The No. 1 Consumer Segment for Future Revenue Growth
Conspicuously absent from many corporate strategic plans is a breakout of which consumer segments will represent their revenue growth into the foreseeable future. Does your marketing plan contain the number-driven facts that give your CFO more beans to count and charts that show upward growth?
Although award-winning branding and the indisputable trends towards digital and youth-oriented marketing still play a role in winning marketing plans, growth is what stakeholders want to see. Which sub-segments of the U.S. population will contribute to the top and bottom lines in the company's annual report to shareholders?
A simple look at consumer segments by their growth contribution will reveal the compelling fact that Hispanic consumers represent more than 68 percent of population growth during the last 10 years. Adding Asian Americans gets you to well over 80 percent of the growth, whereas Anglo Americans and other non-Hispanics declined slightly in population.
And it’s not just population growth, it’s spending growth and other consumer trends. Nielsen media research and others have documented the fact that Hispanics and Asians over-index for social media and entertainment expenditures — due primarily to their relative youth, connectedness and family-oriented cultures.
Get the Nielsen report here.
The Anglo-American population’s fertility rate is well-below replacement level, while Hispanic fertility rates (although trending down) are clearly highest among all ethnic groups. Details here. There also is a huge age gap — the bulk of the Anglo population is aging towards retirement and Latinos are in the prime workforce years – with a median age of 44 as opposed to 27 for Hispanics.
One very compelling fact that is seldom considered while budget planning is the forecasted lifetime spend of households by cultural segment. Viewing the spending curve over remaining lifetimes of households helps us understand which segments will contribute to gains in market share, revenue and profits. As indicated in the chart below, the presently active Hispanic household will spend (on average) $500K more over their lifetimes than non-Hispanic white Households. For Asian households the spending gap is even greater, more than $1 million. In many categories – such as food consumed at home and away from home, apparel, quick service restaurants and personal care products — Hispanics and Asians dominate the spending frontier and spend more in absolute dollar value.
You may be asking yourselves, “why isn’t this analysis in the marketing and business plan…in the strategic plan?” The answer is, “it might be.” However, it is likely buried as the Nth among priorities and relegated to a nominal spend on Spanish language media.
These days the bulk of Hispanics (also known as Latinos) are bi-cultural — some say “ambi-cultural”. That is, they live fluidly between two cultures and can exercise and indulge in either or, and both as they see fit. Switching from English to Spanish to Spanglish…in some cases this even reeks of a kind of swagger, being able to straddle both cultures with style.
This fusion of cultures is being expressed more and more by entertainers and artists. From Camila Cabello, the Cuban-Mexican American singer who’s hit “Havana (ooh na-na)” propelled her to stardom, to the closing ceremony of the World Cup in Moscow which featured Nicky Jam, who is U.S. born of Dominican and Puerto Rican parents, featuring a style that blends pop with Reggaetón and Urban/Hip-Hop interweaving verses in Spanish and English.
Chief Marketing Officers may eventually find the intersection of their numbers and the gloss of their brands with younger Latino and Asian segments. The massive box-office hit “Crazy Rich Asians” reminds us that the growth and magnitude of Asian populations and their spending power is going to be difficult to ignore. Focused targeting of these segments and embracing their cultures and entertainers make a wise investment in the future of leading brands and balance sheets. CMO’s may need to muster the courage to present this type of plan in board rooms, comprised primarily of a demographic no longer representative of the American population — but rather, the demographic segments that will contribute disproportionately to revenues, earnings, dividends and enterprise value.
If we simply get back to the basics — communicating effectively with consumers to garner their loyalty for a lifetime — we would focus on nurturing those groups who will pay the most dividends over the lifetime of the marketing spend. Interestingly, this simple concept is seldom embraced by marketers' budgets in major corporations. Most companies rarely even match the percentage spend with the percentage of these groups in the population; even that ratio is far too low ... and as we know, Wall Street is all about the ratios.
If help is needed to achieve this…help is available, as are data, analytics, research, technology and media to engage in meaningful and relevant ways that can propel a brand and its buyers into a re-energized future. There is one trend that the boardroom and the employee bonus pool will both appreciate — growth. Growth in revenue, profits, market share and brand equity … that’s a perennially cool trend.
CEO and Founder of Geoscape (now a Claritas company), César M. Melgoza, is a leading innovator and thought-leader on analytic services, business strategy, consumer insights and the development of market intelligence systems. After having fulfilled key roles at Silicon Valley firms Apple and Strategic Mapping, César founded Geoscape to develop market information systems and provide services for an increasingly diverse American and international marketplace.
César recently served on the board of directors of the United States Hispanic Chamber of Commerce, and on its Executive Committee. He has served on the advisory boards of Florida International University’s International MBA program and he is a board member of Florida State University’s Center for Hispanic Marketing Communication.
I'd enjoy getting your point of view on this. Feel free to reach out @cesarmmelgoza, @geoscape, @claritas or firstname.lastname@example.org.