Telcos Putting Moves on Vertical, Niche Markets

Posted: 02/2000

Telcos Putting Moves on Vertical, Niche Markets
By Liz Montalbano

hough it may seem telecommunications providers are striving to be all things to all
people, telcos still are putting the moves on vertical and niche markets and targeting
specific customer segments with solutions customized to their needs.

A 1998 Insight Research Corp. (www.insight-corp.com)
report identified selected traditional vertical markets, which include health care,
government, retail and wholesale distribution, education, financial services, professional
business services, hotel and lodging, and durable and nondurable manufacturing (see chart
below, "Selected Vertical Markets in 1998,").

While telecom companies currently are not bombarding all these segments with fierce
marketing campaigns, some of the more revenue-generating verticals, along with
nontraditional vertical and niche markets such as college students and the ethnic
population, are catching the eye of service providers that want to tap them as a revenue
source.

Chart-Selected Vertical
Markets in 1998

Getting ‘Inside the Head’ of Vertical Markets

If a telco wants to penetrate a vertical market successfully, Robert Rosenberg,
president, Insight Research, recommends its marketers "literally have to get inside
of the head of the vertical segment they’re going after."

"You’d have to understand them from the inside out," Rosenberg says.
"I’m not aware of it being successfully done."

Rosenberg thinks that while it would be "a tremendous boon" for a telco to
grab a significant share of a vertical market and hold on tight, he doesn’t think anyone
really has seized the opportunity beyond what he calls "brochure ware." This
means service providers are buying the same equipment from the same vendors as everyone
else, and only making small modifications before marketing solutions to vertical and niche
markets.

"They’re [service providers] buying the base equipment from Lucent (Technologies
Inc., www.lucent.com) and Nortel (Networks, www.nortelnetworks.com), but they made no
investment any which way, kind or shape," he says. "They’re not modifying
anything or putting anything on the front end. They may be tweaking the bill a little
bit–that’s about as far as it will go."

That’s not to say, he adds, they won’t–or shouldn’t–try to land traditional vertical
and niche markets with customized solutions. In fact, Rosenberg says, any telco market
executive with half a brain should recognize the opportunity in this strategy.

"You’ve literally got thousands of new companies becoming telecom providers,"
he says. "One or two of the smart ones are going to go after niches."

Targeting Traditional Vertical Segments

Brian Covney, vice president, commercial market management, Global Crossing Ltd. (www.globalcrossing.com), probably would disagree
that his company hasn’t done a thorough job of marketing to verticals. Covney says the
company recently revisited its strategy and refocused its energies on four traditional
verticals: manufacturing, financial services, and retail and wholesale distribution.

After re-evaluating research into vertical marketing, which the company did two years
ago while it was Frontier Corp. (Global Crossing acquired it in 1999), Covney says the
company decided it must factor the impact of e-business and e-commerce into its solutions
for vertical segments.

Global Crossing chose to concentrate on these specific segments because "all four
of those verticals are heavily impacted by the Internet and e-business."

Covney cites some key partnerships Global Crossing has formed in its targeting of
manufacturing companies to show how it is concerned with bolstering its visibility in
those market segments, and customizing solutions to fit the needs of a specific market.

"In manufacturing, we’re dealing with the National Association of Manufacturers,
promoting our services to their membership through their approval," Covney says.

He adds that Global Crossing also is working within the automobile manufacturing
industry to ensure that its network is up to the standards of the Automotive Network
Exchange (ANX), and explains why this is significant to automobile manufacturers.

"Within manufacturing, this ANX initiative is key because as these manufacturers
are dictating that other suppliers are able to communicate with them over ANX, it’s very,
very critical that Global Crossing understand that and certify ourselves," he says.
"We will certify our network to be ANX-enabled–that’s layman’s terms [for] it meets
all the different security performance, reliability standards established through this
Automotive Network Exchange. [Automobile manufacturing companies] will feel more
comfortable putting our applications on our network if they know it’s been
certified."

While Covney admits it may not be politically correct, Global Crossing also is offering
a solution for U.S. companies that have facilities and plants in Mexico in order to
leverage the inexpensive labor costs of that country. The offering is called Maquila
Connect, and offers international private line and other bundled products to fit the
specific needs of that kind of manufacturing company, Covney says.

Targeting Nontraditional Vertical Markets

Destia Communications Inc. (www.destia.com) also
has a strong presence in niche markets, but, since it has been acquired by Viatel (www.viatel.com), it is leveraging its global network to
target customers in the United States and overseas, as well as to offer its U.S. customers
international calling.

Alan Levy, president and COO of Destia, says it uses its Presto card, a
"virtual" phone card for international calling, to target the nontraditional
vertical market of college students, and has even partnered with Coca-Cola Co. (www.cocacola.com) to reach that segment.

"We see the web as being a great outlet for college students, so we did a number
of campaigns in that domain," Levy says. "We did a Coca-Cola campaign within six
universities in the [New York and vicinity] area where we went in and students who were
buying sodas would get free phone time."

JJ Gross, vice president of marketing for Destia, says the company also has a major
partnership deal with the National Union of Students in the United Kingdom, in which the
union’s membership cards function as Presto phone cards. The union currently has about 2
million members, he adds, "so every student in the U.K. is already carrying the
capability of using our services for voice mail and other services."

While Destia customizes products for college students, it also markets an 800 line
service exclusively to parents of college students, a move that Gross claims is
"the first time to our knowledge that anyone has chosen this particular market, this
particular slant."

Destia offers college students’ parents competitive rates on an 800 number that dials
directly to their home. This way, Gross says, "you can’t call anywhere but home with
that, and if they [the college students] get into trouble or into a car accident or brawl
in a bar–and these things happen with college kids–they can reach home and it’s a real
convenience for all parties concerned."

Another nontraditional vertical market segment Destia targets is the diamond industry.
Since the company’s headquarters is in New York–a major center for this industry–this is
a logical choice for a vertical target, according to Gross. He adds that Destia’s
extensive international network conveniently can link New York diamond dealers to business
associates in the industry’s other major hubs–the United Kingdom, Belgium and Israel.

"We are the exclusive phone carrier for the Diamond Club here in New York, which
is the center for most of the diamond dealers," Gross says. "We offer a calling
on a network that connects New York and Antwerp, [Belgium,] and Tel Aviv, [Israel,] at an
exceptional rate so that the diamond dealers can talk to each other and do their trading
on our network for very low costs."

Targeting Ethnic Markets

Another niche market that doesn’t fit into traditional vertical categories is the
ethnic market, which is a favorite target of prepaid services providers–especially
prepaid calling card providers.

Rosenberg cites historical significance for why service providers want to customize
solutions for the growing U.S. ethnic population.

"I always thought that when my grandparents on my father’s side came over from
Eastern Europe [in the early 20th century]–that was the biggest wave of
immigration," he says. "[According to the major news magazines,] it’s peanuts to
what’s happening in the last 20 years with respect to Latin Americans coming up to North
America. It just completely dwarfs it.

"Now what does that mean for telecom? Well, telecom comes from this background of
universal service, which is we treat everybody the same … in fact, what you find now is
that what you’ve really got is a kind of salad bowl of all these different people …
[and] telecom providers increasingly are going to have to create diverse messages."

Rosenberg says telcos that target ethnic markets will have to design calling plans,
bills, support services and a host of other features to take into consideration language
barriers, "the cultural affinity" of it and "understanding what makes them
feel good and makes them feel bad," he says.

Arnie Goodstein, president of RSL COM PrimeCall Inc. (www.rslcom.com),
which markets a number of prepaid services, including cards to various U.S. ethnic
populations, agrees. He says extra attention must be paid to ethnic affinity when
marketing to ethnic populations, but finds in the calling card business at least,
"it’s about having the right pricing at the end of the day."

Still, he agrees card design and the support services must cater to whatever ethnic
population a service pro-vider targets in order for the marketing campaign to succeed.

For instance, he says in California, RSL COM PrimeCall markets "the leading
card" catering to the significant Mexican population in that state. The prepaid card
is called "Mexico Call" and comes in various styles that "all have a Latin
flavor to them," Goodstein says.

Destia also markets heavily to ethnic populations in the United States and, along with
providing competitively rated prepaid cards to specific international destinations to
cater to certain ethnic segments, Gross says the company hires employees from the specific
ethnic groups it is targeting to work closely on the marketing campaigns.

"It’s very easy to step on your own foot if you don’t know what you’re talking
about [when communicating with ethnic customers]," he says. "Not only [do] the
call centers themselves [have employees that are bilingual], but the product managers for
these ethnic groups are all native speakers and come from that community, so they’re
really in a position to help protect us from those kinds of things."

Liz Montalbano is news editor for PHONE+ magazine.