If you want a big, new market try reaching U.S. Hispanics (Fortune, 1988)November 11, 2012: 9:30 AM ET
Editor's note: Every week, Fortune.com publishes a story from our magazine archives. This week, we turn to a 1988 feature about the rise of Hispanic consumers and corporate America's efforts to market to this increasingly important group. As the outcome of Tuesday's U.S. presidential election has underscored, Hispanics aren't just on the radar of marketers. They're a force in politics, having helped President Barack Obama get re-elected. Hispanics voted for Obama over Republican Mitt Romney by 71% to 27%, according to an analysis of exit polls by the Pew Hispanic Center, a Project of the Pew Research Center. Obama's national vote share among Hispanic voters is the highest seen by a Democratic candidate since 1996, when President Bill Clinton won 72% of the Hispanic vote.
They're 19 million strong, with $130 billion to spend. Here's how to woo this fast-growing ethnic group (and avoid embarrassing mistakes).
By Julia Lieblich
When it comes to Hispanic marketing, a little knowledge is a dangerous thing. Remember Braniff's blooper? The airline's ads told Hispanics to fly en cuero -- or ''naked.'' Tropicana advertised jugo de china in Miami. China means orange to Puerto Ricans, but Miami's Cubans thought it was juice from the Orient. Jack in the Box goofed with a commercial featuring a band of Mexican mariachis accompanying a Spanish flamenco dancer. ''That's like having Willie Nelson sing while Michael Jackson does the moonwalk,'' says Bert Valencia, a marketing professor at the American Graduate School of International Management in Glendale, Arizona.
Why do companies sometimes end up looking like idiotas? Because learning this market takes more than a few lessons at Berlitz. An occasional blunder is forgivable. But many companies are designing advertising for the nation's 19 million Hispanics without understanding the differences among Mexicans, Puerto Ricans, Cubans, and the rich array of other nationalities that make up the U.S. Hispanic population (see map and chart). These misdirected advertisers are shelling out money for prime-time spots and then scrimping on funds to test whether they work. In sum, they're sloughing off a group of consumers with $130 billion in purchasing power. ''And with quick and dirty efforts,'' says Valencia, ''they can't expect big results.''
Companies committed to Hispanic marketing, on the other hand, are scoring big. Their secret is often dumping the message they use for Anglos in favor of one with specific Hispanic appeal and picking Spanish media to convey it. Metropolitan Life increased sales of insurance to Hispanics over 150% this year with nationwide Spanish ads. The company chose to use Latin actors rather than Snoopy, the cartoon mainstay of its English ads, but not a big attraction for Hispanics. Adolph Coors Co. has built Hispanic market share in part by sponsoring festivals celebrating such holidays as Columbus Day in Miami and Cinco de Mayo in Los Angeles. Best Foods' Mazola Corn Oil captured two-thirds of the national Hispanic market with a five-year Spanish-language campaign promoting what these consumers want in corn oil: good taste, not low cholesterol.
Hispanics are a rapidly growing segment of the population, increasing 34% since 1980, four times the overall U.S. growth in that period. Their numbers may exceed 40 million by 2015, surpassing blacks as the nation's largest minority group. The market is not only expanding, it is also relatively inexpensive to reach. A 30-second spot on the top-rated Spanish TV show, Sabado Gigante, costs $11,500, compared with $360,000 for the Cosby Show. Prime-time commercial rates for Spanish-language television are $6 per thousand homes, vs. $9.60 for English-language networks. And newly arrived Hispanics, like the virgin TV viewers of the 1950s, are more open to commercial pitches and trust advertisements for product advice. Best Foods spends only 10% of its Mazola Corn Oil marketing budget promoting the product to Hispanics, but rings up about a third of Mazola's national sales with that effort. Still, many companies are not ready to tango with the Hispanic market. ''Corporate America would rather cross oceans and continents to expand their business than tap Hispanics in the U.S.,'' says Isaac Lasky, vice president of Hispanic marketing at W.B. Doner, an advertising agency in Southfield, Michigan. In one survey, 60% of the companies not marketing to Hispanics had not even done research to consider the possibilities of reaching the group. That's too much market to ignore. Don't think Hispanics are too poor to be attractive marketing targets. True, their median family income is $22,900, compared with $32,800 for the general population, according to Richard Tobin, president of Strategy Research, a Miami market research firm. But they spend more of their disposable income on goods and services. Most purchases center on the household.
What makes this market baffling is that even second- and third-generation Hispanics often remain so tied to their culture that they are impervious to standard national advertising campaigns. Hispanics are not assimilating as fast as the waves of European immigrants who disappeared into the mainstream within a generation or so. ''We're not a melting pot, we're a salad bowl,'' says Filiberto Fernandez, manager of Hispanic markets for Polaroid. ''We mix, but we don't blend.'' Ninety percent of Hispanics reside in just nine states; 80% marry Hispanics. Unlike Europeans and Asians, most Hispanics live relatively near their native countries, making it easier to keep in touch with their families and friends, and their heritage. (For more on Hispanic assimilation, see box.) The degree of Hispanic economic acculturation depends on the country of origin and the length of residence in the U.S. Mexicans make up 63% of the Hispanic population; Puerto Ricans, 13%; and Cubans, 5%. The rest are from other parts of Central and South America and the Caribbean. ''It's deceptive to say there's one Hispanic market,'' says Leo Toralballa, a vice president at American Express. The more educated Cubans have risen the fastest.
Regardless of economic status, no other ethnic group has held on to its language so tenaciously. More than two million adults speak only Spanish, and with the steady influx of immigrants this number will grow for decades. More than 70% of all Hispanics speak Spanish at home, and 96% want their children to learn to read and write it perfectly, according to a study by Strategy Research. Old families in New Mexico and northern California speak English primarily. So do most teenagers, eager to gain acceptance from Anglo peers. But adopting the language does not mean abandoning the culture. Enigmatic Hispanic chuppies (Chicano urban professionals) and yucas (young upwardly mobile Cuban-Americans) are the best examples of Hispanics who live in a dual culture. ''The yucas are confusing as hell,'' says John Bernard, director of Southeast advertising at Publix Super Markets in Florida. ''They drive BMWs and watch network TV. But they live with Cuban grandmothers and listen to salsa radio.''
Hispanic marketers say there's only one way to understand this market. ''You have to live it and breathe it. You can't stay holed up on the 30th floor and expect to understand how Hispanics think,'' says Polaroid's Fernandez. To teach unenlightened Polaroid executives, Fernandez takes them on junkets to Miami, 1,200 miles south and light-years away from the company's Cambridge, Massachusetts, headquarters. ''I give them Hispanic Marketing 101,'' he says. ''I could show them the research, but a picture is worth a thousand words.'' He treats them to Cuban sandwiches on Calle Ocho, the main strip in Little Havana. He escorts them down Brickell Avenue to the top banks. ''I dare them to find an office where there are not Hispanics conducting business in Spanish.''
Fernandez also takes them to street festivals. Corporate participation in such events is important because festivals are intrinsic to Hispanic culture, says Victor Ornelas, former head of promotions at Seven-Up and of Hispanic marketing at Anheuser-Busch, who is now president of his own marketing firm. Miami's Calle Ocho fair brings out over a million people along a 23-block stretch of Little Havana. More than 10,000 turned up for the city's most recent Hispanic Heritage paella festival. Coors shelled out $20,000 and Publix Super Markets $50,000 to sponsor the extravaganza, during which local chefs cooked 12,000 pounds of rice and shellfish in iron pans the size of small ponds. In addition to paying for some of the food and dozens of bands, Coors served 15,400 glasses of beer. ''Hispanics are loyal,'' says Mandy Llanes, one of Coors's six community relations field managers working exclusively on Hispanic promotions. ''If you support them, they'll remember you.'' Those contemplating a run at the Hispanic market should be prepared for inadequate market research and a lack of precise audience ratings. Hence companies rely on sources close to home -- their own employees. Says Polaroid's Fernandez: ''Marketing reps in Florida, California, and Texas kept calling headquarters and saying, 'No ingles spoken here.' '' One key to success is getting the right people to direct the effort. Most often, that means those who know the culture the best. Coors would rather train a Hispanic community leader about the business than teach a beer expert about the market. The next step is giving them enough authority to do the job. Carlos Arboleya, vice chairman of Barnett Bank of South Florida, says that clout is critical. ''I know a lot of Latin marketing people with no real power.''
The importance of cultural experience extends to advertising agencies. There are at least 50 Hispanic advertising agencies in the U.S. and many Anglo shops with Hispanic departments, though some are just one-person units. ''Talk to peers in other corporations about narrowing the choice of agencies,'' advises Luis Santiago, AT&T's Hispanic marketing director. Some companies prefer the one-stop shopping convenience of an agency connected to a general market ad firm, such as Mendoza Dillon & Asociados, the largest Hispanic agency, which was purchased by the WPP Group in December. Astute marketers tend to focus on one of the top six Hispanic cities: Miami * for Cubans; Los Angeles, San Antonio, and Houston for Mexicans; New York for Puerto Ricans and Dominicans; and Chicago, which offers a mix of all. For its pilot study on Hispanic consumers, American Express chose Miami, where the average Hispanic family income is $31,000 and average length of residency is 14 years. The company learned that many of its bilingual customers preferred Spanish promotions. The U.S. Army tried to figure out why its English-language campaign was missing many of the young Hispanics it was designed to reach. The Army discovered that Hispanic recruits age 18 to 24 watched English-language TV, but their parents relied on Spanish media. ''We found that 61.9% of Hispanics said they go first to their parents for advice,'' says Major Gregory McGuckin, chief of media and distribution, ''so we began advertising to them in Spanish.'' The Army says Hispanic enlistments are up. When the Peace Corps appealed to parents in its Emmy Award-winning Spanish TV commercials, Hispanic applicants increased 50%.
Not every product has a good shot at Hispanic pocketbooks. According to Market Development Inc. in San Diego, newcomers find many packaged goods unfamiliar -- caffeine-free soda, for instance, and two-step floor polish. When Webber Farms tested its breakfast sausage on Hispanics, who are big sausage eaters, it discovered that they find the spices in the American breakfast product bland. Webber, located in Cynthiana, Kentucky, decided to concentrate on other markets. But unfamiliarity is not always insurmountable: When Mars found that Hispanics preferred to buy rice in bulk, it promoted ten- pound bags of Uncle Ben's, and sales ballooned. While Hispanic ads can complement general market campaigns, the days of repackaged Anglo ads are coming to an end. PepsiCo considered translating its space travel campaign into Spanish. ''But the Hispanics the company interviewed couldn't relate,'' says Sara Sunshine, creative director of Publicidad Siboney, an independent Hispanic agency. '' 'Why are you talking to me about space?' they asked. 'I'm just discovering the U.S. My fantasies are taking place right here.' '' Sunshine designed a Clio Award-winning campaign for Pepsi that featured a young Hispanic who dreams of becoming a rock star. Good campaigns combine the American dream with the traditional values of the Hispanic extended family. Ads tend to be more colorful and dramatic than the Anglo variety. ''We do everything bigger,'' says Colgate-Palmolive's director of Hispanic marketing, Herney Nisimblat. ''Even our soapsuds are bigger.'' But Sunshine says to keep the copy simple and avoid larger-than-life stereotypes, like Frito Bandito: ''It's an insult.'' Some Hispanic agencies push corporations to do several ad campaigns, each aimed at a different segment of the community. If test marketing shows that a product is perceived and consumed the same way by Cubans, Puerto Ricans, and Mexicans, however, segmentation may be a waste of money. Isaac Lasky of W.B. Doner advertising recommends doing one campaign using Pan-Hispanic casting; ''Walter Cronkite Spanish,'' the equivalent of broadcast English; and Spanish words common to all Hispanics. Instead of choosing china for orange, Tropicana could have used the more generic naranja.
Teresita Zubizarreta, president of Zubi Advertising, a small, independent Hispanic agency, is a strong proponent of segmentation, however, particularly for products that focus on the consumer's image. ''It's more effective to talk to Cuban housewives with Cuban actors.'' Beer and soft-drink companies agree. Coors tailors locations, music, and casting to each region. It runs a rodeo spot in Houston that wouldn't play in Miami. New Jersey-based Goya Foods, which discovered the Puerto Rican market in the 1940s, promotes different products in Miami (Cubans like black beans) and New York (Puerto Ricans prefer red). Sometimes a creative general ad campaign can reach Hispanics who rely on English but still identify with their native culture. ''The key is a spot with a secret message for Hispanics,'' says Carl Kravetz, vice president of Ferrer/ Ad America, a Hispanic agency in Los Angeles. For a McDonald's commercial the agency pictured a celebration that looked like a simple birthday party to most viewers. But Hispanics knew it was a quinceanera, a traditional celebration of a 15-year-old girl's coming of age.
Most Hispanic marketing dollars go to Spanish television. In an average week, about 80% of Hispanic households watch the two Spanish networks: Telemundo and Univision, recently purchased by Hallmark for over $300 million. The hottest show is Univision's Sabado Gigante, a raucous 3 1/2-hour spectacular that combines entertainment, games, and skits with unabashed product promotion. Every Saturday night charismatic host Don Francisco leads the studio audience in rousing singalongs. ''The diaper I like best is called Ultra-Pampers,'' he croons. Since 1987 the 1950s-style show has tripled Univision's Saturday prime-time viewers. Radio is also jumping to the Latin beat. More than 200 Spanish-language stations are now on the air, compared with 67 in 1976. Total Spanish radio billings increased 102% in five years to $162.8 million last year. Many companies shun print advertising because of the low circulation. The medium is most successful in Miami, where Cubans depend on newspapers to stay in touch with their native island. Slick upscale magazines, such as the monthly Miami Mensual, are targeted to reach affluent Hispanic audiences. Amex uses it to run a Spanish version of its ''membership has its privileges'' campaign. English-language magazines aimed at Hispanics are popping up. Vista, a three-year-old Sunday magazine newspaper supplement, reaches 1.2 million Hispanic households in key markets throughout the nation. For all the promise of Hispanic marketing, companies are still not putting much money into it. Advertising expenditures to grab Hispanic consumers reached $490 million in 1987, more than double five years ago, but a fraction of the $110 billion U.S. advertising budget. No. 1 advertiser Philip Morris spends only $13.3 million on Hispanics, less than 1% of its overall advertising budget. According to Hispanic Business magazine, most companies devote about 1% of their total ad budget to reach Hispanics, despite the fact that they make up 8% of the population. It may be inexpensive to reach Hispanic markets, but not that inexpensive.
Low budgets may mean scrimping, sometimes foolishly. JByrons department store in Florida raffled a trip to Venezuela for people who filled out credit card applications. But monolingual Hispanics stared blankly at the forms: They came only in English. Testing ad campaigns is important, yet often ignored. A little pretesting might have saved some companies embarrassment. Even if Hispanics design a campaign, it's no guarantee that they are familiar with all Hispanic groups. The word bichos, for example, means bugs to Mexicans. To Puerto Ricans it means a man's private parts. An insecticide company's posters guaranteeing to kill all ''bichos'' left executives blushing. To avoid mistakes and determine the effectiveness of campaigns, Colgate-Palmolive conducts focus groups and tests ads with consumers in one or two cities. In Miami the company tested an ad campaign promoting a Palmolive dishwashing-liquid sweepstakes offering a free trip to Puerto Rico to have dinner with Latin actress Charytin. When % sales of Palmolive dishwashing liquid increased over 60% in Miami, it rolled out the campaign in several markets. Many firms don't bother to post-test their advertising and promotional campaigns to quantify results. But Joe Albonetti, vice president of Conceptos International, the Hispanic division of Miami-based Tinsley Advertising, says this is the wrong place to cut corners: ''If marketers don't devote part of their budget to evaluating results, they won't be able to justify future expenditures to top management.'' Coors concurs. After ad campaigns, it monitors movement of beer by wholesalers in Hispanic areas. Polaroid's Fernandez takes his own informal polls in the Hispanic community. ''You can't rely on numbers alone,'' he says. ''You have to get out there and talk to the taxi driver. Meet with the funeral director. Chat with the homemaker. In Hispanic America you still play gut feeling.'' In short, you should be simpatico.