News Column

Catering to Fickle Customers

June 2005, HISPANIC BUSINESS Magazine

Kevin Savetz

service

The giant service sector, which accounts for nearly a third of the companies on the Hispanic Business 500, had a slow year in 2004. Overall, the sector's revenues declined, despite the healthy growth of a few of the largest firms.

In this sector, companies tend to handle multiple tasks. Group O, the number 35 company on the 500, has three independent businesses: wholesale packaging material, rebate fulfillment and call center support, and industrial packaging. "There is a high demand for business services and what we do," says Chris Ontiveros, vice-president, in part because Corporate America is increasingly looking for diversity spending opportunities. "People finally know who we are after 30 years, and understand that we can compete with the larger companies."

In the packaging space, Group O's core customers – Fortune 50 consumer product companies – want to differentiate their products through brand extensions, which demand special packaging. This is coupled with bilingual marketing efforts to the Hispanic community as well as rebates and call centers to support those programs.

"The Hispanic market is growing," says Mr. Ontiveros. "The consumer base is changing as well, so [corporations] are looking to reach customers in a more targeted way."

Spanish Broadcasting System (SBS), number 37 on the Hispanic Business 500, also ties its fortune to the expanding Hispanic market. "Full year 2004 results were the strongest in the radio industry," says CEO Raul Alarcón Jr., "with our Miami, Los Angeles, New York, and Chicago markets all generating double-digit gains."

Despite the strong markets, both SBS and Group O had nearly flat revenue growth in 2004, a product of below-average performance for the entire service sector. According to Census data, the service sector grew 2.8 percent last year, compared to 4.4 percent for the total U.S. economy. Among the largest service firms on the Hispanic Business 500, only Molina Healthcare really bucked the trend, thanks to its successful initial public offering and subsequent growth through acquisitions (see story "Strong Medicine").

In the next year, service industries must adapt to an increased availability of self-service for consumers. Corporations in the U.S. expect more customer interaction via the Web, e-mail, telephone, and to a lesser degree, kiosks, according to a report from Forrester. The research firm also expects consumer goods companies to shift their revenue models from product sales to service delivery during the next decade.



Source: HISPANIC BUSINESS Magazine


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