The U.S. Hispanic Population -- One Market or Many?

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Hispanics are the most rapidly growing ethnic group in the United States. And, because they're also becoming increasingly affluent, their importance to marketers has never been greater.

To tap into this burgeoning consumer group, marketers need to understand the differences -- some subtle, some profound -- in consumer behaviors within the different types of Hispanic households.

Numbers You Can't Ignore

In 2006, about 11.6 million U.S. households -- that's one in every 10 -- are Hispanic. This translates into a Hispanic population of about 42 million. The U.S. Census estimates that by 2020, the Hispanic population will reach 60 million -- or almost 18 percent of the total U.S. population.

The economic influence of Hispanics is growing even faster than their population. Nielsen Media Research estimates that the buying power of Hispanics will exceed $1 trillion by 2008 -- a 55 percent increase over 2003 levels.

Sizeable Hispanic Markets: At a Glance

Market

Hispanic Population

Los Angeles

8.4 Million

New York

4.4 Million

Miami

2.1 Million

Houston

1.9 Million

Chicago

1.9 Million

Overall, about two-thirds of all Hispanics in the United States are of Mexican descent. Central and South America account for 14 percent, Puerto Rico 9 percent and Cuba another 4 percent.

Smaller Markets with High Hispanic Concentrations:

McAllen, Texas

94% Hispanic

El Paso, Texas

88% Hispanic

San Antonio, Texas

54% Hispanic

Fresno-Visalia, Calif.

50% Hispanic

Source: U.S. Census, Advertising Age "Hispanic Fact Pack" 2006

A Quick Cultural Overview

As a starting point for understanding the Hispanic marketplace, it's useful to have a few basic facts.

Hispanic households tend to be larger and younger than non-Hispanic households. Hispanic households are more likely to have both multi-generational and non-related family members living together. And 53 percent have children living in the home, which is 66 percent higher than the general U.S. population.

In addition, Hispanic households vary widely in terms of how long they've been in the United States. In fact, 40 percent of U.S. Hispanics are foreign-born and less assimilated into the broader U.S. culture than Hispanics who were born here.

Beyond their demographics, research has shown that the Hispanic community shares at least three broad cultural characteristics of which marketers should be aware.

The U.S. Hispanic population compared to

the country as a whole.

Demographics

Hispanic

Consumers

U.S.

Population

Median Adult Age

38

48

Median HH Income

$34,000

$48,000

Average HH Size

3.1

2.3

% with Children at Home

57%

36%

% High School Graduate

64%

84%

% College Graduate or Higher

12%

25%

Homeownership

48%

67%

Percent Married (HH)

57%

50%

% Catholic

67%

25%

Most Common Occupations

Technical, Sales, Administrative Support, Service Occupations

Managerial, Professional, Technical, Sales, Administrative Support

Sources: Cohorts, Neilson and Simmons Market Research Bureau (2005)

Specifically, Hispanics are more likely to:

1. Focus on Family and Home -- They often shop as a family and make purchasing decisions collectively. Because Hispanic households often span multiple generations, the effective marketer should consider using benefits statements that appeal to differing age groups.

2. Hold Traditional Values -- Hispanics tend to embrace multiple cultural traditions, including those of their country of origin (if they are fairly recent immigrants), their local community and those of the broader U.S. culture. They respect authority, so marketing that uses doctors, policemen or other recognized experts will resonate well. For many, particularly older Hispanics, conservative themes and family-oriented marketing are most effective.

3. Be Media Friendly -- Hispanics tend to trust the information they read in their local newspaper. They listen to the radio for quick news updates and rely on magazines to keep them informed. They are also receptive to television advertising, especially when it's entertaining and gives them something to talk about -- the more interesting the better, because they tend to remember those ads when shopping.

Diverse Down to the Household

Understanding these broad cultural characteristics is important, but to effectively market to Hispanics, marketers need to understand that a wealth of diversity exists within the U.S. Hispanic community. While it can be tempting, for example, to assume that cultural heritage is a key determinant of this diversity, the vast majority of consumer behaviors are determined by current needs and wants -- not by historical cultural ties.

Therefore, marketers would do better to segment the Hispanic community by the household-specific economic and familial circumstances that drive consumer behavior, rather than by cultural heritage.

An extensive study undertaken in 2004 using market research, census data and statistical analyses identified 19 distinct household types (or segments) within the Hispanic marketplace. Here are four examples:

Description

Median Age

Median Income

Population and %

Affluent Grandparents

Successful, dual-income couples who are financially secure and enjoy upscale activities, lots of travel and doting on their grandchildren.

Acculturation = High

62

$97,000

375M

3.2%

Young Families

Families with younger, career-minded parents whose kids affect what they buy and how they spend their free time. At home, they frequently speak Spanish.

Acculturation = Moderate

30

$34,000

1,344M

11.6%

Young Social Latinas

Young, social Latina women who are into fitness and fashion and passionate about their friends, music and hip electronic gadgets. Most are bilingual.

Acculturation = Moderate

23

$23,000

110M

1.0%

Young Latinos

Less-educated, single Latino guys who enjoy living on the edge. They're into sports, cool cars, music and electronics. They share their home with another adult who has children. Acculturation = Low

28

$37,000

1,001M

8.6%

For example, with a median income of $34,000 and young children at home, the largest segment, Young Families, epitomizes a prime Hispanic market segment for many packaged and consumer goods-but not necessarily for high-tech and luxury goods.

Generating the Right Message

One of the biggest mistakes marketers make in trying to reach Hispanic consumers is to simply translate existing marketing messages into Spanish.

Because Hispanic households vary widely, how marketers speak to Hispanic consumers must also vary. That's why successful marketers will make use of the wealth of Hispanic household-level information that exists to ensure that they deliver the right message to the right Hispanic household.

For example, marketers need to communicate their messages in English when trying to reach affluent grandparents -- who are highly acculturated, do not speak Spanish at home and do not read or watch Hispanic media. In addition, marketers might do well to understand that affluent grandparents feel very blessed to have reached their level of financial security and would never forget their family or their cultural heritage.

On the other hand, Spanish language and media are important to moderately acculturated young families, who speak Spanish at home. Their kids, career and conservative values are all important hot buttons that marketers can press in order to elicit a response.

What Now?

With the insights derived from the household-level Hispanic consumer segmentation tools available today, marketers can finally understand the consumer and media behavior of their key Hispanic customers and prospects. For the first time, integrated Hispanic marketing communications programs can be developed across media that target specific, relevant segments of the Hispanic marketplace.

Scott D. Schroeder is President/CEO of Cohorts in Denver. He can be reached at sschroeder@cohorts.com .
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