The “Long-Tail Economics” concept was created a couple of years ago by Chris Anderson, former Wired magazine editor and, until today, it’s one of the best descriptors of the impact the digital revolution has had on the business world. In his own words, Anderson defines the term as follows:
“Our culture and economy is increasingly shifting away from a focus on a relatively small number of ‘hits’ (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail.”
In our opinion, we could identify a similar pattern in today’s U.S. multicultural market, where what was once considered to be a “niche” opportunity like the U.S. Hispanic population today is 59 million strong, generating purchase power levels north of $1.5 trillion a year.
While some advertisers still question whether it is worth having dedicated efforts toward this growing segment, progressive and innovative brands are already looking into new “niche sub-segments” within the Hispanic segment as well as opportunities that have become attractive enough on their own, thus repeating the concept of “Long-Tail” marketing.
The risks of not considering these sub-segments may not only be felt by missed sales and decline in market share, but waiting too long to engage these groups may mean spending more in the future when their preferences may already be fully established.
American CMOs looking for incremental growth in 2017 should consider these five sub-segments as they put their final touches on their marketing plans. Below is a brief description of the opportunities based on our analysis using Simmons Research, among other additional sources:
Hispanic Millennials – Opportunity: 19 Million
At 75 million strong, U.S. millennials represent one of the most coveted segments in today’s marketplace. However, when it comes to ethnicity and cultural affinity, considering this segment cohesive and uniform could be a costly mistake.
Almost 25% of all U.S. millennials are Hispanic, and these consumers, while displaying similarities with other non-Hispanic millennials when it comes to attitudes and behaviors, also demonstrate a strong connection to the Latino culture. For marketers, when these cultural nuances are in play, unique marketing opportunities are created.
For example, Hispanic millennials tend to over-index non-Hispanic millennials when it comes to paying more attention to commercials, they over-index their non-Hispanic peers on their desire to have their own business one day, they tend to build a family and have kids at a relatively young age, and they tend to also over-index on purchases such as clothing, apparel, grooming essentials and alcoholic beverages.
Non-Mexican Hispanics – Opportunity: 19 Million
While the majority of U.S. Hispanics are of Mexican origin, non-Mexican Hispanics represent almost 1/3 of the total U.S. Hispanic population, and this growth outperforms the Mexican-Hispanic population (19% vs. 13% growth in the past 5 years).
This group is mostly foreign-born (63%) and comes mainly from Puerto Rico (almost 6 million). Recently, it has seen a significant growth from South American countries, including Venezuela, Colombia and Brazil.
This is an interesting sub-segment for many reasons, including its geographic concentration (mostly on the East Coast with additional population pockets in Chicago and California), their fully bilingual capabilities, and their strong consumption of digital media.
According to Simmons Research, this sub-segment has higher disposable income and tends to spend more than Mexican-Hispanic consumers, representing a significant opportunity for several categories. As an example of their slightly different behavior nuances, uncovered by studying the “Hispanic Long-Tail,” when it comes to alcoholic beverages, non-Mexican Hispanics tend to prefer whiskey, wine, and cognac to tequila.
The Hispanic 55-year-old+ Population – Opportunity: 7 Million
While almost every demographic statistic about U.S. Hispanics over the past 40 years confirms that the segment is “very young,” with the average age of Hispanics in the U.S. in the low 30s, most people forget that a 37-year-old Hispanic who was enjoying Ricky Martin’s “Living La Vida Loca” back in 1999, will be celebrating his 55th birthday next year.
Don’t get me wrong, the U.S. Hispanic population will still bring down the average age of Americans based on its relative youth, but the number of U.S. Hispanics over 55 will keep growing, and marketers shouldn’t ignore this sub-segment.
While concerned about their economic stability in the present and in the future, this is a group that has significant influence on young Hispanics when it comes to keeping the cultural connection to their Hispanic roots. They are also key influencers in multi-generational households.
For example, some relevant categories where this sub-segment tends to over-index vs. their non-Hispanic peers are seen in casual dining and personal items, such as colognes and perfumes.
Hispanics with Household Income above $100K/Year – Opportunity: 7 Million
One of the most common comments about targeting U.S. Hispanics goes like this: “I understand the significant population growth, but this is a low-income segment, they don’t have the purchase power my brand is looking for.”
First, the U.S. Hispanic household income has actually been growing over the past decade, fueled mainly by advances in education.
Second, one of the biggest kept secrets of this marketplace is that today there are more than 2.4 million U.S. Hispanic households with an annual income at or above $100K, representing almost 7 million Hispanics.
These Hispanic households have built their income with more household earners (2.8 vs. 2.3 earners when compared to non-Hispanic $100+/year households). Interestingly enough, data shows that a Hispanic household with an income $100K+/year tends to mirror the shopping behaviors of their under $100K/year Hispanic peers (despite having much more income to spend), instead of displaying similar purchasing characteristics to their high-income non-Hispanic peers.
Regardless of their income, these households demonstrate significant opportunities for marketers to sell credit cards, travel, and automobiles (mainly more upscale models), as well as offer financial services support (including life insurance).
Emerging Hispanic DMAs – Opportunity: 6 Million
We assume that if you have a Hispanic marketing strategy in your 2017 Marketing Plan, you are probably already targeting Hispanics in Los Angeles, New York, Miami, Dallas, Houston, and Chicago.
However, there are important markets that tend to be forgotten when plans are developed and resources are allocated. These are not your “traditional Hispanic markets,” but over the past few years, they have demonstrated significant Hispanic population growth.
The problem is that since most of them are not on most marketers’ “radar screens,” proper investments in distribution, sales support representation, PR, local community efforts, and advertising are not taking place, leaving the door open to competitive brands trying to establish themselves on these consumers’ hearts and minds.
We’d like to highlight markets like Sacramento, the Washington D.C. metro area, Denver, Atlanta, Salt Lake City, Baltimore, Nashville, Raleigh-Durham, Charlotte, and Columbus.
While we understand that marketers have a limited budget to expand their Hispanic marketing reach, we’d like to point out that these markets can be targeted with a fraction of what marketers spend on the most traditional Hispanic DMAs.
In summary, the opportunities listed above represent the future of multicultural marketing. Instead of looking for a misconceived interpretation of Total Market, where a “one size fits all” approach tailored to non-Hispanics is forced from the top down to create the perception of inclusiveness, progressive brands will further segment their marketing opportunities. This will in turn form smaller clusters of customers and prospects (which has always been the foundation behind segmentation), supported by the current advances on data analytics tools, leveraging the improvements on addressable media opportunities not only on the digital and social media spaces, but also with traditional TV.
So while some may be engaged on discussing the “end of multicultural marketing,” pragmatic marketers will be acting on the hidden opportunities the segment offers for those seeking growth in 2017 and beyond.
This article is by Isaac Mizrahi, co-president, chief operating officer, ALMA.
This article was written by On Marketing from Forbes and was legally licensed through the NewsCred publisher network.