Nearly half of U.S. teens who own mobile phones are on family plans, and a growing number of them are using prepaid services, according to two recent studies.
A poll by research and analyst firm The Yankee Group indicates 45 percent of phone-owning teens are on family plans-56 percent when teens who use or share cell phones with their parents are included-while 22 percent are on prepaid or hybrid plans.
“Family plans have clearly facilitated teen cell-phone use, with nearly half of all teens saying that they own their own cell phones, up significantly from one-third of teens from our 2003 survey,” said Yankee Group senior analyst Linda Barrabee. “The impact of family plans on the teen segment is even more compelling than the impact of alternative plans, such as prepaid/hybrid plans, which are similarly targeted at the youth market.”
But a recent study commissioned by Coinstar drew a slightly different conclusions: that three times as many phone-owning teens are using prepaid services than used them last year-possibly as a way to avoid overage charges.
The poll indicated more than one-third of U.S. teens who use wireless phones don’t know how many daytime minutes their calling plans include, putting them at risk of incurring overage charges. Prepaid calling cards, the study suggests, may be one way of limiting use and avoiding such charges.
Coinstar provides coin-counting machines and prepaid card kiosks in Albertson’s and other grocery stores.
For the study, 500 randomly selected teens between the ages of 12 and 17 were asked about their spending habits and wireless use. According to Coinstar, the poll was conducted by an independent market research firm, and has a margin of error of plus or minus 4.4 percent.
While 10 percent of teens on postpaid plans admitted regularly exceeding their monthly allotment of minutes, 36 percent didn’t know how many daytime minutes they were allowed each month, the Coinstar report concluded. Forty-six percent didn’t know how many night/weekend minutes they had.
That lack of awareness may have helped spur the boost in prepaid services, which can prevent teens from using more minutes than they’ve budgeted for, said Coinstar Vice President of Marketing Gretchen Marks.
“While teens are important consumers with their own spending needs, parents have a need to keep the family budget in check,” Marks said. “Use of prepaid plans for wireless offers teens and families … flexibility and spending control.”
Once prohibitively expensive and targeted solely at the credit-challenged, prepaid plans have evolved into a reasonable alternative to contract plans, said Adam Guy, director of wireless practice at the consulting firm Compete, Inc.
“Prepaid has gone through a fundamental change in the last couple of years,” said Guy. “It’s been more affordable and cool. It used to be kind of a rip-off, costing 40 to 50 cents a minute.”
And one study indicates a growing gap between postpaid plans and users’ needs. A recent study commissioned by TracFone Wireless-the largest prepaid wireless service in the United States-indicates many consumers with high-end plans are using far fewer minutes than they pay for, while the bills of lower-end users are often far higher than their calling plans would indicate.
“In the second quarter of this year, the average monthly wireless use was 550 minutes, and the average bill was about $55,” said Guy. “Just looking at that market as a whole, people are buying more minutes than they’re using. Implicit in that is the want of a better deal.”
In fact, the number of prepaid wireless users will double during the next several years, potentially generating $6.3 billion through 2006, according to The Yankee Group. “Hybrid” plans-such as those that combine minimum monthly payments with usage fees-could drive that number far higher.
Carriers and usage control
Other plans are being targeted specifically at teens and their parents that will help avoid overage charges. “Mobile Guardian,” which was recently launched by Massachusetts-based wireless company BCGI, allows parents or employers to buy buckets of minutes, like a family plan, then allot them to individuals. Much like traditional prepaid plans, Mobile Guardian simply shuts down a user’s phone after the minutes are used.
Whether it’s a chatty teen or a shiftless employee, said Guy, the key is to keep costs under control.
“With traditional postpaid plans, there’s no way to control usage in a manageable way,” Guy said. “The beauty of prepaid is that once you’ve used up what you’ve expected, the phone doesn’t work any more.”
Barrabee suggested carriers could broaden the appeal of their family plans by using prepaid-type features that keep teens from using more minutes than their plans allow.
“Carriers that want to play an increasing role within the teen segment need to balance the potential downside of family plans on their average revenue per user,” she said. “Carriers working with vendors should also consider adding elements of prepaid/hybrid packages to family plans, so that parents can control spending and services use among teen family members on shared plans.”
Enpocket launches `focus groups’
Meanwhile, mobile marketing company Enpocket has teamed with youth-oriented advertiser North Castle Nexststep to hold weekly wireless focus groups to determine how to effectively market to teens and young adults via text messages. Each week, MYIQ will send text messages to a group of 12- to 22-year-olds asking them how what marketing strategies they think would be effective.
“Tapping the youth market requires real experience-tapping the youth market through wireless campaigns requires even more learning given the newness of the media,” said Zdenek Kratky, brand manager at Norelco. “We see MYIQ as a safety net … a tool to triple-check our primary market research and a great way to bring new youth learning to our initiatives.”
One-third of U.S. teens between the ages of 11 and 17 owned a phone last year, according to one poll, and that number is expected to rise to half by the end of this year. And unlike adults, teens tend to think of their phones as extensions of themselves, creating a unique opportunity for carriers and content providers, said Joanne McKinney of North Castle Nextstep.
“The future for mobile youth marketing is enormous,” McKinney said. “The phone is the most important and personal device a teen carries. The fact that they are open to brands sharing that space with them is exciting.”
The results of the surveys will be published semi-monthly and are available by subscription.
