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July 24, 2012

Global Shift to 'Value' in Communications is Coming

By Gary Kim, Contributing Editor

According to industry revenue trends, many developed country markets illustrate the importance of new revenue sources, and might also indirectly point to changing consumer demand profiles.

U.K. service provider revenue, for example, has been largely flat since about 2006. Other tier-one service providers in Europe have seen revenue declines recently. And that trend is unlikely to change.

By 2020, European telcos see their sales fall by nearly 20 percent, while earnings (EBITDA) could even drop by 40 percent, according to a study by Roland Berger Strategy Consultants.

In part, those changes are a result of new competition and changing regulations that will have the effect of reducing service provider revenue.

But economic stringency will also be a factor. Of 10 consumer macro trends shaping the technology, media and service provider markets over the next 10 years, perhaps the most important is the shift to “value” as consumers reset expectations in response to sluggish global growth, analysts at Gartner (News - Alert) suggest.

“All 10 of these trends converge around questions of value, what consumers value enough to pay for, how consumers' values are changing, and how technology and service providers can respond to this to increase their sales and margins,” said Gartner officials.

Consumer technology markets are being redefined by consumer cuts of discretionary spending in the wake of successive financial and economic crises.

Still, consumers seem to put a higher value on media and communications products in times of recession as they cut back on more-expensive substitutes.

In addition to more “recession-friendly” marketing messages, a greater range of "affordable" or value product options, more-strenuous customer engagement efforts and improved customer experience efforts will be required.

Over time, there has been a closing of the classic "digital divide" between the haves and have-nots in terms of access to basic technology products and services. At the same time, there has been an

 acceleration of product update, upgrade and replacement cycles.

Acceleration should in theory give consumers more spare time to do the things they want. In reality, they experience the reverse. Therefore, the most valuable product that service providers can deliver to consumers is extra time in the day to do things that they want or need to get done.

Argues Gartner: products and services that help consumers fill their time more productively and/or pleasurably are the most compelling.


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Edited by Braden Becker
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