How To Gain Monopoly-Like Profits Through Ethnic Marketing

By Michael Bolden,
Managing Partner of the Chatham Consulting Group,
Chicago, IL, U.S.A.

In today's U.S. marketplace, marketing to various ethnic audiences is vital to consumer-oriented product and service companies. Latinos and African Americans already have a critical mass of buying power of over $1 trillion combined and this total is increasing rapidly. The growth of the Hispanic and African American affluent and middle class is occurring faster than the majority of Caucasian Americans. These ethnic audiences are becoming so large and lucrative that even sub-groups of them command substantial buying power. Becoming the dominate player within a sub-group such as affluent and middle class 2nd generation Latinos would allow a company to make substantial revenue and develop a strong loyal customer base. To "own" an ethnic market space would enable a company to obtain monopoly-like profits!

Tapping into and creating ethnic space monopolies is at the heart of this article and should be the goal of every ethnic marketing plan. Owning an ethnic market space yields the following 4 critical benefits:

To have these four factors working in a critical mass of ethnic customers would propel almost any company into an overall highly profitable, bottom line. It is for this reason that ethnic marketing and owning market space in the Hispanic and African American audiences is not a "side" item, but a vital strategy which affects the whole enterprise and will only increase in importance as this century progresses. This directive can turn a marginally profitable company into a revenue generating “powerhouse” and a unprofitable company into a firm which operates solidly in the “black” - no pun intended.

The first step to finding "ownable" ethnic market spaces is to discover which groups of ethnic consumers are underserved or are not actively targeted by an industry's product or service offerings. An executive, manager, or business owner must find an ethnic market space with a differing set of values, and different perceived needs than mainstream consumers. For example, Hispanics believe that family life and the home are very important, so products and services by a company geared toward key aspects of domestic home life have a chance to dominate niches within that space.

The most powerful driver of finding an untapped market space of ethnic customers is perceived need - whether that is for basic functionality or additional comfort or luxury. One may say that this is also true for the general market but a good marketer will understand that this perception of need differs from mainstream consumers. Latinos and African Americans view the world and products & services from a completely different paradigm than Caucasian Americans. Their values, lifestyle, cultural and taste are all different from the mainstream and this phenomenon translates into unique selection, buying, and usage habits for a given set of goods and services. For example, the urban African American 'middle class' higher desire for stylish and designer brand items and the raised threshold for luxury should be a driving factor in developing products and services for this market space.

Once a need is recognized, the space can be identified by key elements such as demographics, geography, lifestyle, and behavior. These elements will tell a strategist or marketer where to find the members of this market group and how to reach them. Their threshold and tolerance for various features in product and service offerings dictates this need perception. The perceived need will drive the product or service’s value proposition and the basics of the business model. The previously mentioned elements of demographics, geography, lifestyle, and behavior will help “fine tune” the business model, and dictate the tactics of reaching an ethnic space or sub-group. For example, the urban African American middle class’ higher desire for stylish and designer brand items and raised threshold for luxury should be a driving factor in developing products and services for this market space. This group can be reached by specific cable channels and a few networks, selected radio stations, and various magazines – Blacks over-index for these mediums.

While targeting ethnic market spaces is important to companies, a marketer must understand how these groups behave. The different usage of various products is often created by ethnic sub-groups. The members of these groups could be compelled to develop a unique functionality of a product. For example, African American “hip-hoppers” buy and display elaborate car rims on their vehicles as stylish and decorative accessories. The usage could also be defined by cultural heritage. An example would be the high usage of salsa in most Hispanic households. Cultural differences create unique ethnic niche situations which can be leveraged by astute companies. It is also vital to link sub-groups based on commonalities to a critical mass of market space. The salsa example illustrates this factor clearly. Many Latino sub-groups have the common use of consuming salsa, and they are linked together by this commonality to create a critical mass of consumers even beyond ketchup users.

An additional key factor for locating potential monopoly spaces is to examine ethnic spaces overlooked by the competition. In the multicultural marketing of even the most progressive companies, often whole ethnic groups are viewed heterogeneously. Especially for Latinos, this could not be a bigger mistake. Latinos have a multitude of sub-groups that are the result of the following major factors:

A company cannot expect to use mainstream marketing to effectively reach Latinos and African Americans. For Blacks, the "they speak English too" syndrome pervades throughout industry and is used as an excuse for not trying to understand the various segments within the African American consumer audience. For astute executives and marketers, "broad brush" marketing by the competition to ethnic audiences represents huge opportunities to own a substantial set of key niche spaces within the Latino and African American audiences. To many marketers, these ethnic niches are invisible. This creates the perfect opportunity in many industries for companies to choose and capture valuable niche spaces within Hispanic and African American consumer audiences.

There are three key factors which an executive or business owner needs to create and develop an ethnic market space monopoly. They need convergence of perceived need, weak or non-existent market space competition, and a favorable industry or business situation. We have talked about two of these factors, need and competition, but not about overall industry shifts. A favorable industry situational shift tends to involve technology enablers or change in the overall industry structure. A simple change in a macro business factor such as for a cyber firm seeking to target on-line ethnic customers is the increased diminishing of the “digital divide” on the internet. This factor has dramatically raised the amount of Latinos and African Americans of all economic classes accessing the internet. As a result, it allows online firms to target more specialized niches of on-line Hispanic and African Americans.

Tactically, to find ethnic market spaces to monopolize, a marketer or executive needs to track all three or these factors together for an industry or set of businesses. The first step in this effort is to develop a set of metrics for all three of these elements. These metrics should be divided into external and internal measurements. The external metrics should be divided into external and internal measurements. the external metrics should be the focus of factors outside the company such as overall market space growth, competitive niche market share, and appropriate technology usage rates. The internal measures should focus on factors specific to the company such as satisfaction ratings in a given niche, current space market share, and appropriate technology capability compatibility ratings.

Strategically, it is important for an executive or marketer to develop deep relationships with a particular ethnic audience space. This relationship is particularly important for companies offering a service or providing a product which is seeking differentiation. For products which can be commoditized or sold based on price, it is crucial to relate to Latinos and African Americans differently than to mainstream America. This means not just having ads featuring Latinos and African American characters and themes, but targeting specific groups within this audience. This type of marketing will really speak to the target group, and develop deep ties with them that will be hard to break by competitors – they will only see you in the category! It is vital to concentrate effort on a key set of sub-groups to maximize penetration and effectiveness, and create a strong base. A company’s product or service should not try to be all things to all members of the larger general ethnic group – this is a recipe for weak market presence and ineffectively relating to any given subspace in the audience.

It is also important for an executive or marketer to note these ethnic monopoly opportunities don’t last forever. The opportunity to own an ethnic market space is finite, and based in large part on shifts in consumer behavior or the ability of a competitor to impede on that space. Given this factor, it is critical that companies move quickly to “build out” the ethnic monopoly space once they recognize it and gain a foothold. This presents a sort of “ethnic first mover” advantage in a given market space and fortifies a company’s position within the ethnic sub-group.

Owning ethnic market space is currently a substantial profit driver, but in the near future for the U.S. market, it will become essential for a firm’s profitability. Companies are now looking to these minority groups as a source to fuel their growth, as the mainstream market continues to be oversaturated. To own a space, it is vital to let the perceived need of a targeted group drive the product or service offering, and to understand the nuances in reaching sub-groups within the greater minority audience. All these strategies and tactics are made particularly effective, because many subgroups within the Hispanic and African American audience are under-served by companies. This creates markets within the U.S. which are equally or more attractive than China or India, due to its easier accessibility and huge buying power. In most consumer industries, these ethnic sub-space pockets are huge gold ores just waiting to be mined!

Author: Michael Bolden is a Managing Partner of the Chatham Consulting Group. To learn more about ethnic marketing visit Chatham Consulting's website at http://www.chathamchicago.com and also obtain a full report based on this article in the "Free Stuff" section. Readers of this article and visitors to our website are eligible for a free 20 minute consultation on your company's multicultural marketing.

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