Vertical Markets:
Insight Research
Management Report December 2003
Telecom Services in Vertical Markets 2003-2008
AMID THE FIERCE PRICING COMPETITION, IDENTIFYING LUCRATIVE VERTICAL SEGMENTS THAT ARE WILLING AND ABLE TO PAY IS CRITICAL TO SURVIVAL. VERTICAL MARKET SEGMENTATION PINPOINTS THE TELECOM SPENDING INCLINATIONS OF VARIOUS INDUSTRIES––IT’S THE KEY TO ANY BUSINESS PLAN, AND A NECESSARY INGREDIENT FOR EFFECTIVE TARGET MARKETING AND SALES FORCE DEPLOYMENT.
IN ITS ANNUAL REVIEW OF VERTICAL MARKETS, INSIGHT EXAMINES THE SPENDING PATTERNS ON LOCAL, LONG DISTANCE, ISP, AND WIRELESS FOR 14 CLASSES OF BUSINESS INCLUDING: HEALTHCARE, CONSTRUCTION, RETAIL TRADES, WHOLESALE TRADES, EDUCATIONAL SERVICES, FINANCIAL, INSURANCE, REAL ESTATE, PROFESSIONAL BUSINESS SERVICES, HOTELS AND LODGING, TRANSPORTATION, COMMUNICATIONS, UTILITIES, ENTERTAINMENT AND MEDIA, DURABLE MANUFACTURING, AND NON-DURABLE MANUFACTURING. IN QUANTITATIVE TERMS, INSIGHT DESCRIBES THE REQUIREMENTS OF EACH VERTICAL MARKET AND HOW LIKELY THEY ARE TO EXPAND THEIR TELECOMMUNICATIONS SERVICES OVER TIME. IF YOU NEED TO TARGET MARKETS FOR TELECOMMUNICATIONS SERVICES, THEN YOU SHOULD READ THIS REPORT.
REPORT EXCERPT
VERTICAL INDUSTRY TELECOMMUNICATIONS SPENDINGTELECOM PROFIT MARGINS ARE RAPIDLY DETERIORATING IN THE US MARKET, IN PART, BECAUSE CARRIER OFFERINGS ARE PERCEIVED AS COMMODITIES. TO DISPEL THIS BELIEF AND RESTORE THE TELECOMMUNICATIONS INDUSTRY TO SUSTAINABLE GROWTH, VENDORS WILL HAVE TO REACH DEEPER INTO THE US MARKET, FOCUSING ON SPECIFIC VERTICAL INDUSTRIES AND CATERING TO THEIR PRECISE COMMUNICATIONS NEEDS. VERTICAL OPPORTUNITIES WILL BE CALCULATED BY:
EVALUATING THE SIZE AND REVENUE POTENTIAL OF EACH VERTICAL INDUSTRY AND DETERMINING THE PROVIDER’S EXPERTISE IN EACH PARTICULAR MARKET SEGMENT. FAILURE TO RESPOND TO THE BUSINESS MARKET’S DEMAND FOR SPECIALIZATION WILL ALLOW COMPETITORS TO CAPTURE MARKET SHARE EARLY ON, RELEGATING SLOW-STARTERS TO A RESIDENTIAL/CONSUMER FOCUS.
VERTICAL MARKETS, THEREFORE, REPRESENT UNTAPPED OPPORTUNITIES FOR THE TELECOMMUNICATIONS INDUSTRY. THE OBJECTIVE OF THIS MARKET RESEARCH REPORT IS TO EXAMINE AND QUANTIFY THESE OPPORTUNITIES IN VARIOUS VERTICAL INDUSTRIES FOR THE TELECOMMUNICATIONS SERVICE PROVIDER COMMUNITY. INSIGHT EXAMINES 14 VERTICAL MARKETS IN THIS REPORT, SEGMENTED ACCORDING TO STANDARD INDUSTRIAL CLASSIFICATION (SIC), A BUREAU OF LABOR STATISTICS (BLS) DIVISION OF ECONOMIC DATA. THESE 14 VERTICAL MARKETS REPRESENT ALMOST 78 PERCENT OF ALL WORKERS AND APPROXIMATELY 82 PERCENT OF THE TOTAL NUMBER OF ESTABLISHMENTS IN THE US.
TELECOMMUNICATIONS PRODUCTS AND SERVICES ARE, BY THEIR VERY NATURE, COMMODITY PRODUCTS, SINCE THEY EXHIBIT LITTLE OR NO CUSTOMIZATION. TELECOM PROVIDERS RECOGNIZE THE COMMODITY NATURE OF THEIR PRODUCT WHEN THEY MARKET HORIZONTALLY—OFFERING EVERYTHING TO EVERYONE, EVERYWHERE. VERTICAL MARKETING FOCUSES ON DEVELOPING SOLUTIONS TO USER PROBLEMS WITHIN SPECIFIC INDUSTRIES. IN CONTRAST, HORIZONTAL MARKETING PROVIDES GENERIC "ONE-SIZE-FITS-ALL" OFFERINGS. IN THIS MARKET ANALYSIS REPORT OUR THESIS IS THAT, WITH COMPETITION EATING INTO ALREADY ANEMIC PROFIT MARGINS, SOLUTION SELLING BY VERTICAL INDUSTRY BECOMES AN ATTRACTIVE WAY FOR TELECOMMUNICATIONS VENDORS TO DIFFERENTIATE AND A VIABLE WAY TO MAINTAIN PROFITABILITY AND SUSTAINED GROWTH. FOUR PRINCIPAL GROWTH FACTORS AFFECT TELECOMMUNICATIONS EXPENDITURES SIGNIFICANTLY.
WITH THE US ECONOMY IN SUCH DIFFICULT STRAITS, BUSINESS OPPORTUNITIES FOR TELECOMMUNICATIONS PROVIDERS IN THE ENTERPRISE MARKET SEEM HARDER TO FIND THAN EVER BEFORE. ACCORDING TO THE BLS, THE EMPLOYMENT PICTURE IS NOT SANGUINE. IN APRIL 2002, UNEMPLOYMENT HIT AN EIGHT-YEAR HIGH OF 5.9 PERCENT. THE PICTURE DID NOT IMPROVE AS THE US ROLLED INTO 2003: BY APRIL, UNEMPLOYMENT HIT SIX PERCENT, IN MAY IT ROSE TO 6.1 PERCENT, AND BY JUNE THE NUMBER PEAKED AT 6.4 PERCENT. ALTHOUGH THE UNEMPLOYMENT RATE IMPROVED TO 6.2 PERCENT BY JULY OF 2003, SOME ECONOMISTS INSISTED THAT THE RATE ONLY IMPROVED BECAUSE A SIGNIFICANT NUMBER PEOPLE DROPPED OUT OF THE "ACTIVELY LOOKING FOR JOBS" MARKET, WHICH IS PARCEL TO THE OVERALL UNEMPLOYMENT CALCULATION. ON THE OTHER HAND, THE JOB MARKET IS USUALLY THE LAST FRAGMENT OF THE ECONOMIC PICTURE TO RECOVER IN A TURNAROUND—SO STUBBORN UNEMPLOYMENT NUMBERS MAY NOT INDICATE A STAGNANT ECONOMY.
THE ECONOMY WILL SHOW CONCRETE SIGNS OF IMPROVEMENT RELATIVELY SOON DUE, IN PART, TO THE ESTIMATED $600 BILLION (OVER FIVE PERCENT OF THE GROSS DOMESTIC PRODUCT) DEFICIT PROVIDING A STIMULUS. FOR THE SECOND HALF OF 2003, IT IS REASONABLE TO EXPECT A GROWTH RATE OF 3.5 PERCENT; MORE THAN DOUBLE THE GROWTH RATE IN THE FIRST SIX MONTHS OF 2003. FEDERAL RESERVE OFFICIALS HAVE CUT INTEREST RATES 13 TIMES SINCE 2001, AND CUT THEIR TARGET FOR SHORT-TERM INTEREST RATES IN JUNE TO ONE PERCENT; A 45 YEAR LOW. STIMULUS PACKAGES, DEFICITS, TAX CUTS, AND LOW INTEREST RATES ARE CERTAIN TO DRIVE THE ECONOMY OVER THE NEXT FIVE YEARS.
MARKET SEGMENTATION
US TOTAL WIRELINE MARKET
US BUSINESS VS. RESIDENTIAL WIRELINE MARKETS
US BUSINESS EXPENDITURES IN VERTICAL MARKETS
US WIRELINE DATA VS. VOICE MARKETS
US WIRELINE DATA EXPENDITURES IN VERTICAL MARKETS
THE WIRELESS DATA EXPLOSION
BY INDUSTRY SECTOR:
- HEALTHCARE
- CONSTRUCTION
- RETAIL TRADE
- WHOLESALE TRADE
- EDUCATIONAL SERVICES
- FINANCIAL, INSURANCE, AND REAL ESTATE SERVICES
- PROFESSIONAL BUSINESS SERVICES
- HOTEL AND LODGING
- TRANSPORTATION
- COMMUNICATIONS
- UTILITIES
- ENTERTAINMENT AND MEDIA
- DURABLE MANUFACTURING
- NON-DURABLE MANUFACTURING
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Chapter I | |
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