The results of the 2000 census are starting to trickle in and one trend has grabbed the attention of marketing executives: The number of Spanish-speaking Latinos in the U.S. is exploding. By 2010 one out of every four consumers will be of Hispanic descent.
The nation's 32.5 milllion Latinos are now becoming a major demographic force, far beyond their traditional strongholds in Texas and California. States such as Oregon, Nevada, and South Carolina now have sizeable populations of Latinos. Suddenly, the trend makes national Spanish-language advertising and marketing campaigns a must for many U.S. companies.
A few companies are already out in front -- mainly big food-and-beverage outfits such as Proctor & Gamble, Kraft, Pepsi, and Anheuser Bush, which each spent upwards of $30 million on Spanish marketing last year. Now, technology and financial-services companies, among others, are scrambling to put Latino niche-marketing strategies in place -- and fast.
The financial lure is clear: Latino buying power now exceeds $458 billion dollars and is increasing at a 7.6% annual clip -- the fastest growth rate among all ethnic groups, according to the U.S. Hispanic Chamber of Commerce, based in Washington, D.C. The number of Latinos earning college degrees has doubled since 1995, the group adds. To a marketer, they're the perfect demographic: More than 65% of U.S.-based Latinos are between the ages of 18-49 -- the prime years for getting married, investing for retirement, and owning a home.
Until recently, however, relatively few U.S. companies have courted Latinos on the same scale as, say, African-American or other niche groups of consumers primarily because of the language issue. In 2000, Latinos accounted for 7% of all consumer spending -- but only 1% of all ad dollars. Out of $186 billion in total U.S. ad spending last year, only $1.9 billion was devoted to the Hispanic market. Based on the population, it should be more like $20.5 billion.
Many companies are signing up marketing consultants to help them cash in. Allstate Insurance is partnering up with a direct-marketing agency called Latin-Pak to place Spanish-language inserts in newspapers around the country. And AT&T, which works with the largest Latino marketing firm, the Bravo Group, paid millions in September, 2000, to run the first Spanish-language commercial on prime-time television during CBS's Latin Grammy Awards. The company says it immediately saw an increase in the number of Spanish-speaking callers inquiring about its international long-distance plan.
Bank One recently began working with the U.S. Chamber of Commerce and Latino consulting firm Creative Civilization, based in San Antonio, Tex., to develop local programs that teach Hispanics how to most easily start small businesses -- and tap Bank One for capital in the process. Nearly 2 million Latinos already own small businesses in the U.S., and that number is expected to double by 2010. "The Latino market is more wide open than the general market because few companies target it specifically," says Gary Berman, CEO of The Market Segment Group, a consulting firm in Coral Gables, Fla., that specializes in Latino-, Asian-, and African-American marketing. "To any corporation [that does target the market], that means a disproportionally high return on advertising investment." Forging an effective Latino marketing strategy isn't easy. Consultants say it's crucial to avoid stereotyping -- something that immediately turns prospective customers off. Yet in-house marketing units often resist bringing in outsiders. Staffers fear that with the economy slowing, their department budgets will be cut to free up money for a Latino consulting agency.
It's also often hard to convince corporate clients that the millions they spend to woo a burgeoning population of consumers is worth it. "Just because a brand is a staple of American culture doesn't mean a few Spanish-language ads will make it popular with Latinos," says Vincent Aldaloro, president of Los Angeles-based Latin-Pak. The good news: Studies by the American Hispanic Advertising Assn. show that Latinos tend to be the most brand-loyal of all ethnic groups.
The key to real long-term results, consultants say, is follow-through. In the 1980s, many food and phone companies began airing Spanish TV and radio spots in Texas and California markets that have a high concentration of Latinos. The campaigns largely failed because the companies didn't provide Spanish information on labels and mailings, and often didn't have enough Spanish speakers to staff the customer-service lines.
These days, it would be hard to make such an obvious mistake. An estimated 200 consultancies now specialize in Latino marketing, up from only about 20 a decade ago, according to the American Association of Hispanic Advertising Agencies. "The whole industry is changing, and we're having a lot of fun being able to flex our muscles," says Creative Civilization President Adolfo Aguilar, a former president of the Hispanic ad group. Now, with Latino spending power on the rise, the effects could ripple across the entire nation.
By Nicole St. Pierre in Washington
Edited by Thane Peterson