Black Customers: A Market Segment Waits to Be Wooed : Surveys Find They Represent a Vast Potential for New Profits

Consumer product companies could expand their markets significantly by paying more attention to black consumers, who have long been neglected in favor of faster-growing or higher-income ethnic groups such as Latinos and Asians, two recent studies have found.

An extensive, 150-page report on the black consumer from Impact Resources, a Columbus, Ohio, research firm, and another by Touche Ross Retail Services Group of New York both conclude that blacks make up a large and loyal market that could prove lucrative for companies that make an effort to tap the estimated $240 billion in yearly income received by blacks.

“These surveys validate what owners of black-oriented media have been saying for years, and that is: ‘Corporate America has got to tap markets at home it has traditionally ignored if it wants to continue to grow’,” said Ken Smikle, editor of Target Market News, a Chicago-based trade publication that follows the black consumer market.

In the past decade, consumer-product companies have shifted their marketing tactics as that largest group of Americans, baby boomers, reached middle age and their spending habits changed.

Shift in Marketing Strategy

Companies are shifting more of their marketing dollars from advertising to coupon and in-store sales promotions and making special sales pitches to consumer groups that are wealthy or expanding, such as the elderly, Latinos and young professionals.

In the process, many companies are making new efforts to reach the more than 28 million black consumers who make up the nation’s largest ethnic group.

“The black (consumer) market is increasingly more important,” said John Baker, president of Omnifacts, a Philadelphia-based demographics research firm. “This is an era of single-digit (sales) growth for most packaged-foods and consumer-products companies, and it is difficult for one brand to capture share from overall increased consumer spending. The only avenue is for advertisers to capture additional share from competitors.”

The Impact report, one of the largest of its kind, surveyed 21,740 black adults 18 and older, and 145,540 whites in the same age group in 35 U.S. markets. The Touche Ross study was based on data from the Impact report and other sources.

The Impact study found some surprising differences between races, mostly because the median age among the blacks is 32.8 years, far younger than the median age of 40.6 years among the whites. Thus, more black consumers than whites could be expected to follow the free-spending life style of youth.

For instance, while black consumers are less likely than whites to own cars, black automobile owners are nearly twice as likely to drive an expensive Audi, BMW or Mercedes-Benz. Similarly, blacks are not as likely as whites to clip and use store coupons even though they have lower household incomes, on average.

Some of the differences stem from the lack of choice offered black consumers. They are less likely than whites to regularly shop in a department store, by catalogue or through direct mail because they are more likely to live in urban areas not served or desired by such retailers, said Duane Palmo, general manager of special reports at Impact.

More Likely to Rent

“You look at where department stores are and most are in suburban areas, not downtown,” Palmo said. “Companies don’t seem to be quite sure of how to market to blacks, but they are going to have to learn, because minorities are a growing consumer market.”

Another important finding in the Impact report is that since blacks are more likely than whites to be renters or to live with relatives, in the $20,000-to-$40,000 household income bracket “black consumers probably have more discretionary income than white consumers.”

The Touche Ross data suggest that companies do more advertising on black-oriented television programs to get at that discretionary income. But it says direct mail may be the most effective way of reaching black customers. In any case, the reports say, it would be wise to make some efforts to lure blacks now in order to get the jump on competitors.

“At a time when competition makes it so difficult to increase market share, and when retailers are making concerted efforts to attract (Latinos) and Asian-Americans, they have overlooked the nation’s largest minority, the black community,” the report said. “Continuing that oversight could be a serious error. Because sooner or later, if you don’t, someone else will.”