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Data usage is an important component for future revenue growth as it becomes an ever greater percentage of ARPU (average revenue per user) and is currently the fastest growing source of revenue for carriers – a fact that has spilled over to companies making handsets able to effectively harness high speed data networks (see iPhones, Blackberrys, Nokia’s Nseries and others).
For the average consumer, these cellphones and plans are interesting but potentially pricey. For teens and young 20-somethings, traditionally very strong early technology adopters, this represents something of a Catch-22 in their desire for the latest and greatest as potential for revenue generation versus their parents’ (who are the bill payers in most cases) desire to keep costs low.
My allowance won’t cover that
The younger the teen in question, the more likely it is that the parent is the primary bill payer, up to age 24 when there is a much more even split amongst those whose parents pay the bill, those who pay the bills themselves, and those who split the bill between themselves and their parents.
Reaching a demographic that does not make all of its own decisions represents a special challenge to marketers who must appeal to these almost-but-not-quite independent users in a way that makes it possible for them to make a decision without their parents’ disapproval. Where cellphones are involved, and the family plans to which most teens and young adults belong, this is even more difficult because costs can easily become unpredictable with a large volume of SMS, data or mobile content usage in a way that going to the movies or buying music does not.
Some common approaches
The most common ways carriers have been addressing this problem is by upselling all-you-can-eat (AYCE) plans or placing limits of what kind of content certain phone numbers or accounts can access. Upselling AYCE plans does impact the potential incremental revenue generated from overage charges, but they are an alluring option because they offer unlimited services that add a lot of value to the consumer. As carriers compete with one another for customers, AYCE plans will become more prominent and more of a selling point for consumers.
Mitigating parental concerns about potentially high bills is another good way to drive incremental revenue. For parents of teenage or young 20-something children, who often note their concern of unexpectedly high bills and indicate that they would be willing to pay for some kind of bill protection, parentally imposed limits give them a peace of mind in setting whatever usage caps they deem appropriate and put a limit to how surprisingly high an ambitious teenager can drive a cellphone bill. This is a less than optimal situation in that it limits the amount of content a teenager can make and takes away much of their own decision making ability.
My allowance might cover this
A more ideal system would combine some of the elements of parental controls and bill limitations with a more sophisticated marketing message and bill management system. The teenagers with the highest data consumption are not teens who pay for themselves or those whose parents are generous enough to pay for the entire bill, but those teens who share or split the bill.
Teenagers and young adults whose parents pay for the entirety of their cellphone likely have never had a conversation about cellphone usage other than an occasional warning not to go over minutes or SMS or perhaps had a spending spree once and are now much more aware of their usage habits.
Teens who share their cellphone bill with their parents, on the other hand, have probably reached an agreement with their parents that looks something like this: the parent is willing to pay for what they consider basic services (the initial phone, which perhaps was purchased as a gift; voice; some SMS) and the child in question pays for any extra services – music, ringtones, games or other data usage. In this case, the parent isn’t paying any more than they would were their child not using any data, but the child in question gets to make his or her own decisions about what content to consume, keeping it within what limits he or she is willing to pay.
A marketing message that helps parents encourage responsible teenage spending and a sophisticated bill management system that makes it very, very easy to see which number on which account charged anything over its basic fees is a win-win-win situation. Parents don’t have to pay for anything more than their family plan services, teens and young adults get to access the content they want, and carriers benefit from the additional content consumption of what is potentially their highest use demographic.
Questions or comments about this column? Contact Seth at SFowler@forrester.com or Julie at JAsk@forrester.com or contact RCR Wireless News at rcrwebhelp@crain.com.
