Redefining and Rediscovering Market Segments in the Wireless Telecom Industry

September 2012 Marketing 1 Comment

In his HBR classic “Marketing Myopia”, Theodore Levitt pointed out that the primary reason for the growth of any industry to be threatened, slowed or stopped is not because the market is saturated. Rather, it happens when the industry leaders define their markets too narrowly by focusing on their respective products/services and not on their customers’ underlying needs. He illustrates this concept by citing that the Railroads lost out to Cars and Airlines because the industries considered themselves to be in the railroad business (product-orientation) and not in the transportation business (customer-orientation).

Before applying Levitt’s analysis to the US Wireless Telecom industry, here are some salient aspects of the industry:

  • Penetration Rate – At 104% penetration (i.e. more Wireless connections than the US population), the market can be considered saturated. No new customers remain to be acquired; only ones that move between Carriers.
  • Industry Structure – From Table 1 (listed below), it is obvious that the industry is a Loose Oligopoly with 4 major Carriers – Verizon Wireless (110 Million subscribers), AT&T (104 Million subscribers), Sprint-Nextel (56 Million subscribers) and T-Mobile (33 Million subscribers) – commanding a combined market share of ~90%. Further, there doesn’t seem to any alternative, at least in the short term, to the services offered via Wireless communications. With little basis for differentiation, Carriers are trying to distinguish themselves by investing in high-speed networks and also redefining their offerings by attaching a range of features and attributes to the core Products.
  • Churn Rate and Net Adds – From Table 1, it is apparent that the Average Monthly Churn Rate (# of customers lost) for all major Carriers has been relatively steady with positive net adds. However, the large Carriers, especially Verizon and AT&T, are struggling to improve their Operating Profits. To compensate for the decline in margins, they are focusing on increasing the volume of usage, primarily with data.

The Shifting Paradigm

Thanks to Levitt’s insights and their own experiences, Carriers, over the last few years, have steadily been focusing on customers’ holistic needs. They have evolved from merely providing Wireless Voice and Data Services to offering the entire range of Quad-play services including Voice, Video, Data and TV. While augmenting existing products with additional features, they are also trying to differentiate some of the core offerings, such as data, based on higher speeds. However, there has been limited progress. For example, the real data download speeds are in the range of 30%-40% of the promised speeds of 100 Mbps (on LTE networks). Consequently, new mobile applications, running on these networks, are neither fast nor user-friendly. With limited adoption, Carriers have been struggling to recover their investments.

So What Should Carriers do?

  • Platform-based portfolio of offerings – The strategic imperative is to position, or reposition, the existing portfolio of Products and Services as Solutions. This is possible when technology platforms such as Cloud and M2M are configured for each specific industry such as Finance, Utility etc. Here are some guidelines:
    • Develop a broad range of solutions – In the manufacturing industry, leverage Mobile and M2M technologies to drive lean innovation with real-time asset management, enhanced logistics, and process automation. Similarly, develop Telematics solutions to remotely manage and monitor vehicle performance in real-time and implement secure mobility that allows customers to safely access sensitive (financial) data from anywhere.
    • Identify value-added solutions that command price premium – It is possible to charge a premium from customers who would be willing to pay a premium for real-time monitoring of heart monitors than those who would pay a higher fee for higher download speeds of movies and music. Such classification provides insights into new customer segmentation criteria.
    • Priority transmission– Similar to services such as premium SMS, where the premium messages receive priority over regular SMS messages, Carriers have the ability to prioritize transmission of real-time data from wireless-enabled devices such as embedded heart monitors. This is another avenue for Carriers to charge a premium from customers.
  • Multi-dimensional analyses – Segment customers along multiple dimensions (Table 2) and use sophisticated analytical tools and techniques to identify the over-served and under-served customers. Although the individual needs of customers are different, significant niche categories can be identified for which new packages can be developed and offered. Similarly, the most and least profitable customers should be identified and unprofitable customers ceded to competitors.
  • Articulate the Value Proposition – This is especially important for Business customers. Understand and/or identify the problems they face, and then tailor the offerings to alleviate those specific problems. The true value proposition should be established vis-à-vis competitors’ offerings. Further, outline the cost-benefit analysis taking into account the respective client’s end-user benefits.
  • Analytics – Apply analytical techniques such as Conjoint Analyses, Price-Benefit mappings on the large volume of transactional data that is already available. Besides rationalizing customers’ preferences, these techniques would expose untapped market segments for which new offerings could be developed.
  • Metrics – Focus on those metrics that yield fresh perspective on the state of the business. Traditional metrics are important but so are new ones. The following list highlights some of them:
    • ARPU (Avg. Revenue per User) – One of the most common metrics, ARPU can be used for competitive analyses. From Table 1, it is interesting to note that USCC, one the regional carriers with less than 2% of the market share, commands the industry’s highest ARPU at $58. Other carriers’ should develop the focus and insights of USCC to increase their margins.
    • CLTV (Customer Life Time Value) – Correlate CLTV with customer satisfaction and run campaigns to satisfy the needs of each segment.
    • CPGA (Cost per Gross Add) and CCPU (Cash cost per user) – Track these metrics continually to ensure newly acquired customers are profitable and that the ongoing costs, of serving the entire customer base, are declining. If either or both of these metrics are on the rise, then it is a clear indicator that segmentation has been ineffective.


Table 1: Top Carriers in the US as of Q1 2012

Table 2: Different Bases of Segmentation


  2. Harvard Business Review “Marketing Myopia”; Author – Theodore Levitt
  3. Harvard Business Review “Customer Value Propositions in Business Markets”; Authors – Anderson, Narus and Rossum
  4. Harvard Business Review “Break Free From the Product Life Cycle”; Author – Youngme Moon

  • Puneet Kulshrestha

    Views are helpful with more saturated telecom segment and pressure to earn revenue

About the author

Kamesh Chelluri is a Principal with the CME (Communications, Media and Entertainment) practice at Infosys Consulting. He has worked with major Telcos in the US including Verizon, AT&T, Sprint, Nextel, Sprint-Nextel and US Cellular. In his current role, he is responsible for developing Business Implementation Strategies for Wireless/Wireline Products and Services, Convergence/Quad-play, Value-added services, and OSS/BSS consolidation. He holds a Master’s degree in Marketing Analysis and an MBA in Business Strategy, both from DePaul University, Chicago. He can be reached at .

Kamesh Chelluri
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