Gaining Insight Into the Latino Middle Class
When it is released next year, data culled from long-form census questionnaires will give advertisers a better grasp of the complex and often-misunderstood Latino population.
The income, education and occupation information will paint the clearest portrait ever of an increasingly powerful Latino middle class that is growing faster than the general population.
“I think marketers are starting to grasp the sheer size of this market, but I don’t think many of them truly understand the economic power of Hispanics,” said Carlos Santiago, a partner with Newport Beach-based Santiago & Valdes Solutions, a Latino marketing firm.
And it’s not just income that marketers must learn to differentiate. “People think Hispanic means one thing,” said Erasmo Arteaga, manager of a Sears, Roebuck & Co. store in West Covina. “But it’s different from Miami to Southern California. And here in California, it’s not just Mexicans, it’s Guatemalans, Salvadorans and other people from Central America.”
Those economic and ethnic distinctions are evident at two Sears stores located just 20 miles apart in Southern California. Because they draw a predominantly Latino customer, the Sears stores in West Covina and Boyle Heights are among 180 locations nationwide that the retailer identifies as “Hispanic-designated stores.”
Yet, from his store manager’s office hidden behind a wall of boom boxes and stereo receivers in the West Covina Fashion Plaza, Arteaga describes the sister store as “a different world.” Similarly, Boyle Heights manager Joe Diaz characterizes his aging location as “a store of a totally different color.”
Median household income of customers in Boyle Heights, home to many first-generation Latinos, hovers at about $25,000. In West Covina, where many second- and third-generation Latinos have purchased homes, median income tops $40,000.
Arteaga actively recruits a culturally diverse sales force because a third of his shoppers in West Covina are not Latinos. Only five of the Boyle Heights store’s employees can’t speak Spanish, and it’s common for employees to spend a day on the sales floor without hearing a customer speak English.
That’s a lesson marketers nationwide are starting to learn.
“Twenty miles can make a huge difference,” Santiago said. “It’s not just about where you put your stores, it’s what a marketer puts on the shelves.”
For Sears, that process has meant listening to its customers.
* In Sears’ West Covina store, there’s a focus on comfortable apparel suitable for office workers. In Boyle Heights, blue-collar shoppers gravitate toward durable clothing.
* The West Covina store’s shoppers are more likely to purchase washers and dryers at the same time; in Boyle Heights, consumers tend to replace only the broken appliance.
* Auto service bays in West Covina do a steady business; in Boyle Heights, shoppers are more likely to carry car batteries, cables and other parts home to do their own repair work.
Sears’ Hispanic-designated stores now lead the retail chain in selling family-oriented computers. Sales of personal digital assistants have flourished since Diaz recently convinced Sears’ buyers to stock them in his store.
The Boyle Heights store also leads Sears’ Southern California region in sales of treadmills and camping and fishing gear. “These aren’t things you’d expect to be happening,” Diaz said. “You have to listen to your customers to learn these things.”
Although Sears has courted Latino shoppers for more than a decade, it is still experimenting. Later this year, the chain will open a Spanish-language Web site for its U.S. customers. Sears also is readying the first bilingual signage to be displayed in its stores.
Sears has good reason to court the Latino population. According to the 2000 census, growth in two age groups (18 to 49 and 25 to 54) that advertisers see as their demographic “sweet spot” is noticeably faster than in the general population. The number of Hispanics ages 18 to 49 is expected to grow by 27% over the next decade, far outpacing the general population’s growth.
And although estimates vary, Latino buying power is skyrocketing. Strategy Research Corp., which earlier estimated buying power growing at a 9% clip during the last two years to $325.1 billion, acknowledges that the estimate is low. Santiago’s firm sets Latino spending at closer to $560 billion.
The Claremont-based Tomas Rivera Policy Institute estimates that the Latino middle class grew at an 80% rate during the last 20 years, or three times the general population growth rate.
Despite the rapid population growth of Latinos, Spanish-language and bilingual campaigns account for just $2 billion of the $200 billion that advertisers pour into broadcast media. When the census data arrives, marketers will see that the figures are woefully low, said Luisa Fairborne, who last year left People en Espanol to become publisher of the U.S. edition of Reader’s Digest Spanish-language Selecciones magazine.
Reader’s Digest acknowledged the growing importance of the Latino market with the May relaunch of Selecciones, a 250,000-circulation magazine that previously had been edited in Mexico City. Now edited in New York, the magazine showcases such Latinos as superstar Alejandro Sanz, along with teasers for exclusive Selecciones polls, including a May report on whether the macho Latino is headed for extinction.
“Our goal is to take circulation up to 500,000 in the next 2 1/2 years. Our median age is 37, which is the prime of life, and household income for our subscribers is over $43,000. More than half of them are college graduates.”
Financial services and credit card issuers also are taking a hard look at the growing Latino middle class. MasterCard International late last year opened a Spanish-language Web site that encourages Latino households to apply for credit.
“Our numbers show that 63% of Hispanics have bank accounts and about 50% have credit,” said Petra Pasquina, director of Hispanic marketing for MasterCard. “That’s very different from the general population.”
Packaged and consumer goods marketers also are targeting Latinos. Three years ago, Tillamook Cheese cautiously entered the Spanish-language advertising market in Los Angeles, pitching its Monterey Jack cheese products. The Tillamook, Ore.-based cooperative started small, with coupons and grass-roots events--and it stuck with its existing product line rather than trying to go head-to-head with such Latino cheese leaders as Industry-based Cacique Inc.
“We realized the Latino population was growing rapidly and was a major player in the marketplace,” said Chris Dinsdale, Tillamook’s vice president of sales and marketing.
“We’ll take a hard look at moving the commercial northward starting next year,” Dinsdale said. “Depending upon how strong the response is, we could put money into Northern California, the Pacific Northwest and Denver in the next few years.”
*
Corporate America still has a lot to learn about Latino households and their buying preferences.
About 9% of the 55,000 households nationwide that track their shopping habits for market research firm ACNielsen are Latino. The Chicago-based firm in April expanded an all-Latino survey conducted in Southern California to track Latino households’ buying patterns.
“We had the idea in 1994 of a [panel] that would cover multiple markets in the U.S., but the industry wasn’t ready for it,” ACNielsen Vice President Ken Greenberg said.
Nielsen’s initial Latino consumer panel, covering 725 households in Los Angeles, Orange, San Bernardino and Riverside counties, was created in 1999. In April, the research firm expanded the panel to include 1,500 Latino households.
“We fully intend to move past Los Angeles,” said Greenberg, whose company serves such consumer products giants as General Mills, Kellogg’s, Kimberly Clark and Kraft. “I think we’ll be able to give [clients] important insights into the Hispanic consumer. But before we can go to other markets we have to prove to the rest of the consumer products goods industry that we can do it in Los Angeles.”
ACNielsen’s experience when it began assembling a consumer panel in Southern California illustrated how much ground must be covered. Recruiting tactics that are effective in the general population--direct mail, telephone calls and community events staged to draw potential participants--didn’t click. “We found out that people didn’t know who ACNielsen was or what we did, that many of these people had no clue as to who we were,” Greenberg said.
And, ACNielsen learned that Latino men often were unimpressed with the coffee mugs and other small gifts the firm typically offers as short-term incentives. Latinos also were turned off by a points-based award system that rewards long-term panelists. “We learned that a monetary premium during the first six months worked well and kept retention rates high,” Greenberg said.
