Nextel is pursuing the youth market. The extreme youth market. The extremely high-margin - but fickle - prepaid youth market. For now, Nextel is only testing the idea, calling it a trial rather than a launch. But for a company known for its enterprise approach, it could be like learning to shack wackle on a mini-half-pipe.
"We will spend this time understanding the appeal of the brand and test a variety of metrics we feel are important to expanding our business into the youth segment," said Tom Kelly, executive vice president and chief marketing officer for Nextel.
The trial began in August in California and Nevada. If successful, Nextel and Boost will expand atypically to markets not defined by your average demographic, but by locations conducive to, and actively sponsoring, extreme sports and other outdoor activities.
"We wouldn't just start in California and drive east," Kelly said. "We'd look at the east coast of Texas, the Florida coast, maybe Colorado - places that have summer and winter sports." He emphasized this list is not a formal schedule - nothing so extreme as that.
Though more into the Beatles than Beck and more a fan of the Stones than the Strokes, Kelly is no stranger to the youth market. A health-conscious snow-skier in his own right, with a single bungee jump to his credit, he has at times peddled movies, beverages, toys, cookies and health and beauty aids, or at least used them to sell products to young consumers.
"Good strategists and good marketers are not limited by the product or target," Kelly said. "They understand the process and discipline required and how to apply and manage it." Good common sense helps: "Listen to the kids, and they will tell you what works."
While there aren't many kids currently walking around with Nextel phones, there are plenty walking around with skateboards. And most of them have older sisters and brothers who have graduated to snowboarding, surfing and dirt bikes. When these squids graduate to the next level of extremism, their siblings will move on to start their own extreme sportswear companies - where Nextel will be waiting with its traditional menu of services.
In the meantime, Boost Mobile will be establishing its brand by supporting every hucker and jibber on the snowboarding circuit and every mud-caked victory lap in motocross. The Boost name will become synonymous (or so Nextel, as a 60% stakeholder, hopes) with young thrill-seekers and thrill-seeking grommets (wannabes) that dare to be different - or at least think they're different.
"They like to feel they are very individual and unlike everyone else, but they also like to hang around with everyone just like them," Kelly said. "I think the Boost brand encompasses that. It focuses on individuality and lifestyle, but it does it in such a way that allows people to build a community of their own."
That's quite a tall order for a logo and product image, but it has been done before. Harley-Davidson comes to mind. Marlboro did it pretty well - up until their cowboy died of lung cancer, anyway. However, there is a methodology for establishing a brand, and Nextel is following the script closely.
Advertising firm Young & Rubicam developed the Brand Asset Valuator to define the foundations for building a brand. There are many steps and stages in a brand life cycle. Nextel is judging Boost Mobile on the two most important stages: differentiation and relevance. Differentiation measures the strength of a brand's meaning and drives consumer choice, brand essence and potential margin. Relevance measures the personal appropriateness of a brand.
"It used to be that you advertise your brand and make people familiar with it. Now you need to identify those attributes that make it relevant to the people you are trying to attract," said Peter Himler, managing director of the . corporate and financial practice at Burson-Marsteller, a member of the Y&R family of companies.
Nextel looked at several brands targeting the youth market and found Boost to be most relevant. "Boost is the most creative and authentic brand for the 14- to 22-year-old marketplace we are attempting to target," Kelly said. "They understand the dynamics of the market, and they understand the lifestyle."
Boost Mobile has proved its relevance in Australia and New Zealand largely through the sponsorship of extreme sports events and employing spokespeople from that world. Kelly said differentiation will come from the service Nextel provides by using its own infrastructure and its ability to meet the instant communications requirements of this new market segment.
It's not an MVNO, Kelly said. "We don't think that economic model makes sense."
So besides image and its own infrastructure, what does the Nextel/Boost joint venture have that other prepaid services don't? Direct Connect. Called Boost 2way under the new brand, the walkie-talkie-like feature that appeals to executives also appeals to younger users.
Kelly said that Boost 2way is like a voice version of instant messaging. "The youth market tends to make decisions at the last minute. They move in groups, and they use instant communications constantly."
If all goes well, Nextel expects the extreme crowd - at least the ones that migrate to jobs and not to "Jackass" - to transition to Nextel's traditional service for the long run.
However, subscriber count alone won't convince Nextel that the extreme youth market is the right one. Kelly wouldn't define the company's metrics for a successful trial, but he said most important was establishing the Boost brand as relevant to the market the company is addressing. Another goal is to get what Kelly said was a higher-value minute from these new prepaid customers than it's getting from business customers. This doesn't mean Nextel will be gouging kids or exploiting their predilection for shelling out more money for brand names than most other market segments.
"The youth market is fickle, but it is very brand conscious," Kelly said. "If they go to Target and buy the best Hanes T-shirt they can buy, it might cost them nine bucks. If they go to Pacific Swimwear and find the same T-shirt with a Billabong logo, they'll pay 30 bucks for it."
True and scary, but not what Nextel is after, necessarily. Kelly said the company can realize a higher value minute by employing a "lower cost of sale." Partly responsible for the lower cost of sale is Boost Mobile's use of Nextel's existing infrastructure, which leaves Boost free to concentrate on branding, marketing and selling.
Nextel also will use non-traditional (at least for them) distribution channels and drive activation, service and the repurchasing of time to the Internet to reduce costs. So far, Best Buy and 7-Eleven are active distributors. Kelly said there will be more retail distributors that will sell Boost phones, but users also need a convenient place to recharge. And for convenience, there's no place like 7-Eleven.
"With 7-Eleven you get a place for kids to go where, frankly, they go anyway. We will use them primarily as a place to buy additional minutes for their phones," Kelly said.
As Nextel gets stoked to enter the market and snake Virgin Mobile's wave, it might rip a line from the recent surfer movie "Blue Crush": "You flew here. We grew here."
But then again, how many competitors can say they flew in on their own airline?
