February 12, 2001

http://www.informationweek.com/824/rbteens.htm

Redefining Business:
Kids These Days

Tech-smart but fickle teens are being taught to expect more from marketing

By Eileen Colkin   (ecolkin@cmp.com)

ans Inc. is so eager to have teen-agers think of the sneaker company as cool that it builds skateboarding parks for them at major shopping malls. When opening its sixth park last April, Vans' CIO Joseph "Jody" Giles decided to try a live Webcast of skaters doing stunts at the park and promote it to loyal customers via E-mail.

The goal was to keep building closer relationships with notoriously ad-wary teens. Somewhat to Giles' surprise, not only did people watch--they also bought. "It was nothing more than 'click here to see the grand opening,' and thousands of people clicked through to watch as my IT guys filmed it on a camcorder," Giles says. "We could see them click through, watch the video, and buy shoes."

That success inspired Giles to use the security cameras already in place at company parks to deliver live Web footage so teens can log on to watch their friends or view events such as Vans' amateur skating championship. It's part of the effort to sell to the tech-smart, marketing-wise teen-agers known as Generation Y, so-labeled for their propensity to question everything. "You can't just throw a product in front of their faces," says Giles. "You have to give them something."

Born into the Internet Age, today's teen-agers embrace Internet technology the way Baby Boomers did television. But they're skeptical of marketers and prefer to independently research products once they hear advertising promises. They seek relationships with brands that cater to their changing interests. And they have money. In 1999, U.S. teens spent $125 billion, and, more important, influenced household purchasing decisions worth $200 billion to $500 billion, according to a report from Gartner.

Generation Y's power goes beyond their spending. Napster showed how young people who aren't tied to old business models and values can take control of what's marketed to them and exploit the Internet to change the rules of commerce. "The whole record industry had to change because of what this generation has done," says Forrester Research analyst Michael Anectol. "It was the kids who drove Bertelsmann to partner with Napster so they could get what they want."

While companies such as Vans may be focused on melding skater-dude attitude and Internet technology to sell shoes today, they're also shaping the expectations of tomorrow's adult consumers. When today's teens grow up, they'll expect the same marketing and technology wizardry from the people who try to sell them cars, mortgages, and mutual funds.

Companies such as Sonera Zed U.S. Inc. understand this. The dominant mobile-phone service in Finland's ultra-wired society, Sonera is entering the U.S. market this winter by focusing on 18-to 24-year-olds and making its marketing campaigns heavily dependent on the Internet. "They understand technology, and it's important to get them at that age," chief operating officer Paul Hughes says. "We see them going from student to employee to manager. If they learn to use a computer or Web-enabled cell phone now, they're going to use it for life."

Vans has been marketing to teen-agers since it was founded in 1966; it reached national fame as the shoe of choice of burned-out surfer-dude Jeff Spicoli in the 1982 film Fast Times At Ridgemont High. Today's customer is different, however, and Giles knows that if Vans wants to build a successful relationship with its market, it needs to cater to its customers' search for individuality while still being associated with an acceptable brand.

Using E-mail distribution service from @once, Giles sends his most loyal or promising customers messages offering limited-edition sneakers. Most recently, the company produced the Compel shoe for young women, a rapidly growing market for Vans. The shoe changes color when exposed to the sun's ultraviolet rays, something Giles thought could be demonstrated better online than in Vans' indoor retail stores. An E-mail included a 3-D, rotating picture of the sneaker changing color and a note promising that the first batch of shoes was being saved for online customers.

Vans.com saw a 20% click-through on the promotion--rates of 2% to 5% are considered successful E-mail marketing. "We've created a very loyal consumer on Vans.com," Giles says. "We'll make a shoe that's available only online and only for a month so that the people who buy it have their own style of shoe."

The notion of being an individual and being accepted has long been fuel for teen angst, but it takes new forms among Generation Y members. Vans aligns itself tightly with sports that are both social and individual, such as BMX biking, skateboarding, snowboarding, and surfing, and that let teens express their attitude toward the world: Look at me, I'm doing this by myself, but I have all my friends cheering me on. Translated into technology: I surf the Web, but I don't live online.

"Kids will say they think advertising is stupid, but at the same time, they love branded content," says Eric Cohen, CEO of Funderstanding, a research organization that monitors teen behavior. "They're so image-conscious that if a brand doesn't represent who they are, they'll dismiss it."

Technology doesn't change the fact that it's tough to figure out what kids like and how they think. Just ask sites such as Kibu.com, which shut down despite a well-funded effort to create a community site for teen-age girls (with the tag line touting it as a site for "Girls Who Got it").

Kids aren't living their lives entirely online despite their embrace of technology. They spend a lot of time in school (unlike the employed who can surf from their desks), and they certainly haven't given up watching TV. A Forrester Research report says that while teens will spend one of every four free hours online, they're big multitaskers--while listening to music on Napster, they're also reading or watching television.

Teens also say that using the Internet stimulates offline behaviors. For example, 21% of teen-agers in the Forrester report say that visiting a newspaper or magazine site inspired them to buy a print subscription, and 26% say that since downloading Napster they've bought more CDs. (Twenty percent say they've bought fewer.)

Record companies may bristle over Napster, but the industry is eagerly experimenting with interactive marketing to reach an audience that thinks in multimedia. Consider a Valentine's Day promotion selling recorded phone calls from members of teen pop group the Backstreet Boys. For $4.95, fans can go online and buy one of six greetings from a band member that's sent to a friend via the telephone. The sender puts his or her own message at the end of the call.

Oh, and The Call just happens to be the Backstreet Boys' latest single, which fans can listen to online. "You're tying everything together," says Richard Hart, VP at Artistdirect, the online music and fan-club network that's selling the phone calls. "You're using the Web site to promote a particular song and giving a personalized call from the artist. It's all part of the marketing package."

Many artists have embraced Internet download sites such as Napster to heighten the anticipation for a new album. For example, the Dave Matthews Band has released the first single from its next album to Napster, though the song isn't available for purchase until Feb. 27.

Teens still flock to the shopping mall, and Simon Property Group Inc., the nation's largest mall developer, is determined to use technology to keep it that way. But Simon also knows how hard it is to get the right tech-nology to connect teens and retailers. Simon Property hired MerchantWired, a network infrastructure company for the retail industry, to develop a program called FastFrog. Teen shoppers at two malls in Atlanta--Mall of Georgia and Gwinnett Place--used wireless devices to scan items they wanted onto a holiday wish list that they could E-mail to family and friends, who could then take a printed list to the store or shop online. Bob Covington, chief technology officer and executive VP of business development for MerchantWired, says that during the pilot the majority of parents brought the list to the store, and FastFrog purchases totaled $2.5 million.

The test took place during the 1999 holiday season, and Covington says the company has spent the past year working out numerous problems. For instance, teens were scanning limited high-fashion items, so when parents went to make a purchase, an item was often out of stock. Shopping online didn't necessarily solve the problem. Because the merchandise coming in and out of brick-and-mortar stores isn't loaded into a database, the Web site didn't reflect what was available on the store shelves. "We needed to close the loop between warehouses and retail stores and the Internet," Covington says.

This spring, MerchantWired plans to launch a project developed with Found Software Inc. called Clixlist that ties a retailer's online site to the cash registers of local stores and to its warehouses. In future incarnations of Clixlist, Covington hopes to offer an in-store scanning capability that automatically charges items to a credit card, so shoppers can buy without waiting in line. Teen-agers will be the first test market, says Covington, because they're anxious to try cool new technology that will help them shop independently while using their parents' credit cards.

To win over these buyers, companies have to provide information, says Forrester Research's Anectol. Even though today's teens are new to retail buying, they're likely to expect to be able to research a product before they purchase it. "That's something that they're going to carry into adulthood and apply to more expensive items," he says. "Are you going to be able to market to them the way you can to adults today? No. Companies are going to have to take this market seriously."

That means presenting products in a way that kids want to see them--with choices and comparisons. Handspring Inc., for example, sells its teen-oriented Visor Platinum handheld gaming computers online but not without showing potential customers a side-by-side chart comparing competitive products, including the Palm IIIxe and Compaq Aero 1550.

Procter & Gamble Co. is handing the entire discussion over to teens. It's promoting itself through a partnership with Bolt Inc., on an online "hangout" that's been visited by more than 500,000 high schoolers. Bolt promises to write about everything from kissing to current events, letting members share opinions with each other and Bolt staffers.

P&G's Web site hosts a page that provides beauty tips for teen-age girls sponsored by its Cover Girl brand but also has discussion rooms offering information about breast cancer and dating. P&G "isn't in a position to shove messages," says Bolt CEO Dan Pelson, "but rather, to have a dialogue."

Bolt analyzes its registration data to create subsets of teens for direct E-mail marketing. For example, within each gender, it has five subset identities ranging from Alpha Teen women, for the trendsetters, to Awkward Teen women, for the less confident. Sponsors such as P&G use that breakout to send messages that conform to the individual's personality.

New technologies have created an additional challenge for marketers--figuring out not just which Internet sites and brands a company wants to be associated with but also which emerging technologies, says Maggie Boyer, VP of media at interactive advertising services firm Avenue A Inc. For instance, banner ads have lost appeal and look rather square, she says, and a cutting-edge brand wants to make sure it's using the right delivery vehicle as well as sending the right message. "That can be best done through killer apps like instant messaging," Boyer says. "That's a relaxed environment where teen-agers are more likely to accept and trust a message."

Boyer predicts the must-have technology for marketers will be wireless. A recent study by Cahners In-Stat Group supports that prediction, forecasting that teen-agers will be the fastest-growing market for wireless voice and data services, climbing from 11 million users today to 43 million in 2004.

Wireless service provider Sonera's Hughes plans to bring together these trends--new technologies, association marketing, and a focus on youth--when the company offers instant messaging on cell phones in the United States this winter. Based on experience gained selling wireless services targeted at the younger set in Europe, the company will rely on affiliations with chat rooms and on "viral marketing" that starts with one teen actually using Sonera's service to connect with friends, who, it hopes, will want to have the same hot technology.

Hughes says this gives a feeling of empowerment that's important to this generation. "Because information is available to them more than any generation before, they're smart, skeptical, and savvy," Hughes says. "They look at a TV ad, roll their eyes, and go on the Internet and research it. They're much more selective."

Sonera faces a tough battle entering a crowded U.S. wireless market as a newcomer with no local brand identity. Hughes is counting on that freshness to appeal to teens who have no connection to older, U.S.-born brands and who want wireless access to the same kind of instant-messaging services they depend on via PCs. "They're looking for something that's more cutting edge, catering to their specific needs and lifestyle," he says.

Sonera is targeting the 18-to 24-year-old market because that's when young buyers are most likely to buy their first cell phone. "What happens when you sell to the 18-year-old is that the 14-, 15-, and 16-year-olds tend to look up to them as role models, which will have some benefit to us," Hughes says.

Many companies like Sonera hope that building a relationship early will keep teens interested into adulthood. Yet technology can destroy those ties as easily as it creates them. E-mail marketing makes it easier to get a message out, but Avenue A's Boyer warns that young people are quick to abandon a brand they feel has taken advantage of them by marketing too aggressively, ignoring them, or betraying their trust over how personal information is used.

"Don't spoil the relationship once you have it," Boyer says. "One-to-one relationships are great, but you need to be careful not to spoil the trust."

At Vans, product presentation is considered a final stage of online brand marketing when it comes to Generation Y, often treated with an "oh yeah, this is what we sell" attitude. A recent batch of E-mails to customers promoted an online video of skateboarding champion Geoff Rowley and left it to customers to find the E-commerce on the site. The formula seems to be working--Vans reported a 23% increase in revenue to $173.9 million and a rise to $10.5 million in income for its first six months of fiscal 2001; it forecasts a 33% increase in earnings for the year ending in May.

Giles expects that E-mail and database technology will make it easier for Vans to keep a relationship alive with teens even after they've grown up. While Vans has been trying to do that for three decades, Giles now expects to use technology to reach grown-up customers at the exact moment they most need a blast from their carefree past. "In a few years, we can send them an E-mail saying 'We know you're wearing a suit and tie and sitting in an office now, but wouldn't it be great to go back to that time in your life?'" Giles says.

Vans is trying to extend relationships it worked hard to build with these demanding consumers. And it's also setting a standard that companies trying to attract these customers for the first time better be prepared to meet. IW

Photo of Giles by Katrina Dickson
Photo of Hughes by Asia Kepka

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