Hispanic Segmentation Made Simpler

Discussion
May 17, 2006

By Terry Soto, President and CEO, About Marketing Solutions, Inc.

(www.aboutmarketingsolutions.com)

I’m often asked how companies can avoid stereotyping or generalizing when creating a Hispanic strategy, given the various ways in which the market segments.


One of the first considerations when creating a Hispanic brand strategy is to understand how a product or service is purchased. Unless a product is country specific or purchasing behavior is representative of a certain country, nationality is often not a consideration. It is a consideration, however, for certain types of food, music, concerts, restaurants, or specialized services like money transfers. What’s important is to be clear on whether the product or service is a functional purchase or an emotional purchase.


Functional purchases are typically for commodities and are usually inelastic in terms of costs. This means price sensitivity is high and they meet minimum characteristics considered acceptable or preferred options between brands. Defining a Hispanic target for one of these categories is more about basic demographics and consumption patterns. Target profiles are typically broad. Areas like distribution and pricing are likely to be the drivers of the business. Branding work that focuses on special attributes or advantages is especially important in these categories to create a distinction between similar competitors. These categories also tend to be very promotion activity dependent.


Emotional purchases are very different. They are discretionary purchases and are made not because they are necessary, but because they make the purchaser feel good. These categories include wine, premium distilled spirits (cognac), luxury cars, fine restaurants, jewelry, flowers, specialty foods and spa services. The important segmentation work here is based not only on behavior, but attitudes, values, life style and life stage. This results in the psychographic profiles most likely to be consumers of your product/service/brand. In these cases, developing a brand personality that closely aligns with how the Hispanic consumer perceives him or herself is a strong consideration when developing a brand strategy.


Messages depicting how the consumer sees himself as the user and the emotional benefit gained are most effective. These messages tap into consumers’ emotional and psychological hot buttons. Pricing is typically elastic. Merchandising and distribution channel exclusivity is important to conveying a distinctiveness for which consumers are willing to pay more. Demographics such as age, gender, education and income are important factors, but they typically fall naturally out of the behavior or lifestyle description of the category user. Again, nationality is typically unimportant here.


Once a target market and its purchase hot buttons for your category or banner are clear, the objective becomes creating a message that best motivates functional and/or emotional purchases. Here, it’s important to craft messages that avoid colloquialisms to avoid misinterpretation, unless they are necessary to make the point or if tongue in cheek humor is being employed. Messages should focus on using language that ensures comprehension among as many different Hispanics within a target definition as possible.  


Moderator’s Comment: What segmentation challenges do you see for consumer marketers and retailers reaching out for Hispanic consumers? How do ‘best in
class” marketers address Hispanic consumer segmentation without getting into the complexity and cost of creating branding or banner messages on a individual country of origin
basis?
– Terry Soto – Moderator

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8 Comments on "Hispanic Segmentation Made Simpler"

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Mark Lilien
Guest
11 years 3 months ago

When analyzing Hispanic shoppers, it’s important to compare them to non-Hispanic shoppers of the same demographics. Some Hispanic shopper info isn’t comparing their behavior to non-Hispanics of the same income, for example. When the demographics are comparable, the true ethnically-driven differences reveal themselves.

Eva A. May
Guest
Eva A. May
11 years 3 months ago
For those companies willing to invest in Hispanic marketing efforts in the 80’s and 90’s, it was fairly easy to define the key segment for nearly all marketers. The key determinant was the language spoken. With fairly few media options available in Spanish, companies who created relevant and impactful Spanish-language advertising programs were rewarded with quick gains in awareness and trial. This is still the case for many manufacturers and retailers; however, the Hispanic market has diversified into both a Spanish and an English market due to the strong growth and financial clout of 2nd generation Hispanics, as well as the evolution and emergence of a wide variety of English and Spanish-language media options. I believe that the key determinant for a Hispanic market program today, as well as in the past, is language selection. This selection should be made based on the primary target consumer’s level of acculturation in the US. In some cases, it will be worthwhile to create bilingual efforts and/or dual efforts targeting unacculturated Hispanics in Spanish and more acculturated Hispanics in English. The messaging for a bilingual effort could be very similar, while for dual efforts it could be very different, based on key consumer… Read more »
Shaun Bossons
Guest
Shaun Bossons
11 years 3 months ago

Another interesting addition to the above comments is the question – do you start and segment/cluster total stores, or on a category by category basis? Looking at the dynamic categories within a store, many determining factors are required to understand the customer and therefore decide on the required mix of products to be sold.

Ethnicity certainly has a role to play, such as in H&B and many food related categories, but in other less dynamic categories like Batteries, is it really required? With such a diverse ethnic mix in the majority of cities, it has become far more difficult to label a store (or even category) as “Hispanic” or “Jewish.”

We see a lot of categories now being defined as ethnic, such as ready meals, leading to the consumer decision tree taking into account the ethnic mix in that local population (therefore using ethnicity as the first level of segmentation/purchase decision). The percentage product count or space allocation can then be flexed depending on the more dominant groups in that area. This ensures an accurate mix of products inline with the ethnicity of the consumers walking through the door.

Camille P. Schuster, PhD.
BrainTrust

Before understanding how a product is purchased by Hispanics or any other group of consumers, it is important to understand how it is used! While understanding the purchasing process may help improve one time sales, there will be no repeat sales unless consumers like the product or service when they are using it.

Robert Craycraft
Guest
Robert Craycraft
11 years 3 months ago

As merchants we need to be introspective on whether we are feeding the current illegal immigration tensions by inadvertantly segregating Hispanics from the mainstream, delaying their integration, and forcing Spanish-language signage and other promotional vehicles onto a larger population which finds it uncomfortable and inappropriate.

Len Lewis
Guest
Len Lewis
11 years 3 months ago

I agree with Camille. A perfect example is Procter & Gamble and their focus on how consumers use their products — especially beauty products among Hispanic women.

Find out how your customers live their lives, then adjust the buying environment.

Rochelle Newman-Carrasco
Guest
Rochelle Newman-Carrasco
11 years 3 months ago

At the end of the day, it continues to come down to how actionable you can make the segmentation based on the budget realities that exist. There are a myriad of ways to segment the Hispanic consumer population and to compare and contrast it to non-Latinos. The consumer insights reveal themselves when this work is done both quantitatively and qualitatively. That said, there are only a hand full of companies that are allocating dollars to both do the research and analysis and then make the effort to have their executions speak to the various high potential segments defined.

Daniel Clous
Guest
Daniel Clous
11 years 3 months ago

Best in Class manufacturers will most likely approach this through a Store of the Community approach. There will be stores that Hispanics like to shop, and most likely will be within a “high Hispanic” community, with Spanish speaking employees.

Good marketers should have a strong handle on their target of the Hispanics who are acculturated, assimilated, or isolated by language and customs in the U.S.

I believe they will also understand the spending power of this segment and, depending on the categories they represent, will target the proper household members for purchasing decisions.

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