Kids: A Goldmine for Wireless Companies?

Posted by: Olga Kharif on March 15, 2005

We’ve all heard parents sigh that teens are a pain. Until recently, wireless companies seemed to have agreed with that notion wholeheartedly — by virtually ignoring this market. They had their reasons: Most kids would rather spend their small allowances on bubble gum, they said. The market was obviously low margin. Tsk, tsk, tsk. How wrong they were. A new study from market researcher NOP World Technology proves that kids are, actually, an amazingly attractive market. An amazingly loyal market, that is.

About 77% of the thousands of 10- to 19-year-olds NOP interviewed said that they are still using their first wireless service provider. Only 11% are planning to switch carriers in the next six months.

That churn rate is a lot higher among adults. More than 30% of adult cell phone users change providers every year. Such defections spell disaster for the wireless companies involved: It costs service providers about $300 to acquire a new customer. It takes them nearly two years to recoup that investment.

NOP's study shows that, with teens, cell phone service providers don't have to worry about switching nearly as much. That means that the teen market is a lot more attractive than previously thought. That explains why, in the past several years, we've seen companies like Virgin Mobile and Boost Mobile go after this market. In the past month, at least two companies had come out with cell phones specifically designed for teens and pre-teens.

Until recently, analysts have attributed these moves to companies trying to go after low-margin markets when all the good ones were already taken. Now we know better. Teens rock!

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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