In marketing its Nova sedan in Latin America, Chevrolet overlooked the fact that in Spanish, "no va" means "doesn’t go." And when the US Milk Board translated its "Got milk?" campaign for Hispanic consumers, it accidentally asked them if they were lactating. People rarely make such embarrassing mistakes twice. Yet in their pitches to the United States’ large Hispanic population, marketers continue to make an error that is more fundamental and more costly than simply mistranslating advertising copy.

Every year, US marketers lose millions—perhaps billions—of dollars in sales by misunderstanding their country’s Hispanic market and clinging to a simplistic notion of its structure. Many see the market as comprising two groups: an isolated segment that speaks only Spanish, and an assimilated English-speaking segment whose preferences are barely distinguishable from those of the general consumer market. Adherence to this "bipolar" view causes marketers to overlook the vast majority of consumers who speak both English and Spanish and make up a third, acculturated segment (Exhibit 1).

The acculturated segment is the largest and fastest-growing of the three groups, currently accounting for 57 percent of the Hispanic market and on course to take 67 percent by 2010 (Exhibit 2). To serve it, marketers must approach it in a way that considers its particular needs and preferences. Above all, they need to project an identity that is Hispanic and American in equal measure.

Sizing up the market

Why target the Hispanic market? For most marketers, the reasons are size, growth rate, geographic concentration, and purchasing power:

Big, and getting bigger. There are almost 30 million US Hispanics, 11 percent of the total population. This proportion will rise to about 14 percent by 2010. Hispanics are expected to account for 40 percent of US population growth between 1995 and 2010.

Young. Almost 70 percent of US Hispanics are under 35, compared with less than 50 percent of non-Hispanics. Their median age is 26, against 35 for the rest of the population. Their relative youth is likely to furnish growth opportunities for marketers of "young" products such as music, entertainment, fashion, and fast food, and, as they age, of "life-stage" products such as minivans and home improvement items.

Rising income. Although median household income is 30 percent lower for Hispanics ($27,000 against $38,000), the gap will shrink as the percentage of Hispanics of working age increases and the proportion of those born and educated in the United States rises in relation to the proportion who arrived as immigrants. Over the past five years, Hispanic purchasing power has risen at a compound annual growth rate of 7.5 percent, compared with 4.9 percent for the rest of the population. Total US Hispanic purchasing power exceeded $350 billion in 1997—greater than that of any Latin American country except Brazil.

Geographic concentration. Hispanics are tightly concentrated geographically. The 12 metropolitan areas they most favor accommodate 70 percent of all US Hispanics, but less than 30 percent of the total population. In fact, more than half of US Hispanics live in two states, California and Texas. These dense concentrations make it easier for them to maintain their own culture and institutions. They also make marketers’ jobs easier.

Understanding the consumer

Some marketers view the Hispanic market as a monolithic entity that can be reached simply by advertising in Spanish. While this tack may work for certain products with immigrant Hispanics, it does not work with the majority of US Hispanics who were born or reared in the United States.

The bipolar view of the market is more sophisticated in that it recognizes variations in levels of assimilation. Under this model, marketers seek to serve the assimilated segment through their pitches to the general market, but tailor their specifically Hispanic efforts to the perceived needs of the isolated segment.

A third, more nuanced model recognizes that most Hispanic consumers are neither assimilated nor isolated, but acculturated. They speak Spanish and English, though they may have a preference for one or the other. They have taken their place in US society, yet are proud of their Hispanic heritage. Acculturated Hispanics retain the core values of their traditional culture while adopting many of the behavioral norms of the general market. The growth of this segment correlates with Hispanics’ attainment of critical mass in certain regions of the United States where they have achieved sufficiently large and concentrated populations to be able to sustain their own community, institutions, culture, and language.¹

Even a casual listener to Hispanic-oriented radio stations will immediately notice the cultural mélange

Language use offers an insight into the acculturated segment. Language preference falls into four categories: Spanish only (isolated), predominantly Spanish (acculturated), predominantly English (acculturated), and English only (assimilated). Perhaps surprisingly, predominantly English speakers devote 37 percent of their radio listening time to Spanish programs, which suggests that they retain an affection for their traditional culture and music despite choosing to speak the language of the wider population. Even a casual listener to Hispanic-oriented radio stations will immediately notice the cultural mélange. In Texas, for example, radio stations play Tejano (Tex-Mex) music, which usually has Spanish lyrics. Yet the announcers frequently speak in English, albeit with Spanish or "Spanglish" words thrown in.

The growth of bilingual print media further demonstrates the economic power of the acculturated segment. Between 1990 and 1996, the total circulation of Hispanic-oriented magazines grew at a compound annual growth rate of 18 percent, while that of bilingual magazines grew at 42 percent. Advertisers must be aware that a growing portion of the Hispanic audience will form impressions from both Spanish- and English-language advertising. While this creates opportunities to capture mindshare in both languages, advertisers must be sure to present a consistent story in each or else risk confusing or alienating their audience by sending conflicting messages.

The biggest opportunity

The acculturated segment represents the most attractive growth opportunity for most marketers

The acculturated segment represents the most attractive growth opportunity for most marketers. Not only does it represent the largest portion of the Hispanic market, but, on the basis of language preference, income, and projections of time spent in the United States, it is also growing the fastest: by an annual rate of 11.9 per cent a year compared with just 3.5 per cent for the market overall.

Companies seeking maximum mileage from their budgets should consider the costs and benefits of addressing each segment. While the assimilated segment can largely be reached through mainstream marketing with a few tweaks, the isolated segment usually demands a parallel effort, with the duplication of existing expenditure. The only exceptions are niche players whose products or services are oriented to this segment (such as importers or producers of Latin American foodstuffs), or whose services meet specific communications needs (international long-distance travel and telephony). It is the acculturated segment that provides marketers with the biggest bang for the buck. While a campaign targeted to this segment calls for a modicum of sophistication—companies need to understand how acculturated consumers’ preferences differ from those of non-Hispanics—it can usually draw on existing work.

Grocery chains Albertson’s and H-E-B and retailer Sears have successfully targeted the acculturated segment by tailoring all aspects of their marketing (advertising, promotion, merchandise selection, store layout, and customer service) to the needs of bilingual consumers whose preferences and tastes reflect a mix of Hispanic and Anglo-Saxon influences.

Marketing to the segments

Once marketers understand each segment from a cultural, behavioral, and attitudinal point of view, they must work out how to attract and retain the desired segment. Four steps are essential to success:

Assess the fit

How far a company should target a particular segment naturally depends on the size of the opportunity. The first step is to assess the attractiveness of the segment for the product or service being offered. Its position in relation to the vertical axis in Exhibit 3 is defined by its consistency or otherwise with traditional Hispanic values and experience. The horizontal axis denotes Hispanic share (current and potential) of the addressable customer base. It relates to such issues as product affordability and geographic relevance. A snow shovel, for example, would be at the low end of this axis because most US Hispanics live in warm climates. Conversely, affordable domestic leisure air travel on southern or southwestern regional carriers such as Southwest or AirTran would be at the high end because of the concentration of Hispanics in Texas and California.

Companies in the top right corner of the grid should aspire to be segment owners: that is, they should seek to dominate the segment because it is their natural territory. Cosmetics manufacturer Avon provides a good example. Consumer research shows that Hispanics set great store by personal appearance (good vertical axis fit). Similarly, their preference for face-to-face relationships based on trust gives Avon’s network sales method an edge in the market (again, good vertical axis fit). In addition, the company’s price points suit Hispanics’ income levels (good horizontal axis fit).

As a segment owner, Avon would be expected to devote resources to tailoring its marketing to the acculturated segment. It might, for example, develop product formulations to suit Hispanic skin tones and color preferences, advertise in Hispanic-oriented publications, and distribute bilingual literature featuring appropriate merchandise.

Conversely, companies at the lower left of the grid should limit the resources they devote to the Hispanic market. Callaway Golf, for example, can aspire to be no more than an opportunist. Unlike soccer, golf is not a sport in which Hispanics have a long tradition of participation. And since Callaway’s clubs are expensive, Hispanic purchasers are unlikely to make up more than a fraction of the customer base. Accordingly, the company should probably pursue opportunities on an ad hoc basis, perhaps soliciting endorsements from Hispanic golf pros or promoting its products in areas with a high concentration of wealthy Hispanic golf players.

Show commitment

The second key to success is to show commitment to serving Hispanic needs. Many marketers feign interest, but fall short on action.

Having made serving Hispanic customers an important strand of its turnaround strategy, Sears shows what can be done. It is the leading retail advertiser to Hispanics using Spanish and English media; it publishes a magazine with a circulation of 700,000 exclusively for Hispanics; it sponsors community events such as Fiesta Broadway in Los Angeles and the Calle Ocho Festival in Miami; and it sponsored the 1996 tour of singer Gloria Estefan, who even made the cover of its annual report. Though these efforts may well appeal to more than one market segment, the acculturated group is the obvious target.

Project an identity

The third key to success is to project an identity that validates both Hispanics’ cultural heritage and their aspirations to make it in the broader context of US society. By tying products and services to this identity, marketers can create an emotional hook for their goods.

A few pioneers have shown the way. Consider Latina magazine, the brainchild of Christy Haubegger, a Stanford-educated attorney of Hispanic descent who noticed that acculturated Hispanic women did not have a magazine that spoke to their needs. Haubegger’s initial efforts to gain support from publishers failed, but in 1996 she acquired the backing of Essence, a leading publisher of periodicals for African Americans.

Latina’s success is the result of several qualities. First, the magazine focuses on subjects important to acculturated Hispanic women: traditional concerns (fashion, parenting, the home), contemporary issues (culture clashes, social and religious issues), and aspirations (careers, money management, education). Second, it is produced to a high standard with superior copy, photography, layout, paper, and binding. Third, it is bilingual, and so can be shared by different generations in a multilingual household.

During its first year, Latina achieved a circulation of 300,000 and switched from quarterly to monthly publication. A recent subscriber survey indicates how well the magazine connects with its target audience: in an industry where a 20 percent response rate is considered healthy, Latina achieved 67 percent.

Brewer Anheuser-Busch is another case in point. It runs television and print advertisements for its Budweiser brand that depict Hispanic people in successful careers and include boxing, soccer, and other sporting events popular with these consumers.

Adjust the marketing mix

Marketers must adjust the marketing mix according to what they want to be (Exhibit 4). An aspiring segment owner might want to create a differentiated value proposition, while an opportunist might consider one-off promotions.

For most mainstream marketers, adjusting the mix chiefly involves satisfying what might be termed the "unique 20 percent" of Hispanic needs. Take a clothing retailer that wants to expand its market among Hispanic consumers. It still has to meet the "basic 80 percent" of general consumer requirements, such as good value and a wide selection of merchandise, but it may also have to stock the colors favored by Hispanic shoppers, employ bilingual sales staff, and run culturally relevant promotions. A manufacturer of household and personal cleaning products, meanwhile, may find that apparently minor adjustments to the scent, color, and packaging of its goods will increase sales to Hispanics without damaging sales in general. As with any target segment, the key is to recognize that the Hispanic market will continue to evolve in ways that are sometimes parallel to and sometimes at odds with trends in the general market.

Size, youth, economic clout, and geographic concentration all make the Hispanic market attractive to consumer goods companies. Understanding how the market is constructed and then determining the most appropriate segment to target are the keys to success for those that want to begin building a lifetime relationship with one of the fastest-growing ethnic groups in the United States.