3 Reasons Why Youth are Important to Your Business

In this article I’ll look at the myths involving the youth market and offer 3 reasons why you need to be on board to keep your brand relevant – not just in the future but right here today.

Exploding the Myths

  • “Youth are cheap”
  • “Gen Y is fickle”
  • “Millennials are only good for prepaid”

We hear these words every day and every day we simply point to the evidence – great brands like Apple and Amazon have successfully built their businesses on the youth market, so why can’t you?

Defining the Youth Market

According to Wikipedia

Generation Y, also known as the Millennial Generation, is the demographic cohort following Generation X. There are no precise dates for when Generation Y starts and ends. Commentators use beginning birth dates from the latter 1970s, or from the early 1980s to the early 2000s.

That means we’re dealing with customers from the early teens up until the threshold of their 30s. That’s a very large market and with it a very wide and complex set of mobile customers. Trying to categorize these customers as one blob for analytical convenience is as difficult as using one metric to measure their value – but that’s what we as an industry do.

Redefining Value

The issue stems from an inherent problem in the mobile industry – the only measure of value we have of a customer’s worth is their phone bill. But, what of the student who spends $500 on an iPhone and then puts it on prepay at $12 a month? The reality is that ARPU is a weak measure of value and particularly for mobile operators, we need to move from measuring revenue to measuring value.

  • Youth are cheap if we only consider ARPU
  • Our measures of value need to evolve from ARPU to lifetime value
  • Great brands like Apple and Amazon have successfully evolved from ARPU to lifetime value

Apple: Building a Beachhead on the Student Market

Apple got this right, first building a Beachhead in the student market with its music offering, iTunes and the iPod. From this vantage point it moved into the iPhone and the rest, as they say, is history. If Apple had gone after the high-spending executive customers, it would have been duking it out with Microsoft on the Redmond’s home turf.

When I went to college, everyone used PC. Only left-handers used Macs. By the late 90s, all the college kids were using Macs. Now, the same students are IT managers and heads of departments with their iPads and iPhones.

  • Apple built on its brand Beachhead in the student market
  • Apple adopted a long term organic approach to growing the brand
  • If Apple had chased high end customers first, it would have lost to Microsoft

The Harley Effect: What Ages Brands

Nokia and Blackberry didn’t get it right. From 2006-2008 both Nokia and Blackberry rose to prominence as the leading youth brands not just in their category but globally. Nokia was ranked as the #1 youth brand in the world. Blackberry beat Coke as the most respected youth brand in South Africa in 2010, the same year of the soccer world cup (where Coke was a $500m headline sponsor).

Nokia and Blackberry suffered from what we call the Harley Effect – aging with your customer base. The average age of the Harley Davidson owner is now 51. Middle aged folk remember Easy Rider and Dennis Hopper from their era as the icons of cool. The problem is, that Harley chased the high end customers rather than reinvest their profit into staying relevant with youth.

Harley-Davidson Tries to Rejuvenate Its Business
“Its patrons grew older and wealthier, but its efforts to cultivate a large base of
female and younger riders have been marginally successful.” (source Time)

Now both brands are suffering the tail end of a slow-motion car-crash, the basketball feeding through the hose pipe and other analogies. It will take time, as with aged brands like Levis 501, for these two to rediscover their roots in the youth market and feed through to relevance once again.

  • Short term focus on ARPU seduces brands into focusing on high end customers
  • If you always chase the high end, middle market, your market will age out of relevance
  • Harley Davidson used to be a cutting edge youth brand but now it suffers from an aging market

The 3 Reasons

The Key to winning the youth market is building a compelling business case why. Why do we need youth?

If it’s only about ARPU, you’re always going to chase the high end customers and end up like Harley Davidson.

The challenge here is building a case around long term value, the stuff which happens off the phone bill. So, here’s 3 reason to help you build that case:

1. Youth are the High End Customers

Consider the phone bill and youth appear to be cheaper than middle aged executives. According to The Mobile Youth Report, execs spend marginally more (10-20%) but are often on contract as opposed to prepaid.

What isn’t factored into this equation is the complete picture:

  • Spend on the handset
  • Spend on mobile data services and accessories

Our research shows that youth are far more willing to spend on the above two categories than older customers. In fact, they’re spending significantly more of their disposable income meaning they have more skin in the game, meaning they place a higher premium on getting in right.

Only 42% of youth rated price as “very important” as a factor in choosing their handset (the lowest of all age groups according to our research), with 88% citing a good customer experience as key to their purchase decision.

Factors included warranty, durability and reliability.

That means not only do youth cite tangible factors other than price, they also offer real insight into what drives the market. Price is never a good indicator of product demand.

Price is overrated by the industry. According to the Mobile Youth Report, industry execs thought “price” was the #1 reason why people bought handsets followed by experience at #2. In reality, customers cited these factors the other way round showing that as an industry, our logic and understanding of buyer behavior is very basic.

When it becomes about price, you’re in the business of commodity. If handsets and operators want to know why buy, look beyond the older customers who tend to mention price and see what youth are saying about the offers.

Youth propensity to spend on value added services is well documented. Youth use mobile messaging services 10x more than older peers. But beyond messaging, youth are spending on music, games, video and apps, opening up these new markets to further investment with their initial revenues.

The value of youth should not be confined to the phone bill. This logic limits you to the mistakes of brands like Nokia, Blackberry and Levis. Think more like Apple and Amazon and invest in the long term.

  • If you consider complete spend (ARPU + handset + off bill services/products), youth are high end customers
  • Youth rate experience over price. Older customers rate price. If you want to move away from the race-to-the-bottom you have to seek answers in the youth market
  • Youth means investing in the long term. It’s not an either-or situation with young vs old customers in the same way business should not focus on the short or the long term. Business needs to focus on both.

2. Youth are the Influencers

Gen Y, Millennials and students are the most vocal when it comes to sharing reviews and information about products with peers. 57% of teenage girls and 47% of teenage boys share new brands or trends with their friends (source The Mobile Youth Report).

What separates the youth and older markets is the youth market’s propensity to create Earned Media.

A quick 101 on Earned Media from Wikipedia to bring you up to speed:

Earned media (or free media) refers to favorable publicity gained through promotional efforts other than advertising, as opposed to paid media, which refers to publicity gained through advertising. Earned media often refers specifically to publicity gained through editorial influence, whereas social media refers to publicity gained through grassroots action, particularly on the Internet.

Earned media is key to brand success today.

But it’s not just each other they’re influencing. Consider the mother of the teenager daughter who’s just learned to use Whatsapp thanks to her daughter installing it on her Samsung Galaxy. Youth tend to be the educators and introducers of new technologies into families.

Brands are often scared to let youth get hold of their products and start advocating them but this is the route to the adult market. Of course, it takes time but Apple has risen to prominence with the highest NPS (net promoter score) of all handset brands on the back of a highly vocal student population who grew up with the brand.

  • Youth are the most vocal customers
  • Youth influence each other and adult customers
  • The route to the adult market (long term) is through organic growth in the youth market

3. Youth Drive Innovation

When parents first bought the iPad, they bought it on the promise of the educational tool painted by its initial marketing. In reality, it was youth (particularly primary school children) who soon co-opted the device and turned it into a games machine.

Youth often take devices out of the context they were originally intended for and turn them into something better (Blackberry and BBM are good cases in point). SMS represents possibly the most significant example of this, given than SMS was originally designed by industry engineers as a system test tool. $1 trillion later, youth have demonstrated their ability to turn our mistakes into successes.

Innovation today is fraught with risk. Consider MMS or Location Based Services – 2 very expensive mistakes made by the mobile industry. It took the best part of a decade to see even the smallest upticks in customer behavior on these two platforms. Only when the industry let go and customers took control did MMS or LBS become anything of note.

De-risking innovation means allowing youth to take the technology, run with it and turn it into something useful. Something useful means applicable for the less-tolerant mass market who want products out of the box. Where youth will navigate inconsistency, the adult mass market wants everything to simply work.

Launching products onto the adult mass market is risky, particularly if you are targeting corporate executives. If you filter it through the youth market first, you get a better idea of applicable charging models, usage scenarios and the messages you need to emphasize in your marketing when later approaching the mass market.

  • Youth drive the uptake of new technologies
  • Youth today provide a mirror to how the mass market will use technologies tomorrow
  • Investing in the innovation of the youth market today allows you to de-risk new product launches for the mass market tomorrow

GET THE BOOK & DISCOVER THE MOBILE GENERATION

The Mobile Youth Book
"A compelling exploration of how the mobile youth culture revolution is driving our increasingly social and mobile future"
- Derek Baird, Director Product Development, Disney

"This book offers instant texture to anyone confused by the core technology driver"
- Edward O'Meara, SVP Wunderman

"What makes this book such a great read is that’s it’s written as a narrative in the life of different young people around the world"
- Marc Kornberger, CEO Student Village

* Kindle/iPad version from Amazon
* Paperback from Amazon
* PDF download online
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About Graham Brown

Co-founder of mobileYouth. Cultural explorer, ethnographer and digital anthropologist. Author of The annual mobileYouth report and books The Mobile Youth: Voices of the Mobile Generation, All is Social, The Youth Marketing Handbook, Fans and Youth Marketing 101.

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