10¢ off peak.

“So 70% of our usage is off peak because during peak hours, kids are in school,” Cassidy said.

Bricken concurred that prepaid is an excellent start to a youth strategy. The three carriers she identified as early leaders in the youth market all have prepaid-focused products.

Dan Pegg, Leap Wireless senior vice president, public affairs, said the carrier's Cricket service provides simplicity that attracts young people (www.cricketcommunications.com).

Not only does prepaid give young consumers access to wireless service, it allows them to get extra minutes beyond the basic security plan their parents might pay for. The idea for Sprint PCS' (www.sprintpcs.com) hybrid prepaid plan, the wireless allowance, came from research with parents.

“They said one of their frustrations was wanting the safety and security of wireless for their kids, but not (wanting) to get stuck with a high bill,” said Jeff Hallock, Sprint PCS director of consumer marketing. “It (the wireless allowance) allows parents to pay a fixed $35 fee every month, and the kids have that much to use in a piggybank. When they run out, they have to add money to it like a prepaid account.”

Permission Slips

Whether to target the youth market directly or approach those potential subscribers through their parents is a decision every carrier should have made by now. Most carriers are pursuing a balance of the two, whereas carriers such as i-wireless and Kode (www.dkode.com), a mobile virtual network operator in Sacramento, CA, have honed in on the youth market as their raison d'etre.

Verizon Wireless traditionally saw the market as one controlled by the parents but has recently shifted to market to 16-year-olds and above (www.verizonwireless.com).

“Late teens — over 18 and in college — have developed incredible amounts of discretionary income,” said Brenda Raney, Verizon spokesperson. “We're (also) marketing to 16 and above, because we've recognized that those people influence their parents.”

Family plans have served the national carriers as “a good segue” into youth-specific efforts, Bricken said. For those carriers to compete with the likes of Cricket, i-wireless and Powertel in the youth space, however, “they need to develop a product for teens and not try to piggyback on an adult product,” she added.

Over the long term, though, powerhouse carriers that target youth through their parents may be victims of their own success. Younger consumers eyeing wireless may be turned off by the carrier(s) their parents use.

Handsets With Flair

Regardless of how uncool the carrier may be, unique handsets can go a long way toward making your service awesome. Changeable face plates were a start. Nokia (www.nokia.com) has taken phone design full tilt. For $29.99, users can choose from many faceplate designs, or take a design and customize it to add their own flair.

Creating the separate i-wireless brand has brought success to Cincinnati Bell with subscribers, as well as attention from competition.

“We've had more than a few inquiries from people as to knocking off the product that we have,” Cassidy said.

To effectively market to teens, carriers need to use a hands-on approach and learn a new lingo. Young people will not take well to hard sells or being told what is cool.

“They want to have something that they have discovered for themselves,” Bricken said.

Viral marketing, where the product sells itself through word of mouth, will be critical to youth uptake. Such was the case for i-wireless, as activations spiked when teens returned to school after Christmas.

Carriers that capitalize on this market over the long term will be those that can migrate teenage subscribers up to more a mature brand or service plan once the subscriber isn't so concerned about cool.

“Those are customers that my competition will not get, because I've got them cradle to grave,” Cassidy said.

I Love my Job

To push the brand, i-wireless (www.i-ontheweb.com) taps employees from its target market. Dubbed the i-crew, a collection of 10 to 15 teenagers shows up anywhere young people congregate.

Jen Bracken is an 18-year-old 2-time i-crew member. For Cincinnati-area teens, being on the i-crew is as cool as i-wireless.

“Out of all my friends, everybody envies my job,” Bracken said.

The most common questions the i-crew hears, she said, revolve around the carrier's rates. Bracken added that prepaid is popular for i-wireless because of its simplicity and flexibility.

I-wireless has cemented a relationship with the area's young people through the i-crew and the brand's image. A major part of that is the carrier's advertising, which speaks to teens more fluently than that of traditional carriers.

“I find (other carriers') advertising kind of boring,” Bracken said. “I don't think it appeals to youth very well because they are just throwing facts at you, whereas i-wireless gets your attention.”