E-motions: Vol. No. 1, Issue No. 16 Brought to you by California News Tech (OTC BB: CNTE)

By: Tai Nicolopoulos E-Motions Writer 11/29/2005

Courting the Fickle Teenage Dollar

1. Emotions in Focus: Youth Trends Make for Faster, Cheaper Retail Cycles

    In recent years teenagers and tweens, those between the ages of 8 and 12, have become an increasingly important market sector. Teenagers today have more cash than any previous generation. They get bigger allowances and make more at part time jobs, but tend to not have any real living costs. Consequently, marketers court their disposable dollars. Of further interest is what teenagers overwhelmingly chose to buy. They are a generation largely shaped by the power and speed of the internet and consequently, trend cycles for teenagers are very fast. Cheap, trendy clothes meant to only last a season, flashy pre-paid phones and low-cost downloadable pop music and video rule the day.

    Teenagers have more money to spend, are buying products that used to be aimed only at adults, and are generally much more tech-savvy than older people. Despite these facts, they still often lack an appreciation of quality goods, and have not completely mastered responsible spending habits. As a consequence, the kinds of goods that have been the most profitably marketed to teens cut corners on quality, depend on the impulse buy and do not require long-term care and attention. A major component of what makes marketing these sorts of products so successful is that, while they lack in quality and longevity, they heavily reference pop culture and make high-status items associated with an exclusive adult world readily available to teens.

    Technology companies making money on this formula include Apple (NASDAQ: AAPL), who can keep up with music trends by selling iTunes with the latest in pop for pennies a song, but also makes a stiff profit on successive iPods, always the latest and slickest in MP3 players. Wireless phone companies such as T-Mobile, mobile telecommunications subsidiary of Deutsche Telekom AG (NYSE: DT), make money offering low-responsibility pre-paid minutes on high-status phones. The Cingular, (NYSE:SBC), soon to be AT&T, Go-Phone specifically advertises to teenagers, and more so the parents of teenagers, stressing that they make cell phones available to those otherwise unable to regulate their wireless usage.

    In the world of teen fashion marketers engage in a similar kind of mediation between parents’ concerns and their teenagers’ desires. One of the major strategies fashion retailers use to get teen and tween dollars is a marketing technique called “age compression”, where items previously sold only to adults or older teens is repositioned as a product for a younger market. Convincing tweens and young teens that sexy clothing, make up, cell phones, iPods and rap music will give them entre in into a cool, mature world is a brilliant strategy, but it can enrage their parents. While parents are becoming more and more permissive about what their children purchase, there are still some boundaries beyond which companies will experience aggressive parental protest and boycotting. Like the telecommunications companies offering pre-paid phones, smart teen clothing brands also address parents’ fears. The Steve Madden, Inc. (NASDAQ: SHOO) brand Candies, which produces sexy high-heeled shoes and flirtatious clothes, uses the slogan, “You can be sexy without having sex,” to calm concerned parents. In short, across a number of industries, a winning formula of appealing to teens while appeasing parents, is emerging and evolving.

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2. The Big Movers and Why

    For instance, last week keeping on top of youth trends proved profitable for a number of companies. Particularly two tween fashion retailers releasing earnings statements went up on positive news related to their timely, trendy products with low manufacturing costs. On November 17th, Claire’s (NYSE: CLE) went up 6% on positive earnings news at 6:02 AM EST. Claire’s produces low end versions for tweens and younger teenaged girls of the jewelry and accessories popular with older teenagers and 20-somethings each season. Poorer-quality materials and construction keep price tags low, and a fast-paced sales cycle keeps the goods trendy. Young girls keep coming back to buy each new accessory trend just after it has hit older markets. On November 16th, Too, Inc. (NYSE: TOO) went up 6.69% at 8:03AM EST on positive news after releasing earnings. A subsidiary of the Limited, Limited, Too makes teen trends in hyper-feminine clothing, accessories and room décor available to tweens. Limited, Too was one of the first brands to pioneer age compression and offer sassy, often-sexualized clothing and lifestyle statements to pre-teen girls. Seemingly, their formula is still going strong.

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3. How to Use the News

    Taking advantage of the increasingly-powerful youth market in your own investment portfolio can be profitable, but it also has the potential to be time consuming. Teen trends are born and die even faster than trends in other demographics. What is the height of cool one season can be completely abandoned the next. Understanding what kinds of music, technology and fashion will be popular during the next quarter involves not only what trends are coming up from the street, but also what major retailers are marketing down to teens. Everything from staking out the mall, to closely following tech and music reviews and related news can help you stay ahead of the pack.

    Most people, however, are too busy for this kind of intensive research, and they should follow some more general rules when investing in youth-oriented companies. A company should have already proven itself capable of weathering more than one trend cycle, or at least to have a brand image flexible enough to capitalize on multiple trends. In addition to keeping up with that is cool and edgy for kids, good youth companies will also understand the limits beyond which they will start to face resistance from parents. Furthermore, a company should be able to quickly and cheaply design, update, and manufacture new products to keep up with current trends. Use tools such as MediaSentiment Trend™ to learn more about the practices of individual youth-oriented companies in these critical areas and to track their trendiness and press coverage over time.

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4. Last Week in Media Sentiment

    Recent correlations between MediaSentiment.com's thumbs up / thumbs down recommendations for Heads Up™ rated companies and subsequent day price highs and lows show a strong relationship. The correlation between ratings for MediaSentiment.com selected stocks and their highs and lows the next day is 77%. Therefore, this week, MediaSentiment™ gave an edge up to 77% to smart investors who used Heads Up™ recommendations to trade on intraday volatility!

    All figures reflect all MediaSentiment Heads Up™ recommendations for the week of November 14, 2005 through November 18, 2005, rating companies on the day of their quarterly earnings releases correlated with their stock highs, lows, closing prices and daily volumes for the subsequent day.

5. Links you can use

Sex Sells: Marketing and 'Age Compression'
Now Teens Can Pick Up Pre-paid Phone Minutes on-the-go at 7-11