Mobile phone companies, operating in a highly competitive market, are keen to attract young consumers; this is where the greatest potential for growth lies, as this group is keen to keep up with technological advances and fashions. Operators plough millions of pounds into tie-ups with youth-oriented events, from concerts to television shows. Nokia is ramping up its efforts to engage with the UK’s youth through sponsoring The X Factor and Live8 (MW last week), but how well do the operators communicate with the nation’s student population?
There are about 2 million undergraduates in the UK, and with annual discretionary spending of £10bn, students are a lucrative market. Research from The Student Panel (comprising more than 23,000 students in UK higher education) shows their impact on the mobile phone sector: 68 per cent of first-year students had changed their phone (network, contract and/or handset) in the year before the study. Fifty-two per cent had changed in the previous six months (August on) with 32 per cent changing in the key period from August to November. Significantly, as many as 14 per cent made the change in Freshers’ Week itself.
For the networks, these changes tended to be in the desired direction: 31 per cent switched from pay-as-you-go packages to contracts and just three per cent switched in the opposite direction. As a result, the proportion of contract customers among the switchers doubled, from one-third to almost two-thirds, and these students are active users, with monthly bills of about £30.
Marketing communications that focus on life-changing events are notoriously difficult to get right and can be relatively expensive, yet the task seems easier with those entering higher education. Almost all students experience the same entry process, and they all finish up in the same place – a university, where there is a plethora of media available to advertisers: exhibitions and fairs, student newspapers and magazines, on-site posters and billboards, and word of mouth, which is most likely to work when it matters.
Students will not necessarily react like other consumers – or indeed like everyone else aged between 16 and 34 years old. The difficulty for marketers targeting students is that the same life-change that makes them attractive as customers also makes them more demanding. It appears that mobile networks and handset suppliers offer good deals and packages that encourage students to switch, but are they doing enough to hold on to these customers, or are they merely fostering the habit of frequent switching and so maintaining high churn rates?
It seems there is a problem with fostering customer loyalty and achieving customer retention in the mobile phone sector. Students were asked to rate the importance of seven different attributes in their choice of mobile and then to rate their satisfaction with their existing mobile using the same terms. Their answers show clearly that ongoing service demands (on which loyalty depends) are not dealt with as well as demands at the time of initial purchase.
On three of the seven attributes, performance was in line with demand, with the percentage rating their mobile as “good” close to the percentage deeming the attribute “important”. These were initial cost (satisfaction 43 per cent; importance 45 per cent), handset style (satisfaction 48 per cent; importance 47 per cent) and handset features (satisfaction 45 per cent; importance 43 per cent).
There were signs of weak performance in two areas – reception quality and the quality of service and support. In a third, the lack of percent rated running costs as being important, only 34 per cent thought their supplier was good in this respect. There was only one attribute – “ease of buying” – where performance (30 per cent) exceeded demand (20 per cent).
The contrast between short-term and longer-term considerations is dramatic. It’s easy and not unduly expensive to get a contract or a pay-as-you-go phone, but will a student choose to stay with their provider in the long run? This will be dependent on their experience of their phone’s reception, service support and – above all – running costs. The Student Panel’s research suggests that some mobile providers just aren’t performing.
Mobile phone marketers need to focus on their customer relationship management programmes and ensure that they offer the services and price packages that students want. If they fail to do so, churn rates will remain high and switching provider will become the norm, just as it is in the credit-card sector.
Nigel Waterson, vice-president of Capgemini Telecom, Media & Entertainment comments:
The student market is a sophisticated one – demands for complex handset functionality combined with a willingness (and the free time) to trawl through tariffs to get the cheapest possible price means churn in the student market will only increase. Clever marketing is essential, with companies such as Cricket in the US setting up “homezone” tariffson campus, and Orange’s Glastonbury initiative appealing to this price-conscious market. The major operators should seek to differentiate themselves through improved customer service – and the way that service is delivered will be a crucial factor. Many students may prefer the online approach, provided it is done well.
Trends is edited by nathalie Kilby, Professor martin Collins, research director of Opinionpanel Research (operator of The Student Panel), contributed to this week’s Trend Insight