Don't Ignore Ethnic Groups

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Non-Caucasians are one-quarter of the U.S. population, and in the next five years that figure is expected to expand to one-third. Still, less than 2 percent of all money spent on consumer advertising in the United States is used to target these buyers.


Research has shown that per-household consumer spending has risen more quickly among multicultural households than among the general population. Yet, of $200 billion spent annually on consumer advertising, only $1.5 billion is allocated to ethnic campaigns.


This gap could spell opportunity for marketers savvy enough to see the potential. While the need for ethnic-focused marketing can depend on the product, most brand marketers in major markets would be foolish not to market directly to select ethnic groups.


Some businesses have discovered ethnic marketing as a way to increase sales of products that are close to saturating the market. One company's dessert product already had an 80 percent market share. Then the firm realized that Hispanic households, where coffee and sweets are important, would probably embrace its product. By launching a campaign directed at Hispanic consumers, the company opened a new market for its dessert product.


For some packaged-food products such as cheese, butter and meat, some ethnic cultures may hold richer potential than Anglo cultures do. People of some ethnic cultures - including Americans of Hispanic, Japanese and Korean descent - are highly brand-loyal. And many ethnic groups tend to live in more tightly knit communities where referrals carry even more weight than in the general population.


So once you have their business, following up with good service can really pay.


Building marketing intimacy. Direct marketing is well suited to reaching ethnic markets because of its ability to communicate intimately to distinct niches. Direct marketing gives you the ability to be precise.


You communicate directly with marketing messages that are meaningful to that group. You also can communicate your message in their native language if that is appropriate to your targeted group.


And the return, in many cases, is higher than with the mainstream because people of different ethnic groups often get a fraction of the direct mail that the mainstream receives. It is an untapped market. In doing specific ethnic marketing, people are getting tremendous results because typically it has not been done in the past.


As with any new marketing campaign, testing is a good idea. Test and track as many variables as you can.


Data selection strategies. Inherent cautions come with ethnic marketing. If you are looking to target a specific group, effective marketing data for prospecting may cost you more money. And if you do not get the message and the target right, you risk offending some of those you are trying to reach. But with careful research, prudently chosen information sources and a willingness to listen and learn, marketers can more effectively hone their methods and their messages using strategic data choices.


Consider that by targeting the top 10 U.S. Hispanic markets, you can reach about 45 percent of the Hispanic population. With African-Americans, the top 10 markets contain about 39 percent of the population - for Asians, 64.6 percent.


Though it is easier to geographically target some ethnic groups, you usually should not depend solely on geography-based data. Using that method, you might get neighborhood population numbers in 2000 that still are based on the 1990 census. The ethnic makeup of the neighborhood may have changed during the 1990s. (Census data for 2000 will not be available on consumer databases until 2002.)


In addition, household-level marketing based just on surnames such as Rodriguez or Lee may not be that reliable. For many, that Hispanic- or Asian-sounding last name is the result of marriage, not personal background. And some Hispanic- or Asian-sounding names may come from other roots. Targeting these people with specific ethnic messages risks offending them.


But it is a mistake to skip ethnic marketing just because you think reliable database information does not exist.


Understanding the compilation behind ethnic data. Marketing data that are compiled using first and last names, for instance, are much more helpful in targeting African-Americans as well as people of other ethnic backgrounds. It is not foolproof, but it contains a lesser margin for error.


Some databases also offer ethnic encoding systems that analyze not only first and last names, but also prefixes and suffixes that may help identify specific ethnic or religious backgrounds.


If you want ethnic groups based on language, files of phone-verified lists are available. With files of Hispanics who speak Spanish, the data have been verified by calling the household and saying something in Spanish. If the recipient answers in Spanish - or gives the phone to someone who speaks Spanish - the name goes into the database.


Other files are compiled using information received through students, who verify that they or someone in their household speaks the specified language.


In some states, voter registration lists can be a mother lode of precision because people are required to state their ethnicity. This type of primary source information is especially helpful when trying to determine the quality of one ethnic database over another.


Response data. You also could use specialty data. One client's offer was a book of African-American baby names. The client had no room for error, and so used the subscription file of an African-American magazine. Even if someone on that list who was not African-American received the offer, he presumably would not be sensitive to receiving the piece since he already had expressed interest in African-American heritage by subscribing to the magazine.


It is often wise to use a combination of compiled files (with surnames) and managed files (such as subscriptions).


When should you invest more for highly targeted ethnic data that have little room for error? If your product or offer is universally attractive and relevant to people outside your target audience, you may not need to spend the extra money. But if the offer is directed specifically at an ethnic group, you are better off paying a little more versus sending the message to people who will not find it of value.


The medium, the message and the offer. Marketers can make misguided assumptions about ethnic groups that are not necessarily true from market to market. The best way to find the best messages and strategies is to get in that market, observe and talk with representatives of the ethnic groups you are looking to target.


In campaigns aimed at African-Americans, many clients have found that if you create a mail piece with art and visuals that embrace their culture, the rate of response is up to twice as high compared with mainstream marketing.


When targeting an ethnic group whose language origins are other than English, do you offer the message in that group's native tongue? Marketers are divided.


When a U.S. car dealership sent a Hispanic-targeted mailing written in Spanish instead of English, it received a lot of phone calls from people angry with the dealership. One individual had a name that sounded Spanish but was Italian. To avoid this, put the offer or letter in English first and use the "native" language as a secondary message. You can put the English version on the front while placing another language on the back.


Even with Spanish or Chinese version secondaries, there are many different geographically based dialects of these languages. If you do want to use Spanish or Chinese, keep it as simple and generic as possible.


Integrated marketing campaigns. It is no surprise that clients typically get the highest returns in ethnic marketing campaigns when they use direct mail in conjunction with local radio ads or other promotions.


An example: A packaged-goods manufacturer wants to attract Hispanic customers to a high-profile retailer - such as a grocery chain - where its goods are sold. Near those stores, it floods ZIP codes that have high Hispanic-resident densities with a direct mail offer such as a coupon. About a week before the mailings hit, it creates excitement on local Spanish radio stations: "Look in your mailbox Monday for a special offer."


Via other media - newspaper ads, billboards, bus boards, local radio and TV - the same message is used as in the direct mail campaign, but without a call-to-action.


When the mail piece is received, there is a correlation.


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