The current woes of Research in Motion (RIM) are a cautionary tale for the world's car companies – most (if not all) of which remain obsessed with figuring out how to capture the so-called "youth market."
The problem RIM is facing with the youth market was nicely described in yesterday's article by Iain Marlow and Josh O'Kane: the youth market is fickle. Those under-30 buyers that companies crave to "own" are quickly bored and, at least when it comes to mobile devices, they move quickly and en masse when something new and better comes along.
As the article notes, "the valuable youth market – from texting teenagers to recent college and university graduates – is abandoning the BlackBerry in droves. The phone's BBM-fuelled appeal among North America's youth has fallen rapidly – one reason its sales, and its stock price, are in free fall." The authors note that a Morgan Stanley analyst described the firm as "essentially broken."
Smartphones are throwaway items compared to a new car, however. That's good and bad for auto makers chasing younger customers.
It's good in that a car's higher price tag forces commitment on a scale far grander than a mere smartphone. On the other hand, it's bad in that the high cost of a new car is a deterrent for many young buyers who would rather not spend the money – and make the commitment – and instead use public transit or freeload a ride in the car of a friend or parent.
As one of my son's friends put it to me: "Sure, I have a car; it's called Sam's car."
As I see it, the great challenge for car companies chasing youth is to make a compelling case for ownership in the face of so many other less expensive distractions.
Ross Martin, the executive vice-president of MTV Scratch, a unit of the giant media company Viacom, recently told The New York Times that many, many young people actually "think of a car as a giant bummer. Think about your dashboard. It's filled with nothing but bad news."
Martin consults with brands about connecting with consumers and, as the Times notes, there is a giant disconnect there. Half (46 per cent) of U.S. drivers aged 18 to 24 said they would choose Internet access over owning a car, according to the research firm Gartner. Two-thirds of drivers 19 and younger had a driver's licence in 1998, compared to about 46 per cent today, notes the Times.
According to the article, auto makers are realizing that if they do not adjust to changing youth tastes, they "risk becoming the dad at the middle school dance," said Anne Hubert, senior vice president at Scratch, who leads the firm's consulting practice and works closely with GM.
Youth tastes, as both RIM and the various car companies know all too well, change quickly and often on a whim. In the hi tech business, that has often meant once-strong brands like Blackberry can become obsolete almost overnight. The result is that many tech companies simply go away. Think Palm, for a good example. That surely is keeping RIM's executive team awake at night in Waterloo, Ont., and it should also worry the high-fliers at Apple.
Car companies are a different animal. They produce expensive but durable goods with an emotional and practical appeal. At the same time, as the Times notes, product cycles – the time it takes to reinvent a new model – run to at least three years, and "the car industry, from assembly line to union to smooth-talking dealer, revolves around a powerful and entrenched culture" – one that does not change easily.
None of that is good if you're chasing a whimsical young buyer. Worse, as The Wall Street Journal writes, more 20-somethings "are staying home, using social networks to connect with friends, and moving to big cities where mass transit makes car ownership optional."
As 31-year-old Chevrolet marketing executive John McFarland told The Detroit News, GM's research found that these 20-something consumers really value their friends and doing things with them. The so-called Millennials are less interested in sporty compacts and cute hatchbacks than "a car to do things with." They want basic transportation, not performance, said the former Procter & Gamble marketer, who is described as GM's "newly-appointed youth emissary."
In the spring, GM showed two concepts designed to capture what the company thinks young buyers want in a new car. Dubbed the Tru 140S and the Code 130R, these concepts were inspired by the looks of muscle cars and Italian sportsters, yet both seat four, are highly fuel efficient, feature technology interfaces designed to interact with smartphones and, if sold today, would list for around $20,000 or less.
The technology part of the story is critical for the car business, and connects it to the world of smartphones. As the News reports, a recent survey by Deloitte and Michigan State University's Broad College of Business found most 19 to 31-year-olds from Boston to Beijing to Berlin want "a smartphone on wheels." Tech-savvy young people around the world want a car that's equally tech savvy, flexible, useful and inexpensive. Consider this: nearly 60 per cent of the young people surveyed by Deloitte said in-dash technology is the most important part of a vehicle's interior, while 73 per cent said they wanted touch screen interfaces.
RIM is in rapid decline for a long list of reasons, not least of which the fact that the company misread the youth market and no longer has appealing products for the vast swath of Millennials who drive smartphone sales. The car business as a whole is anxiously and furiously working to avoid making that same mistake. Auto makers that fail risk RIM's fate. Those that succeed might become Apple.