Understanding the Ethnic Consumer
By Diane Anderson,
The ethnic make up of U.S. consumers is expanding, mixing and ready to spend. Are you ready to get their attention?
By 2020, America’s largest ethnic group will be “mixed,” a blend of the nation’s dominant racial groups – African-Americans, Asians, Hispanics and whites. The 2000 U.S. Census strengthens the point: The typical two-parent, same-race, same-religion, twocar, suburban household is giving way to an increasingly multiracial, multigenerational world. Although only 2 percent of the 2000 U.S. Census reported belonging to more than one race, those that did were typically young, with 42 percent of the 6.8 million declaring themselves multiracial being under 18. And the growth of the nation’s immigrant population outstrips that of other countries, so America will look radically different by 2040.
Why is it important to understand the changing landscape? These “minority” groups, which will soon make up the majority, are astoundingly active consumers. Not only do today’s multicultural markets show strength in numbers, they show strength in dollars. The 102.8 percent increase in minority buying power since 1990 far outpaces the 67.4 percent increase for the white population during the same time period.
Look at the Numbers
The Selig Center projects that by 2008, the combined buying power of African-Americans, Asians and Native Americans will account for 14.3 percent of the nation’s total, or $10.6 trillion, up from 10.7 percent in 1990. The buying power of Hispanics will rise from $653 billion in 2003 to $1.01 trillion, outpacing the buying power of African-Americans, which will rise over the same period from $688 billion to $921 billion. Those numbers translate into an increase of 315 percent for Hispanics, 287 percent for Asians and 170 percent for African-Americans, compared with a projected growth of 112 percent for whites.
Savvy companies are capitalizing on the spending power trend. Look at the popularity of Bratz dolls, a company with 2004 revenues of $1 billion dollars – achieved by offering children an alternative to Barbie. Mott’s revived flat sales of its Clamato juice by marketing it exclusively to Hispanics. Before Mott’s initiated this tactic, overall sales of the juice were nearly 2 million cases. By 2003, sales to Hispanics alone matched that volume. Mott’s benefited, in part, because Clamato has an underground reputation as an aphrodisiac in some Hispanic communities. Part of the success of Mott’s and other companies in the Hispanic market comes from understanding what appeals to Hispanics and the subtleties among various Hispanics groups.
Habla Español
Medica Economics Group reports that ad dollars in Hispanic magazines grew by 24 percent between 2002 and 2003, versus a growth rate of 8.6 percent for the general market over the same period. General Motors, for example, raised its spending on Hispanic-themed magazines $7.7 million, a 166 percent jump over the previous year.
Marketers invested $101.9 million in Hispanic magazines during the first half of 2005, up 17.7 percent from the same period last year, according to TNS Media Intelligence. The top spender in magazines continues to be Procter & Gamble, spending $11.2 million in 2004, according to TNS.
Spanish TV is now the fastest-growing medium, gaining some 15 percent in the first part of 2005. Mainstream TV outlets such as ESPN have launched ESPN Deportes La Revista, adding a print component to its Hispanic cable sports programming. And Editorial Televisa, the publishing giant behind titles such as Vanidades, Cristina and Men’s Health en Español, will unveil Tu Dinero. The monthly Spanish-language personal finance magazine will launch with a circulation of 75,000 to 100,000.
Appealing to the African-American market has taken on increasing strategic importance in recent years. It is becoming nearly impossible to maintain market leadership without directly addressing African-American consumers in a consistent and meaningful way.
African-Americans represent 13 percent of the U.S. population. Their buying power in 2004 was $723 billion. By 2009, that figure is projected to reach $965 billion, when African-Americans will account for 62 percent of the combined national spending power of all African- Americans, Asians and Hispanics. This means that African-American consumers will account for almost 9 cents out of every dollar that is spent in the United States.
Furthermore, stereotyping the African-American market as low-income is erroneous. As far back as the census of 2000, 19.3 percent of African-American adults had earned a bachelor’s degree or higher. And African- American households with annual incomes that exceed $75,000 now stand at 14 percent, comparable to Hispanic households at 15 percent.
Howard Buford, president and CEO of Prime Access, notes that planning services are misguided in selling African-Americans retirement packages. Research indicates that African-Americans’ top concern is financing their children’s and grandchildren’s education. Since life expectancy among African-Americans is lower than that of whites, it’s easy to see why financing a child’s education is more compelling than retirement planning.
Asians are another group that will greatly influence America’s bicultural mix. Here are some key Asian facts:
- Growing fast – In March 2002, 12.5 million Asians and Pacific Islanders were living in the United States, according to the Commerce Department’s Census Bureau, representing 4.4 percent of the population. TV measurement firm Nielsen Media Research recently adjusted its count for certain minority groups. The most stunning increase was in the number of Asian TV homes, which rose by 3.2 percent to 4.2 million, out of a total of 110.2 million U.S. homes.
- Cosmopolitan – Asians and Pacific Islanders living in the United States are likely to be well-educated and live in a metropolitan area, according to a statistical snapshot taken in 2002 by the U.S. Census Bureau. Not surprisingly, states closest to Asia boast the largest Asian populations. In California, Asians and part-Asians make up 13 percent of the statewide population. But in the nine San Francisco Bay Area counties, Asians make up 21 percent of the population, exceeding the Bay Area’s Latino community.
- High income – Asians in the United States are the highest-earning subgroup, with a median income of $57,518 compared to the national average of $44,389, according to data produced by the U.S. Census based on 2004 sample surveys.
Targeting Bicultural and Tricultural Consumers
Ethnic populations are not effectively reached by advertising placed with traditional, “general market” media. Nielsen Media Research shows that only one top-10 general market program, American Idol, is among the top 10 for African-American homes. And that show just raised its price to $700,000 for a 30-second ad. The Los Angeles Times’ estimated Hispanic market of 778,181 reaches only 12 percent of the 6.5 million Hispanics in the Los Angeles area. More than 21.5 million, or 36 percent of all 10- to 24-year-olds, belong to a nonwhite ethnic group. These facts make your company’s multicultural efforts hard to ignore as a part of any youth marketing plan.
Even when general market advertising does reach ethnic audiences, the advertising messages often miss the mark. Multicultural audiences feel that mainstream media does not understand them, for the most part, and does not speak directly to them.
Targeted ethnic media, however, cater their messages to their communities. Ethnic newspapers contain editorial focused on the news and issues directly affecting their readership. Spanish-language radio stations, among the top-rated stations in many markets, feature music catering to Hispanic tastes. And television outlets such as BET, the International Channel and Telemundo draw diverse ethnic audiences with their focused programming.
But while companies obviously must address various cultures with finesse, they also must be mindful that the cultural blending will continue. Individuals won’t continue to fit neatly into one category but will, in fact, identify with more than one cultural group.