Economic Recovery and the U.S. Hispanic Market

Tony Malaghan
January 23, 2012 | COMMENTS

In early 2007 when I wrote a paper titled “Still Not Targeting the U.S. Hispanic Market?” little did I know what the next four years would have in store for businesses, families, and individuals across the United States. Putting aside the hardships that the “Great Recession” has had on us all in one way or another, little appears to have changed with regards to the great majority of businesses overlooking the U.S. Hispanic market and few companies proactively targeting the market in a strategic and culturally appropriate manner.

When businesses across all industries are struggling in the face of an economic climate not seen since the Great Depression, what better way to grow your business than tap into a market of 50.5 million people with a purchasing power of more than one trillion dollars right at your own back door!

According to the U.S. Census Bureau 2010 census data, 308.7 million people reside in the U.S., of which 50.5 million (or 16%) are of Hispanic origin. This is an increase from 35.3 million in 2000, when this group made up 13% of the total population. That’s an increase of 15.2 million between 2000 and 2010, and accounts for over half of the 27.3-million increase in the total population of the United States. Put another way, the Hispanic population grew by 43%, which is four times the growth in the total population at 10%.

Some of you may be thinking that the U.S. Hispanic market has been impacted just as much, if not more, than the general market by recessionary forces. It’s true that Hispanics were proportionally significant employees in those industries hardest hit by the recession, and that the Hispanic unemployment rate has been running higher than the nation’s overall rate.

*seasonally adjusted
Source: Bureau of Labor Statistics

So, why is the U.S. Hispanic market a more viable growth opportunity in an economy currently struggling to climb out of recession? To answer this question we have to look to the cultural, social, personal, and psychological differences between the general market and the Hispanic market that influence and impact consumer buying behavior:

The burst of the housing market bubble in 2006 and the subsequent drop in housing values over the past five years has had an impact on everybody. Hispanics have seen the effects of loss of wealth firsthand as a proportionally large number reside in states that have been among the hardest hit by the housing crisis: California, Florida, Nevada, and Arizona. On the positive side, Hispanic homeownership rates remain significantly below the average of the general population and to non-Hispanics in the U.S. The home-ownership gap in 2006 according to the U.S. Census Bureau between non-Hispanic whites and Hispanics was 26.1 percent. In 2010 the gap had increased marginally to 26.9 percent.

Another favorable factor is that Hispanics have a larger household size than non-Hispanics. According to the 2010 U.S. Census Bureau, the average Hispanic household size is 3.53 people compared to 2.45 for non-Hispanics. In 2010, 26.3 percent of family households in which a Hispanic person was the householder consisted of five or more people. In contrast, only 10.7 percent of non-Hispanic white family households were this large. Having an extended family household provides additional disposable income for the family unit and makes the family less economically vulnerable if there is a reduction in income or a job loss in the household.

Economic and political turmoil is nothing new to many U.S. Hispanics who have experienced the effects of recession and poverty in their country of origin. As a consequence Hispanics are more desensitized than the general market to the hype generated by 24/7 cable news channels surrounding the current economic plight in the U.S. The current spending constraints many in the general market are forced to make in today’s economic climate are nothing new to many Hispanics who still feel they are better off in the US than if they were in their homeland.

In reality U.S. citizens in the general market have lived on credit for many years which is in stark contrast to Hispanics. According to the latest information gathered by the U.S. Census Bureau, in 2000, well before the Great Recession hit, there were 159 million credit cardholders in the U.S. which equates to each cardholder having nine credit cards. A 2009 FDIC National Survey of Unbanked and Underbanked Households, reported that 43.3 percent of Hispanic households are either unbanked or underbanked, which means that the adverse impact of the current credit crunch on this segment of the market is proportionally less severe. 

As a potential market to grow your customer base, I’m surprised that more companies are not looking at this segment as a growth opportunity. In our experience of consulting and
training with companies targeting and servicing the U.S. Hispanic market, the hesitation and resistance to proactively target this segment of the U.S. market can be attributed to one or more of the following reasons:

• Lack of corporate commitment to the strategic decision to target the U.S. Hispanic market.

• Lack of adequate and long-term budget commitment to undertake the marketing and build the necessary customer service infrastructure.

• Resistance due to the sheer magnitude of the undertaking. There are a multitude of components that comprise your Hispanic marketing and servicing platform—e.g., culturally relevant products/services, Spanish language marketing collateral, customer communication, Spanish language website, bilingual call center and customer service personnel bilingual IVR, etc.

• Fear of the unknown.

How have companies that have faced these and similar issues overcome them?

1. Research, research, and more research! In addition to undertaking primary research specific to your company and its products/services, there is an abundance of secondary research available. Information is power and will enable you to make informed decisions about the direction you should take.

2. Assign a U.S. Hispanic market champion within the senior executive team to nurture the idea within the senior management team. In our experience, U.S. Hispanic projects are one of the first to be cut when departments are looking to cut costs and trim budgets. Having a U.S. Hispanic champion on board will help to raise the profile of what you are doing and help build momentum. Once you have built momentum and raised the profile internally, it becomes a little harder and more political to cut.

3. Build a compelling business case that clearly shows the potential of this market today and over the next 5, 10, and 15 years. There is plenty of data available to help support your business case—a few examples are the U.S. Census Bureau and the Selig Center’s U.S. Hispanic Purchasing Power dataset.

4. Take the time to do the research and fully understand who the U.S. Hispanic market is. There is a common misconception that it is one market. The term U.S. Hispanic is a name to refer to people living in the U.S. from any Spanish-speaking Country, for example.
   
   Therefore, U.S. Hispanics herald from around 20 different countries, and while there are similarities that exist between the various sub-groups, there are also distinct differences marketers and customer service agents must be sensitive to in order to best serve the interests of specific consumer groups.

5. Test your product or concept before launching to the market. Time and dollars spent wisely here could save you millions down the road.  

6. Be realistic and up-front about the magnitude of the undertaking. Not only is there substantial cost in marketing to this segment, but having the infrastructure in place to service this segment should not be underestimated. Before you go out and proactively target the U.S. Hispanic market, make sure that your bilingual customer service infrastructure is in place. Companies that practice “Best Practice” U.S. Hispanic customer care do the following:

• Test the Spanish/English language proficiency of bilingual staff before they pay a bilingual differential.

• Undertake training for bilingual staff in Spanish. Many companies provide training in English, and then tell training course participants to “now go and say the same in Spanish to Spanish-speaking customers.”

• Utilize the services of Hispanic market experts. Companies specializing in one or more of the following fields: research, advertising, marketing, training and recruitment can be an invaluable resource in helping you to “get it right the first time.” Professionals in these fields also have a wealth of knowledge about what has been attempted in the past and has not worked.

In summary, there is no doubt that there is a large and potentially lucrative market opportunity for those companies prepared to invest in developing a U.S. Hispanic market strategy. With the impact of the Great Recession making consumers cautious to spend and companies in a fierce battle for their available disposable income, there is no better time than now for those companies prepared to put forth the effort in a new customer acquisition strategy targeting the U.S. Hispanic market. Companies prepared to invest up front and develop their U.S. Hispanic market strategy and customer service infrastructure will be well-positioned to reap the rewards, while competitors continue to struggle in an economy barely limping along.

Tony Malaghan is CEO of Arial International (www.arialinternational.com), a muticultural consulting and training firm. Contact him at Tony@arialinternational.com.