iKids? Generation Y eyes iMacs

Last week, Apple Computer Inc. (Nasdaq:AAPL) Senior Vice President Mitch Mandich stood before a giant screen featuring two surly looking pre-teens, arms folded, smirking at the camera.

Across the picture -- a replica of a BusinessWeek cover -- were the words "Generation Y."

It's the generation that's swapped out khakis for cargos, Levi for Tommy, and Nike for Adidas. Now Apple is hoping these children of the baby boomer generation will replace PCs with the Mac.

"They're computer-literate. They're learning on the iMac. You have an opportunity to reach this generation with new products," Mandich, head of sales at the company, told the developers attending the Apple Worldwide Developers Conference in San Jose, Calif.

Right now, the not-so-secret weapon for doing this is the multi-hued iMac, which grabs attention with its candy-colored coating and matching peripherals.

In the future, the instrument will be sophisticated G4 machines, specially designed to handle heavy-duty applications such as audio, video and games.

Are tangerine iMacs cool?
Apple didn't say exactly how it plans to target boomer babies, but it already is infiltrating their world. MTV, for instance, runs ads that refer to the cool kids who buy tangerine iMacs.

"We're in the culture," Mandich said proudly, showing off the ad. He claimed Apple had nothing to do with the campaign.

That kind of ad wouldn't have happened a few years ago, when Apple was in free fall. "We found we were becoming irrelevant," Mandich said. "We would've died to have MTV validate us."

Now instead of just weaning PC users off their machines, the company also is focusing on getting a whole new generation of computer users to jump on board the Mac train. And that might be a better use of energy. After all, only 13 percent of iMac buyers are Windows defectors, while 32 percent are first-time computer owners, according to Apple's latest sales figures.

"It's a brilliant strategy. Basically, Apple ends up with this whole youth market to themselves," said longtime Apple watcher Tim Bajarin, president of Creative Strategies.

Bajarin said his college-age son just bought a tangerine iMac with his own money, even though he has access to any technology he wants through his father's connections. "I even tried to talk him out of it, but he kept saying, 'it's cool,'" Bajarin said. "To them, it's not your mother's or your grandmother's PC."

But pitching to the Generation Y market, kids between the ages of 6 and 20, is a tricky proposition. On the one hand, there are 60 million of them, and they have more spending power than any young generation before them. In the end, though, parents still decide big-ticket buys such as computers.

Repeat of history
In a sense, history may be repeating itself. The education market always has been a strong one for Apple.

In the early '80s the company landed in many a home -- and some offices -- by pushing the machines to college students. The plan didn't pan out, as PC makers began churning out computers with a friendlier face, Apple lost much of its place in businesses, and Mac prices rose beyond the reach of many consumers.

Now Apple is trying its strategy again, through both schools and stores, though it has indicated it will keep prices lower this time around. The company is hoping to parlay its success in schools -- where it holds about a 25 percent share -- into the home market, a plan that analysts say is only logical.

"That's always been a good long-term strategy to build markets -- get 'em while they're young," said Lou Mazzucchelli, an analyst with Gerard Klauer Mattison & Company.

Mazzucchelli said the iMac fits in well with the media-savvy Gen Yers. "The iMac is colorful and real easy to use," Mazzucchelli. "Yes, there are more Windows machines out there, but you still have the blue screen of death."

For the past year Apple also has been actively luring game makers back to the platform, a move needed to attract teens to the Mac.

Get connected
Being connected to the world around them is the definition of Generation Y, according to a study of kids and digital media performed by marketing company Saatchi & Saatchi.

Interviewers surveyed and observed 200 kids ages 6 to 20 in the United States. The study found that kids believe knowledge is powerful and are more optimistic than the generations that came before them.

By positioning the iMac as the easiest way to connect to the Internet and the icon of its Think Different campaign, Apple is playing right into their hands.

Generation Y is less brand-loyal than other demographic groups, which is bad news for big-name companies and good news for underdogs like Apple. Already, they've left Levi Strauss reeling by ditching its jeans in favor of lesser-known brands. Levi has closed plants and cut jobs because of declining demand.

But the study said kids today also are more realistic, and more verbally and visually sophisticated than previous generations, in part because many have grown up with computers. Therefore, marketers have to be careful not to talk down to them.

Edgy is good
The Saatchi & Saatchi study suggested edgy, fun campaigns based on more than just a product -- campaigns that tie into the kids' lifestyles. "Don't build a brand for them," the study suggested. "Rather, build a brand with them."

To do that, analysts said Apple has to keep innovating, churning out machines the kids deem cool. It also has to hope its rivals don't catch on.

"The PC makers aren't doing it yet," said Creative Strategies' Bajarin. "Think about their beige boxes -- they're still square."