Aug 5, 2014
5 Steps To Capturing The Hispanic Market — The Last True Growth Opportunity
Most U.S.-based firms have a significant corporate imperative to attract Hispanic consumers, given their tremendous demographic and economic importance. Some companies, such as McDonald’s, Budweiser, and AT&T, are spending significant resources to gain market share with Hispanics and are making inroads. But it’s no simple task. According to a 2012 Nielsen report, “Hispanics are the fastest growing ethnic segment expected to grow 167 percent from 2010 to 2050, compared to 42 percent for the total population.” The report also found that Hispanics “will be the dominant and in many cases the only driver of domestic CPG sales growth.”
In fact, AdAge reported that Steve Mandala, Univision’s VP of advertising and sales had recently stated at a company presentation, that all of beverage marketers’ growth will come from the Hispanic market, likewise auto sales will grow twice as fast as sales to non-Hispanics. With this new business reality, the Hispanic market may well be one of the last significant growth opportunities left in the U.S., particularly in the consumer goods and service industries.
So, how do you capture this often elusive market? A well-crafted, data-driven strategy is the first step in reaching the Hispanic marketplace. The process must incorporate marketing, strategy, and financial assessments to comprehensively assess the Hispanic opportunity, which results in outputs that frame the size, scope, and process required to win with Hispanics, as well as clear financial contributions and investments.
As Monica Gill, Senior Vice President, Public Affairs and Government Relations – Nielsen, sees it: “Latinos are emerging as a powerhouse of economic influence, presenting marketers an increasingly influential consumer group that can translate into business impact. The key is to recognize that today’s modern Latino is ‘ambicultural’ with the ability to seamlessly pivot between English and Spanish languages and to embrace two distinct cultures. Understanding how to connect with this unique consumer profile will be key to successful engagement.”
As the 2012 Nielsen report put into perspective, “Latinos are no longer just a sub-segment of the economy, but a prominent player in all aspects of American life.” To that end, what’s needed is a comprehensive approach to creating a Hispanic strategy that highlights a deep understanding of brand building for Hispanics and their critical voice across social media platforms, as well as a “traditional” understanding of the need to approach this group in a highly-targeted and micro-localized fashion, using a test-as-you-go approach to determining best practices.
From my experience leading the Center for Hispanic Leadership, a human capital and business strategy development firm with Fortune 500 client companies, I have developed five guiding principles for companies looking to establish a Hispanic strategy.
1. Define Clear Goals and Objectives to Win with Hispanics
Most firms continue to approach the Hispanic market as either an outreach of general market business practices or an extension of a brand or business unit-specific strategies. Worse still, is that investments targeting the Hispanic market are unusually limited, a paradox given the sophisticated market sizing and financial analysis performed by major U.S. firms to grow major brands or win across a portfolio.
What prevents firms from allocating sufficient capital to such an attractive opportunity? We have repeatedly seen many firms become reluctant to invest accordingly because the management talent is lacking and the approach required to win is unclear or muddled, lacking well-defined goals and objectives. Most are challenged to state a simple growth statement objective backed by share, financial or category goals. While these numerical challenges do exist, the bigger, often unspoken truth is that management teams do not trust that a solid strategy exists.
A well-crafted, data-driven strategy is the first step in reaching the Hispanic marketplace. The process must incorporate marketing, strategy, and financial assessments to comprehensively assess the Hispanic opportunity, which results in outputs that frame the size, scope, and process required to win with Hispanics, as well as clear financial contributions and investments.
“The number one issue,” according to Cesar Melgoza – Founder & CEO, Geoscape, “is that companies fail to recognize the critical importance of the Hispanic market to their overall top and bottom lines. They believe they can experiment and only incrementally invest in this segment, but they’re mistaken because, for most companies out there, it is the bulk of their growth into the foreseeable future.”
Anheuser Busch struggled for several years to effectively win with Hispanics. The turning point came with its acquisition by InBev, whose Brazilian management team had deep expertise in driving strategy from commercial initiatives, and understood many of the lifestyle and behaviors of Hispanics. ABI made Hispanics a key growth priority and delivered comprehensive data-driven strategy heavily oriented by their competitive advantage in go-to-market activities.
2. Hyper Local is Critical
A second reality of Hispanic strategy formulation is that hyper local strategies will be required. This is because Hispanic interactions with brands and channels are vastly different by age, market and level of acculturation. Understanding these differences results in vastly different market sizing, strategic approaches, and for consumer goods, radically different routes to market and channel strategies.
“I would consider hyper local marketing to be a key element in any strategy targeting the Hispanic demographic,” says Gabriel Torres, Vice President and General Manager for the Southeast Region – T-Mobile. “Hyper local means engaging individuals or groups where they live or shop, and connecting customers with an experience. T-Mobile utilizes hyper local strategies when we launch new products and open new stores. In our recent launch of our innovative upgrade program, JUMP!, we employed hyper local campaigns to engage with customers through social media and on the street and then guide them to our web store or one of our retail store locations.”
A simple example can show the powerful impact of a well-designed Hispanic strategy:
A large global food company had struggled to establish a growth platform with Hispanics, a market controlled by its primary competitor. For several years they invested heavily in Hispanic targeted advertising, sponsoring shows on Spanish-language television. Products were positioned and distributed across general market channels, with only Spanish-language packaging to support this effort.
Our team helped this client to rethink this approach. While most Hispanic population centers align on the states of Texas, California, and Florida, our approach identified growth dynamics targeting a 16-24 year-old consumer with average to high levels of acculturation, rather than the previous targeting of the mass Hispanic market.
This target has high levels of internet and social media access and usage, allowing for the establishment of a reconsideration of our clients’ brands, supported by a new positioning of their brands. This facilitated identification of a new prioritization of cities / towns across these states.
Our work also noted the importance of “on the go” consumption by this target, requiring distribution of single serve packaging to up-and-down the street channels in their neighborhoods. In market work and insights work identified independent grocery stores and convenience stores as critical channels, which required new routes to market and relations with distribution partners our client had never approached. Naturally, attractive point of sale and ‘retail theater’ displays tied to group activities and a year-round calendar of events across major holidays helped to create in-store excitement.
What emerged was a hyper-local strategy, with a 360-degree approach incorporating a prioritization of consumers, brands, geographies, market approaches (specifically social media), and distribution channels. It was further reinforced by aligning and sponsoring activities and community events important to our target audience’s lifestyles.
3. Deploy Your Best People
The prior example demonstrates that a comprehensive Hispanic strategy has a myriad of layers that must be solved and are distinctly different from general market approaches. Therefore, the talent and leadership required for your Hispanic strategy is a critical success factor.
“Perhaps the most obvious area where companies fail to invest enough is in talent,” says Chiqui Cartagena, Vice President, Corporate Marketing – Univision (and author of the book, Latino Boom II). “Everyone on the marketing staff needs to understand the importance of the Hispanic consumer and understand how to capture that opportunity. The person/marketer with responsibility for the Hispanic effort doesn’t need to be Hispanic – but they do need to have the skills necessary to do the job and the ability/interest to learn about the Hispanic consumer.”
In the near term, your best talent – not your best Hispanic talent – is required to lead a successful Hispanic strategy. While you certainly need top Hispanic leaders to play critical roles, they may not be the ultimate leaders of your Hispanic strategy in the short term. This is often a controversial decision in many companies. But think about it: If you entered a new market or established a new brand or service, wouldn’t you bring the “A team” of top, proven leaders to drive the opportunity? Of course you would. Despite the language and cultural issues required for Hispanic strategy (which require your best Hispanic talent, particularly in marketing, insights and sales), this is ultimately a business, which requires the best leaders and strong decision making. It may take three-five years to gain traction with a Hispanic strategy, which is why bringing the best current talent is critical, and building a senior cadre of future Hispanic talent, who will ultimately lead the business.
4. World Class Analytics – and Partners – are Required
Poor Hispanic strategy often suffers from less than compelling analytics and market sizing. These limitations come from data-supplier limitations, although they have improved significantly in recent years. As would be required with any big strategic opportunity, you must have the knowledge and data to assure a continual loop of “Test, Refine, Prove, and Repeat,” which can only occur if strong data and analytics exist.
According to David Burgos, Vice President of Millward Brown and head of its Multicultural Practice, “Strategic research is one of the areas companies in general fail to invest enough in when it comes to Hispanics. Feeling the market pressure, many jump onto the Hispanic bandwagon by adapting their mainstream ads to Latinos, without looking at how they use their products or what they think/feel about their brands. Many blame this on limited budgets, but I’d argue that the cost of making a major marketing / commercial mistake is much higher than the investment needed to obtain sound knowledge early on in the marketing cycle.”
Indeed, many firms have taken less rigorous paths with their Hispanic strategy formulation because of data or knowledge limitations. Fortunately, strong analytical solutions are now available from major syndicated data providers and a variety of specialist market research firms. It’s critically important to dive deep into Hispanic behavior habits to understand how and why they shop:
- Their unique trip mission patterns support higher per-trip spending (higher basket rings) by Hispanic shoppers versus their non-Hispanic counterparts,
- Hispanic families tend to be brand loyal once brand relationships are established (national, regional and/or store brand alike),
- Hispanics look to particular channels for specific needs, especially club and mass merchandise and independent grocery, where Hispanics spend +20%, +36 percent and +15% more than non-Hispanics respectively
Immediately you see that unique shopper strategies must be crafted around specific channels of opportunity, and for consumer goods categories, strong route-to-market and distribution partners will be required.
5. Hispanic Strategy is a Change Management Imperative
As you may have discovered, in many respects a successful Hispanic strategy is a change management exercise. It requires pushing the boundaries of the business model and human talent capabilities in ways to which one is not accustomed. It also requires the same levels of rigor one would require of any large, exciting growth opportunity, but is very different due to language and cultural cues, and perhaps distribution channel and route to market considerations. Lastly, it requires building a leadership team and bench that has different incentives and needs; one understands the importance of being culturally intelligent about the audience it is serving.
“The Hispanic strategy is certainly a good case study in change management,” says Cesar Melgoza of Geoscape. “The reason why more companies haven’t embraced this and done the right thing for their investors is because the organization resists change and wants to maintain legacy at the peril of their own valuation. The tools, technologies, analytics and data are available to help companies execute on this imperative. With this availability, there’s no excuse not to execute.”
With the Hispanic opportunity positioned as the last significant growth market in the U.S., corporations can no longer settle for compromises across any of these five areas above. Expect the Hispanic opportunity to merit the same standards as the general market, if not more, and embrace an Hispanic strategy as the vehicle to achieving a true profitable Hispanic business model. The opportunity is here. Culture is the new currency for growth. Now, capitalize on it – before your competition does – and the barriers to entry become more complex and costly.
Speaker
Glenn Llopis Tags