Generation Y, most of whom are now in their teens and early twenties, are famous for their skepticism and media oversaturation – making them one of the toughest groups marketers have ever wooed. But in the wireless industry, Boost Mobile and Virgin Mobile USA have begun to crack the code for marketing airtime to Gen Y. The companies' methods share some basic precepts. Both Boost and Virgin eschew traditional distribution channels, instead focusing on selling in surf shops, record stores, and other places where kids hang out. Credit checks and binding contracts are out: The average high school or college student has no credit history. The companies rely, therefore, on pay-as-you-go plans. Rather than receive a monthly bill, customers can purchase prepaid chunks of airtime, in increments ranging from $20 to $50, at places like 7-Eleven or Target.

Virgin was first on the case in July 2002, launching its service with a marketing slogan, posted on its website, attuned to Gen Y's antihype instincts: "Exposing young America to the joy of no bullshit cellular." One of its most popular features is its "rescue ring." Virgin users can schedule an incoming call in advance; young adults commonly use it as an excuse to escape from a bad date or a brain-numbing work meeting.

Boost Mobile takes a more lifestyle-oriented approach to reaching kids. Launched last fall, Boost advertises in print titles such as Surfer Magazine and skateboarding bible Thrasher. Boost also sponsors Gen Y-friendly events like the Boost Mobile Pro – the Super Bowl of extreme skateboarding – held recently at the Las Vegas Hard Rock Casino.

Most Boost subscribers in America likely don't realize that their calls are carried by Nextel, a company whose brand name, by its own admission, is a total loser with the young. "Kids see us as the brand their mom or dad uses," says Nextel COO Tom Kelly. Nextel originally set out to target 15- to 25-year-olds itself. But after its market research revealed the brand's weakness, Nextel began to court Boost's 35-year-old founder and CEO, Peter Adderton. Though at first skeptical, Adderton was won over after experimenting with the walkie-talkie feature included in all Nextel phones. Called Direct Connect, it's one of the industry's few easily differentiated services. In May 2002, Nextel bought 66 percent of Boost for an undisclosed amount. Now more than 35 percent of the minutes used by Boost customers go toward the $1-a-day unlimited-use walkie-talkie feature. The company has also forged relationships with companies like surf-gear makers Quiksilver (ZQK) and Billabong to develop products that reflect Boost's youth focus. As the result of one such partnership, Boost appeals to 15- to 20-year-old women by offering phones bearing the Roxy brand, a sister to the Quiksilver line.

The initial youth market inroads by Boost and Virgin represent the industry's first concerted forays into niche demographics, but certainly not the last. Branding airtime is a new concept, but it has obvious applications to other demographics and special-interest groups. Companies like MTV and Disney have already shown interest in running their own specialized services, possibly aimed at sports fans or entertainment buffs. If carriers can crack Generation Y, going after other niches ought to be a much easier call.

Source: Business 2.0, October 2003

For most items, customers do not have accurate price points they can recall at a moment's notice. But each of us probably knows some benchmark prices, typically on items we buy frequently. Many customers, for instance, know the price of a twelve-ounce can of Coke or the cost of admission to a movie, so they can distinguish expensive and inexpensive price levels for such "signpost" items without the help of pricing cues.

Research suggests that customers use the prices of signpost items to form an overall impression of a store's prices. That impression then guides their purchase of other items for which they have less price knowledge. While very few customers know the price of baking soda, they do realize that if a store charges more than $1 for a can of Coke it is probably also charging a premium on its baking soda. Similarly, a customer looking to purchase a new tennis racket might first check the store's price on a can of tennis balls. If the balls are less than $2, the customer will assume the tennis rackets will also be low priced. If the balls are closer to $4, the customer will walk out of the store without any tennis gear – and the message that the bargains are elsewhere.

The implications for retailers are important, and many already act accordingly. Supermarkets often take a loss on Coke or Pepsi, and many sporting-goods stores offer tennis balls at a price below cost. (Of course, they make up for this with their sales of baking soda and tennis rackets.)

Signposts can be very effective, but remember that consumers are less likely to make positive inferences about a store's pricing policies and image if they can attribute the low price they're being offered to special circumstances. For example, if everyone knows there is a glut of computer memory chips, then low prices on chip-intensive products might be attributed to the market and not to the retailer's overall pricing philosophy. Phrases such as "special purchase" should be avoided. The retailer's goal should be to convey an overarching image of low prices, which then translates into sales of other items. Wal-Mart, of course, is the master of this practice.

Of course, the most reliable way to identify which customers' price knowledge is poor (and which items they're unsure about) is simply to poll them. Play your own version of The Price Is Right – show a sample of customers your products, and ask them to predict the prices. Different types of customers will have different answers.

Source: Harvard Business School Working Knowledge, October 6, 2003

The technique is typically used by companies when brainstorming with their staffs; the focus on the positive unleashes a great deal of energy, resulting in innovations which generate profits. For example, a company organized formal AI summits on the its major business processes, during which more than 200 employees, over half the work force, focused on raising productivity. They worked through a "4D" process to:

• Discover the "best of what is" – they identified where the company's processes worked perfectly.
• Dream "what might be" – they envisioned processes that would work perfectly all the time.
• Design "what should be" – they defined and prioritized the elements of perfect processes.
• Create a Destiny based on "what will be" – they participated in the creation of the design.

Appreciative inquiry is not just appropriate for internal brainstorming – it can be adapted for use in consumer focus groups. Call Jay Zaltzman at Bureau West Research Group (tel: 1-818-752-7210) to design research customized for your needs.

For more on appreciative inquiry, see Harvard Business School Working Knowledge, September 22, 2003

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