Keys to Segmenting the U.S. Hispanic Market
Census 2000 figures report that Hispanics total about 37 million and are now one of the largest minority groups in the United States. Companies in almost every consumer industry are beginning to recognize the purchasing power, variously estimated between $430 billion and $630 billion, of this emerging market segment.
To be successful in targeting this market, marketers not only need to assess the market, purchasing power and growth potential, but also need to understandfor segmentation purposesthe inherent differences that exist within the sub-groups that comprise the U.S. Hispanic market and the impact on individuals that the level of acculturation has on their purchasing behavior.
Common Marketing Mistakes
Marketers in the U.S. are relishing the opportunity presented by this emerging segment. However, most companies targeting the U.S. Hispanic market are guilty of at least one of the following mistakes: (1) treating the market as an extension of the general market; (2) inadequate budget allocation; (3) poorly translated communication material; and (4) treating the U.S. Hispanic market as a homogenous segment.
In this article I will discuss the differences that exist within the U.S. Hispanic market so you can better segment, prioritize and position your products/services, and then target the heterogeneous segments of the U.S. Hispanic market by applying sound market segmentation strategies and tactics.
Marketing to U.S. Hispanics
Many U.S. companies have approached the U.S. Hispanic market by treating it as a homogenous group and segmenting by age, sex, family size, educational level and income, etc. While there are many similarities that exist between the various sub-groups that comprise the U.S. Hispanic market, there also are distinct differences that marketers must be sensitive to in order to best serve the interests of these consumer segments.
When marketing to the U.S. Hispanic segment, consumer buying behavior will be influenced not only by demographics, psychographics, situational factors and personal attributes that marketers to the general market need to consider, but variables such as ethnicity, country of birth and the level of acculturation need to be taken into account as well.
Country of Origin. There are major ethnic subdivisions within the U.S. Hispanic population, since Hispanics in the U.S. originate from more than 20 different countries. The largest group, by far, is of Mexican ethnic origin, comprising around 63 percent of the total U.S. Hispanic population. U.S. Hispanics from Central and South America comprise around 15 percent of the population, Puerto Rico (11 percent), Cuba (4 percent) and the remaining 7 percent are from other regions.
Common language and a link with colonial Spain serve as a means of considering the U.S. Hispanic segment as a single market, but their diverse religions, cuisine, family beliefs and values as well as diverse linguistic variations make them one of the most culturally rich groups in the U.S. today. These regional differences exist in part because of the existence of indigenous people, such as the Maya and Aztec cultures of Mexico, because of the presence of an African population, as in the Caribbean, and the integration of non-Hispanic immigrants in many southern South American countries.
Country of Birth. Consumer behavior is highly influenced by a person's country of birth, ethnicity and culture. Culture is defined as the set of shared knowledge, beliefs, preferences, customs, behaviors and basic values that a person learns from the time he is born, by being part of a particular society. Cultural traits are passed down from generation to generation regardless of geographic location, but the presence of a dominant culture will impact people over timeand the impact will be greater in future generations, (as shown in the diagram on p. 20).
From a marketing perspective, a third generation Hispanic born in the U.S. will behave differently than a foreign-born U.S. Hispanic in terms of language usage, consumerism, media exposure and marketing maturity. A third generation U.S. Hispanic will have more behaviors that coincide with the U.S. culture than behaviors that differ from it. Accordingly, he will be more aware of the various products available; how these products are used and advertised across a variety of media including TV, radio, newspapers, magazines and Internet; and how to go about acquiring the products that fulfill a need.
Geographic Segmentation. Historically, settlement patterns of Hispanics in the U.S. have been concentrated by ethnicity, with those of Puerto Rican origin more likely to live in the Northeast. Those of Cuban origin are highly concentrated in the Southeast, and in the West the heritage of Spanish speakers is mostly Mexican and Central American. Then, there are people from South America, who live all over. These regional groupings of U.S. Hispanic sub-groups by ethnicity goes some way to helping preserve the native cultures and regionalizes the different variations of Spanish spoken in the U.S.
Purchasing Power. Disposable personal income by state is a segmentation variable which can give you a regional focus. It is estimated by the Selig Center for Economic Growth at the University of Georgia's Terry College of Business that Hispanics in the U.S. controlled about $580 billion in spending power in 2002. While spending is distributed throughout the country, as can be seen in the graph at left, it is currently concentrated in a handful of states. California represents the largest market, estimated at $170.7 billion (29 percent of total), followed by Texas (16 percent), Florida (9 percent), New York (8 percent), Illinois (4 percent) and New Jersey (4 percent). These six states combined represent 70 percent of U.S. Hispanic purchasing power.
However, as can be seen from the graph at the bottom of the page, the top 10 states with the largest rate of growth of Hispanic purchasing power from 1990 to 2002 are surprisingly states that traditionally have not been considered U.S. Hispanic markets. As the Hispanic population increases and growth in non-traditional markets continues, viable regional segmentation opportunities will present themselves in these markets.
Segmentation by Level of Acculturation. The process of acculturation takes place when two or more cultures co-exist, and occurs when an individual or a group of people integrate a second culture's shared knowledge, beliefs, preferences, customs, behaviors and basic values into their traditional immigrant cultural values.
Characteristics of potential customers in the highly acculturated market are very different from customers in a less acculturated market. There has been much written about language segmentation and how it can be used as a measure of the level of individual acculturation. It's clear that a recent immigrant, who may only speak Spanish, will display different purchase and media consumption behavior than a second or third generation U.S. Hispanic, who may be bilingual or speak only English, because the latter will have a higher level of acculturation and understand the language, lifestyle, beliefs and values of both cultures.
Irrespective of an individual's level of acculturation, marketing in Spanish still ranks very high with U.S. Hispanics. Cheskin Research utilized a segmentation model, in the 2002 Hispanic Opinion Tracker Study, that divided the market into three segments: Hispanic Dominant (56 percent), Bicultural (20 percent) and English Dominant (23 percent). The survey of 6,000 respondents found that 76 percent of the U.S. Hispanic market prefers to be marketed to in Spanish.
There may be circumstances when marketers want to focus on the similarities that exist between U.S. Hispanics. In this case, there is no necessity to segment the subgroups, and segmentation by variables such as age, gender or stage of lifecycle (as is done with the general market) will be an appropriate segmentation approach.
However, marketers in the U.S. are now realizing the importance and impact of this emerging segment and are developing specific products and services for the various subgroups that comprise the U.S. Hispanic market. By identifying the distinguishing variables between the various sub-groups, marketers can utilize smart segmentation practices and develop very specific campaigns that are tightly targeted and culturally appropriate for a specific segment of the market.
Tony Malaghan is director, strategic marketing, of Arial International, LLC. With offices in the U.S. and Mexico City, Arial International provides comprehensive marketing consulting and training services to companies that service the U.S. Hispanic market. He can be reached at email@example.com.