While retailers in both the digital and physical world have seemingly become obsessed with reaching millennial shoppers, older generations still have a lot of purchasing power. In fact, Generation X, those born between 1965 and 1980, has the highest annual spending per American household, averaging $66,981, while millennials, defined for this info as those born 1981 through now, come in third at $47,114, according to a Bureau of Labor Statistics (BLS) blog. Baby boomers, people born between 1946 and 1964, have the second most at $59,646.
With the youngest boomer now 53, most of that age group has crossed the 55+ mark, a group being targeted by T-Mobile (NASDAQ:TMUS) in a new promotion. The wireless carrier has essentially created a senior discount for people 55 and older, a group it says it has a less than 10% share of currently.
What is T-Mobile doing?
The Un-carrier, as it calls itself, has offered the more than 93 million Americans that are 55 and over, two lines with unlimited data, calls, and text for $60 per month, including all taxes and fees. (It's $50 for the first line and $10 for the second. Only the first person needs to be 55 or older.) That's $40 cheaper than the $100 the company charges younger customers for the same plan.
The offer starts Aug. 9 and it requires customers to use autopay to get the deal price. T-Mobile CEO John Legere touted the offer as a different way to market to baby boomers, and members of the silent generation (born 1929-1945).
"For years, the carriers have been patronizing the generations that invented wireless. They thank these mobile pioneers by selling dumbed down 'senior' plans with exactly zero data and -- get this -- night and weekend minutes! That's not just idiotic -- it's insulting!" said Legere.
Getting the deal requires that new customers visit a T-Mobile store to actually show their ID. Existing customers in the impacted age group can switch pricing by calling the carrier or visiting a store.
T-Mobile sees demand
Legere is right when he notes that the deals being offered to seniors don't reflect how many of them use their phones. Yes, there's a much-older audience that wants very limited handsets with big buttons, but that's not what most Americans over age 55 want. According to T-Mobile:
- 74% of Americans over 55 have a smartphone (a number that has been growing).
- Baby boomers spend an average of 149 minutes a day on their smartphones (about as much as millennials at 171 minutes per day).
- The majority of those 55+ say a smartphone is the top way they connect with family and friends.
A senior discount has worked well in a number of industries. The wireless company is not requiring 55+ customers to do anything different to get the deal. This is not an early bird special or a movie deal for going to see a film when younger people are working or at school, it's the regular T-Mobile One Unlimited plan at a better price.
Why is T-Mobile doing this?
Legere's company just surpassed Verizon (NYSE: VZ) for first place on one of the two major wireless studies. The results of that report suggest that T-Mobile can make inroads in a market dominated by Verizon and AT&T (NYSE: T). T-Mobile makes that very clear in its press release, saying that those two companies control nearly 81% of the postpaid wireless market of people 55 and older while T-Mobile only has 8%.
"When these generations were getting their first phones, AT&T and Verizon were the only real options -- and the Duopoly has been taking advantage of them ever since!" said Legere.
Basically T-Mobile feels it can now prove it has a good enough network to go after an audience that has been very conservative, opting for the traditional leaders. By offering aggressive pricing coupled with its new status as the top network (though a second major study disagrees), Legere believes that his company can take share from AT&T and Verizon. There's no reason to expect this deal won't work.
Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.