The $83 billion telecommunications industry is headed for a dramatic makeover, as the composition of the United States population changes over the next half century. According to the U.S. Census, projections for African Americans, Asians, and Hispanics show faster growth than other groups as a percent of the total U.S. population.
These ethnic groups are holding onto their distinctive cultural identities, rather than assimilating into a melting pot culture. Consumer products and services companies will need to build diversity strategies in order to keep pace with people patterns.
The Telecommunications Act of 1996, which regulates the companies created by the breakup of AT&T, has transformed the industry into a furiously competitive business, exemplified by the recent merger mania, "10-10" dial-around advertisements, and 10-cents-a-minute plans. And technological advances have turned the one-time monopoly corporate culture inside out, introducing concepts such as "customer service" to the strategic lexicon of the phone business.
Still, even many upstart long-distance companies have not quite caught on to the fact that the telecom business has fundamentally changed. Despite the breakup of Ma Bell, providers are still required by law to provide universal service to consumers. And that, industry observers say, has tended to lull some providers into believing that a one-size-fits-all phone service is all it takes to grab a piece of the pie. "But with over 40 million people changing their long-distance service providers over the last two years, it's clear that the telecom [industry] must strive to satisfy the needs of specific users," Rosenberg cautions. Now, telecom players are learning that they must market their services strategically in order to stay competitive, and that means offering more sophisticated, customized plans that suit the needs of individual consumers. And ethnic consumers have particular service needs, according to a recent study by the Insight Research Corporation, a telecommunications market research firm based in Parsippany, New Jersey.
"Telephone companies that concentrate on maintaining a strong customer service relationship with ethnic consumers will not only win over more of this rapidly growing market but also will hold on to it, even as competition in the telecom industry keeps building," says Robert Rosenberg, president of Insight Research.
Among findings in a recent Insight consumer study, "Telecom Marketing Opportunities to Ethnic Groups":
* Consumers spent $31 billion on local telephone services and $52 billion on long-distance calls in 1998. The ethnic market (Hispanics, Asians, and African Americans), which represents approximately one-quarter of the U.S. population, spent $11.4 billion and accounted for 37 percent of all local service usage. They spent $15 billion on long distance-racking up 29 percent of long-distance use.
* Hispanic and Asian consumers tend to be make more long distance calls than African American and white consumers. African Americans are generally more assimilated, with fewer family ties back to the countries of their origin. As a result, they tend to make more domestic calls. Exceptions include members of Caribbean groups, such as Jamaicans and Haitians. "We also found that Hispanics tend to be heavy users of international prepaid calling cards," says Rosenberg. "Asian consumers...spend more on wireless services and the Internet than the average subscriber."
* Hispanics alone are projected to account for almost one-quarter of all telecommunications revenues by 2050. Add Asians, and the total could exceed one-third of all revenues. In many urban markets, ethnic users already account for more than 50 percent of telecommunications revenues. Here, Hispanics may be the largest subscriber group, followed by Asians.
"Long-distance carriers are devoting a great deal of attention to the ethnic market because they view it as an excellent way to promote international calling plans," Rosenberg explains.
The increasingly competitive international calling market has lead to lower prices and greater availability, which are attracting more callers. Many are recent immigrants who speak limited or no English, and who are trying to maintain ties to family and friends back home. Inexpensive international calling and affordable travel means they're better able to retain their language and culture than earlier immigrants. It also means that telecom carriers catering to this market must do so "in-language" and "in-culture" if they are to win over the ethnic consumer.
Insight believes the ethnic consumers' telecom spending will also grow, making this an increasingly important segment of the telecommunications market.
For more information on Insight Research's "Telecom Marketing to Ethnic Groups" study, visit http:// www.insight-corp.com or call 973-605-1400.
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