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Why everything we believe about youth mobile services is wrong

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  • 1. Why everything we believe about YouthMobile services is wrongby GRAHAM BROWN on FEBRUARY 9, 2012Why (Most) Youth Mobile Services are Doomed to FailureAmp’d, Disney, Helio, Virgin Mobile India and Blyk – just a few MVNOs that have triedto capture the youth market and been dashed at the rocks of failure. They failed becausethe youth market is less about “Big Ideas” amped by your creative agency and moreabout doing the small things well – like customer service.So what does it take to win the hearts and minds of today’s 2 billion mobile owningyouth?Let’s start by looking at where youth mobile services go wrong because, as we’ll discover,simply doing the opposite of the received wisdom is the key to success.Too many mobile services are easy come, easy goImg (c) Flickr http://www.mobileyouth.org
  • 2. Here are the 3 biggest mistakes made in servicing youth: Provide the cheapest mobile service Sell a lifestyle (extreme, aspirational, cool) License the brand to a mobile providerMistake #1: Provide the cheapest mobile service:There is a common misconception of youth – they want everything free. In ourresearch we identify the 3 key pain points of youth mobile usage and cost isn’t one ofthem. Youth don’t want free, they simply want control. They don’t want cheap servicesthey want a service that guarantees them this is how much they’ll be spending in themonth – no hidden surprises.On this matter, Blyk is wrong, Boost Mobile is right: I don’t care what Blyk saidotherwise, you can’t build a youth mobile service giving everything away for free. Whatyouth want is control. If they wanted everything for free they wouldn’t be lining upoutside Apple Store for the latest iPad or iPhone 4S. They wouldn’t be buying AirJordans or getting drunk at Spring Break. These all cost dollars.Here’s how one customer puts it on the Boost Mobile website:“I LOVE the fact that my plan eliminates the worry of overages or hidden charges. Iknow exactly what is expected each month and it helps me keep my monthly budgetbalanced. Boost’s pricing has kept me loyal because it allows me to have all the servicesof a contract plan at an affordable price that fits into my tight budget!”- Kelita S. (Capron, VA)Even in Africa, the logic holds true. In Kenya – where the average GDP is less than$5,000 youth aren’t gravitating towards the cheapest option. In fact, our2012 mobileYouth report shows that in Kenya, the cheapest mobile services have thehighest churn rates. Conversely, Safaricom is the most expensive and has the most loyalcustomers even though its proposition is based on a large, young prepaid base. How?Because Safaricom built its proposition on long term customer relationships, valueadded services (like MPesa) and marketing that aimed to create Permission Assets inyouth communities (rather than typical agency fare of cool celebrities + campaign). http://www.mobileyouth.org
  • 3. Mistake #2: Sell a lifestyleLifestyle doesn’t sell mobile. Your brand means nothing. Hiring a PR or marketingagency to make you “more youth” will not change a thing. Who cares if your brand iswell known in snowboarding or hip hop? Who cares if you have a sponsorship withLewis Hamilton or Lady Gaga? Sure, it wins you ad agency awards but this isn’t aboutawards to satisfy them but winning customers.Unfortunately it’s not what brand managers and agencies want to hear. Where’s theroom for the “Big Idea“? What about our “Life is for Sharing” advertisements? The coldtruth is that youth don’t buy mobile services on the base of lifestyle – they buy becauseof simple, convenient customer experience. Common things done uncommonlywell – the unsexy stuff – getting the billing right, a good range of handsets, goodcustomer support, retail presence.Smart youth mobile services know that getting these right means changing how we viewyoung customers. Mobile providers see the youth acquisition game as one ofcool advertising and cheap offers but as the logic goes, it’s easy come easy go. In themodern era, retention is the new Acquisition. Operators should think less about “cool”,“entertainment” and “lifestyle” and more about how they can reduce the numerous waysthey annoy their customers. Stop trying to delight youth and start trying to do commonthings uncommonly well. In the Customer Experience module of the 2012mobileYouth report we detail the 3 areas of customer experience and how operators canadd value in each. By changing the metrics from ARPU to loyalty we yield differentresults.Traditionally, mobile asks the question “how can we maximize ARPU from thiscustomer?” When it comes to youth that doesn’t make sense. The effort required to shifta mobile user from $50 to $55 a month (10% uplift) is significant. If you changed yourmetric to loyalty based measurements (such as churn or EMI like NPS and SMARTindex) the math makes sense: the cost of acquiring a new customer + lost revenues forexisting customer ($800 a year) vs the uplift from ARPU gain ($60 a year). http://www.mobileyouth.org
  • 4. Boost Mobile, for example, thinks differently. Rather than sell a lifestyle product andmaximize ARPU gains, Boost asks the question “how can we reduce this customer’sphone bill?” The longer you’re a customer, the cheaper your bill. Great idea because 65%of youth buy mobile phones based on what their friends, not what ad agencies say. Longterm customers recommend the most.Mistake #3: License the Brand to a Mobile ProviderIt’s tempting to think a lifestyle brand exported to mobile can help monetize an existingfranchise but think carefully. Mistake #2 highlighted how youth don’t care for lifestylebranding in mobile. What wins the youth mobile game isn’t branding but customerexperience and operations. The staff and expertise needed to win the retention gamearen’t the same staff and expertise needed to create exciting lifestyle brands like MTV,Disney or Red Bull.Virgin Mobile discovered this to their peril in India. Virgin licensed the brand to theirlocal partner Tata who had little expertise in delivering the customer experienceexpected of the Virgin brand. As in many of these licensed cases customers sign up onthe premise of lifestyle branding expecting the pizazz familiar with the mother brandand are left with a shoddy experience that doubly disappoints.Apple outsources its production to Foxconn in Asia but controls its retail operationsbecause it’s in the retail touchpoint (its Permission Asset), Apple can generate a NPS of+75% (and +90% in its most successful stores) creating one of the most profitable retailfranchises in the world. The key for mobile providers and brands considering this spaceis understanding what creates value and what doesn’t. Control the front end, outsourcethe back.Be the ExceptionKenya’s Safaricom has the highest loyalty rates, prices and NPS scores in its categoryeven though it built a market on young, prepaid mobile owners. Boost Mobile has thehighest loyalty rates in the prepaid segment in the US even though it charges above themarket average price. http://www.mobileyouth.org
  • 5. Despite these obvious anomalies, mobile operators will continue to see youth as cheapand provide discount tariffs to win the market. Brands will continue to try and squeezeextra revenues from their licensing by partnering with mobile providers in localmarkets. All along operators will look at the results of these endeavors and agree thatyouth are unprofitable, fickle and too expensive to reach.When we look at our own mobile choices we’ll probably find we gravitated to theprovider who simply got things right rather than the one who delighted us with offersand technology. Sure, we’re paying a little more than the next guy, sure we don’t havethe latest phone but we’re comfortable and that’s what we want. The problem is thatwhile every single mobile industry employee knows this the machine they work in keepspulling them back to the received wisdom of failure.Safaricom ex-CEO Joseph grew the business from a starting point of just 5 employees inKenya. He took the Kenyan position in the Vodafone group because some insiders say hedidn’t have the traditional background of a telecom CEO. These examples demonstratethat the received wisdom behind this schooling – Price, Brand Management, Efficiency– is wrong.And that’s why these success stories remain the exception rather than the rule – becausethe rule is broken. There is only one Facebook, one Google search engine and one AppleiPad despite countless imitations. Anomalies win because they challenge theconventional wisdom.Contact us for report, workshops, webinars and more:Josh DhaliwalDirector, mobileYouthhttp://www.mobileYouth.orghttp://www.mobileYouthReport.comTel: +44 203 286 3635Mob: +44 7904 200 513 http://www.mobileyouth.org