Reaching
Out - A special report on Hispanic Direct Marketing
Hispanic Market Weekly
Published: March 14, 2005
The trend started when pharmaceutical companies
gained permission to market directly to consumers, and took off
like wildfire. Today, direct marketing permeates nearly every
corner of the industry, particularly when it comes to the Hispanic
market. Growth has been significant in the DM space, where everyone
from major telecoms and financial services firms, to small and
mid-sized product and service providers are speaking directly
to the growing population of Latino consumers.
The trend started back in 1997,
when pharmaceutical companies gained permission to market directly
to consumers, instead of through doctor's offices and hospitals.
It took off like wildfire since then, with direct
marketing (DM) advertising today permeating nearly
every corner of the industry, particularly when it comes to the
Hispanic market.
The basic premise behind DM is simple: companies
create advertising that is targeted to consumers, as opposed to
businesses. Those efforts include television ads, print ads in
consumer publications, direct mail and radio ads, to name just
a few avenues. Growth has been significant in the DM space, where
everyone from major telecoms and financial services firms, to
small and mid-sized product and service providers are speaking
directly to the growing population of Latino consumers. "We've
seen exponential growth in the Hispanic DM market," says
Humberto Freydell, president at New York-based direct marketing
agency Directo Hispano. He estimates that together, new companies'
spending on Hispanic DM and existing firms that expanded their
efforts in this area, pushed spending up roughly 50 percent last
year compared to 2003.
Although most involved in direct marketing
point to continued growth, the industry is still in development
and mostly experiential. The data and spending tracking vehicles
already popular for television, radio, print and even magazine
advertising are still not active for direct marketing, particularly
in the Hispanic market. Freydell adds that financial services
firms and non-profit organizations are leading the charge in the
industry. One need only look to the overall direct marketing field
for proof of the medium's attractive qualities. According to Vertis
Retail Direct Marketing, for example, direct mail pieces alone
drive 25 percent of recipients into stores, while 25 percent of
adults who read direct mail have visited a store in the last 90
days - prompted by a retailer's direct mail piece.
Latinos are even more apt to respond to such
contacts, primarily because they receive one-tenth the amount
of direct mail that their non-Hispanic counterparts get. Michael
Saray, president of Michael Saray Hispanic Marketing in New York
and chairman of the DMA's Directo Council on Hispanic Marketing,
says publishing firms are also jumping into the fray, using direct
marketing to reach Latino consumers. "We're seeing an awful
lot of new players using Hispanic DM," Saray comments. "While
certain companies have been using DM since the 1990s, we've definitely
seen an increased interest over the last year."
Playing the Game
For San Diego-based prepaid debit and credit card provider
CardMartPlus, advertising directly to the Hispanic consumer is
extremely important. That's because the firm offers a 2-in-1-card
- one for the U.S.-based consumer, and the other for his or her
family back home. Using a combination of Spanish-language ads
in Hispanic media - including Peruvian and Colombian newspapers
and in La Opinión in Los Angeles - as well as direct response
infomercials alongside 30- and 60-second television spots, all
backed up with a call center staffed with bilingual personnel,
the company hopes to beef up the numbers of Latino consumers using
its cards this year.
"We're using DM to reach out to the large
group of non-bank users who lack the credit needed to get a traditional
credit card," says Jeff Bazán, vice president of business
development, who sees a larger number of firms using similar advertising
strategies. "There's definitely a lot of interest there."
Bazán says he's currently developing a national campaign
and plans to spend about 80 percent of the firm's marketing budget
on Hispanic DM, starting with a $150,000 test run in the San Diego
market. "Once we have a clear message and can see our cost-per-acquisition,
we expect to be spending about $1 million in our first year in
the Hispanic market," says Bazán "That's not
to say that if we see some great results we wouldn't bump it up
and get greater reach."
Saray says the Direct Marketing Association
doesn't break out Hispanic spending, but he insists that DM in
general continues to grow at a rate of 8 to 9 percent annually.
Right now, much of the growth on the Latino side is being driven
by large financial services firms that are "calling all Hispanic
agencies for help right now," according to Saray.
Among the key agencies handling this scope
of work are Zubi Advertising, La Agencia de Orcí and Dieste,
Harmel & Partners. "Having worked with Capital One, I
know their DM spending is in the multi-millions," says Saray,
who points to Columbia House, Reader's Digest and AOL Latino as
other "heavy users" of Hispanic DM. Drawing them in,
he says, is the pure accountability that the medium provides.
Put $100,000 into a campaign, for example, and either get more
than that back (in the form of ROI), or tweak your campaign and
try again. "Direct marketers can clearly say, 'this campaign
resulted in this much profit'," says Saray. "So anyone
who continues using it is obviously making money on it. AOL Latino,
for example, is mailing millions of CDs in different formats.
To do that, the company must be getting some type of response."
Eye-Opening
Roger Arevalo, vice president and director of media
at Sante Advertising in Phoenix, says similar efforts are playing
out across the country as more firms of all sizes wake up to the
$575.5 billion in buying power that the 43.4 million U.S. Hispanics
possess, according to data from Synovate's Diversity 2004 Hispanic
Market Report.
"Marketers are followers by nature, so
when one does it, the rest tend to copy," says Arevalo. "It
took the Proctor & Gambles of the world to say, 'okay, this
is a viable medium, let's use it.' Then everyone else follows
suit." Arevalo has seen it firsthand. His name makes him
a moving target for any marketer looking to penetrate the Hispanic
population with DM. "I get put on a lot of lists, so I get
a lot of direct mail in Spanish," says Arevalo. Currently,
he says that ads targeting "non-banked" consumers, pushing
pre-approved car loans and selling wireless service and phones
are the most prevalent.
Directo Hispano's Freydell points out that
banks like Wells Fargo, MNBA and Wachovia are leading the Hispanic
DM charge, followed closely by credit card providers Visa and
MasterCard, insurance companies including Allstate and Aegon,
and music sellers Columbia House and BMG. Driving those firms
to put their ad dollars in the DM space, notes Freydell, is not
only the realization that Latinos make up the largest and fastest-growing
minority group in the U.S., but also that those consumers respond
to advertising. "The average Hispanic household receives
20 pieces of direct mail annually, compared to 300 for the general
population," says Freydell. "That alone presents a significant
opportunity, not to mention the fact that Latinos are information-seekers
who would like to receive more mail and more DM efforts. They
don't think of it as junk mail, like many other consumers do."
Derene Allen, senior vice president
at Santiago Solutions Group in New York, says the largest
growth in DM comes from those firms that, by the very nature of
their business, have direct contact with consumers. Retailers
are one good example. "They see the consumer walking in their
door every day, so they know who they need to communicate with,"
says Allen, who also sees manufacturers like PepsiCo testing the
DM waters. "They're analyzing in-depth the Hispanic opportunity,
whereas their previous efforts were much more lip service in terms
of the importance of this marketplace," says Allen. "Now,
they're actually digging into the information to see how to best
service the Latino consumer, and what message they can create
to best reach this customer. That's a significant shift from the
past."
On the pharmaceutical front, Allen indicates
that companies like Pfizer (Bravo), Schering-Plough (Reynardus
& Moya), Johnson & Johnson (Casanova Pendrill), Ortho-McNeil
(La Agencia de Orcí) and GlaxoSmithKline (WING Latino)
are using DM to reach Latino consumers. Handling much of the business
are agencies like Casanova Pendrill (Johnson & Johnson) WING
Latino (GlaxoSmithKline) and Bravo (Pfizer). While the return
on investment achieved by these efforts is not available. Allen
says a quick analysis of investment levels over time by pharmaceutical
companies reveals positive results. She indicates the pharma investment
in Hispanic, as a percentage of overall advertising, grew from
0.6 percent in 2000 to 0.9 percent in 2003. Still, notes Allen,
pharma investment levels in the Hispanic market are still extremely
conservative.
DM in Action
Today's marketers are using a wide variety of DM mediums
to reach the Latino market - from television and radio commercials
to direct mail pieces and billboards. "Television is particularly
powerful, says Arevalo, from Sante Advertising. "So is radio."
Directo's Saray explains that direct mail is growing in popularity
among Hispanic DM advertisers, particularly for financial services
firms that are trolling for new clients. Direct response television
(DRTV) advertising, with its toll-free phone number response mechanism,
is also gaining ground, notes Saray, adding that the U.S. military
uses such efforts on Spanish-language television stations.
Use of outbound telemarketing is another option,
according to Saray, who points out that the number of Latinos
who have signed up for the Federal Do Not Call list is "much
smaller in proportion than the number of consumers overall who
have opted out." While some marketers experience healthy
returns on their DM investments, others come into the field with
high expectations and are quickly disappointed by how long it
takes to achieve those returns, notes Freydell, from Directo Hispano.
After all, he adds, advertising is about building long-term relationships,
not just selling one product. Marketers appear to be getting more
creative with their DM advertising vehicles, using everything
from Spanish-language websites to prepaid phone cards (equipped
with telemarketing prompts) to door-to-door and even co-op advertising
programs to reach their intended audience. Saray says marketers
are also using DRTV on Spanish-language channels, thus following
in the footsteps of successful marketers like Inglés Sin
Barreras.
Shayne Walters, president of Carmen's Cupones
y Consejos, a glossy direct mailer with up to 24 bilingual offers,
explains that he's seen an increase in the number of U.S. firms
wanting to use his company's direct mail program to reach Hispanic
consumers. Walters found that 72 percent of Latinos say they open
and read direct mail, 66 percent say they respond to it and 30
percent say they want to receive more of it. Carmen's Cupones
y Consejos, in full color 6"x 9" envelopes, is mailed
to densely populated areas, targeting Hispanic homes where there
is a female, 25-40 years old, children under the age of 18, and
an average income of $28,000 and above (HMW Archives 5/20/02.
Building). So, for about 3.5 cents per household, companies like
J.C. Penney, Vanity Fair, Gillette, America Online and even the
U.S. Postal Service are reaching over 2.5 million households nationwide.
According to Walters, the firms are seeing "significant ROI,"
with many increasing their sales volume to Latinos by 10-12 percent
as a result of their direct efforts.
Looking To Score
Saray, who was previously president of Cartel Contacto,
the direct marketing arm of the San Antonio-based advertising
agency Cartel Group, indicates that the formula for Hispanic DM
success is fairly straightforward: invest money in a campaign
that targets consumers with a quality product or service that
they truly need, and the returns will come. Both direct mail and
DRTV are particularly measurable, with results tracked either
through codes included on the direct marketing pieces, or via
the telemarketing service that's handling the DRTV calls. "That's
the beauty of direct marketing," Saray adds.
Allen, from Santiago Solutions Group, explains
that getting those television viewers to pick up the phone and
place an order depends heavily on whether flexible payment options
are offered. Dividing the market into multiple segments, based
on their numbers of years in the U.S., Allen says the "newcomer"
who has only been in the country for a few years is less likely
to pull out a credit card to make a purchase. Knowing that this
newcomer will drive much of the population's growth over the next
five to ten years, Allen advises marketers to break the credit
card mold and find more creative ways to receive payment. "That
could mean partnering with a firm that has a retail presence,
where the consumer can go to either buy a money order or even
pick up the product in exchange for cash," Allen suggests.
"The DR marketer has to be a bit more creative," says
Allen, "by forging a model that successfully reaches out
to that 'newcomer' segment of the population."
The Agency Connection
At The Vidal Partnership in New York, Alberto Ferrer
says client interest in the Hispanic DM space has grown steadily
over the last three years. Most recently, the firm has been working
with DirecTV's direct sales group, and using a combination of
DRTV, direct mail and alternative media like Val-Paks - the coupon
mailing service - to reach the Latino consumer. Other users of
DM include Inglés Sin Barreras and a number of automobile
manufacturers, all of whom are "catching on" to the
strength of Hispanic DM. "The Hispanic market has been getting
a lot of attention lately, and a high tide lifts all boats,"
says Ferrer, vice president and director of online and direct
marketing.
Historically underdeveloped, the Hispanic DM
market is attractive for several reasons, not the least of which
are the ROI and accountability that channels like direct mail
and DRTV can provide. As an increasing number of firms seek out
ROI and accountability from their media purchases, Ferrer expects
Hispanic DM use to expand. "Hispanics get a fraction of the
mail that the general market does, and they actually read it,"
confirms Ferrer, adding that DM tends to work best for purchases
that need extra consideration before buying. So while soap manufacturers
may not use it, he says telecom providers and car manufacturers
will.
According to Freydell, from Directo Hispano,
several Latino agencies stand out in the DM world. Bravo is by
far the largest, he says, with Vidal's DM group also claiming
a portion of the business. Where those agencies are challenged,
he says, is in finding qualified personnel to handle the account
management, creative and production. "When you get brand-oriented
people doing DM work, the frustration index rises very quickly,"
Freydell says. Expect that frustration level to rise as an increasing
number of firms turn to direct means of reaching the Hispanic
audience. While solid ROI numbers are unavailable, Freydell notes
that the proliferation of programs is "an indication"
of success.
"What agencies and marketers need to remember,"
he says, "is that Hispanic efforts must be flexible, and
stated from the outset. It goes beyond break-even point."
Take into consideration that most mailings are bilingual, that
packages are the same size as in the non-Latino market, and that
universes are far smaller in the Latino segments, Freydell points
out. "So you lack economies of scale and efficiencies based
on large volumes," he says. "Bring into your model lifetime
value, a loyal customer who can become a brand advocate and is
open to friend-get-friend and affinity marketing."
Affinity marketing includes e-mail promotions,
banners or traditional media targeted at consumers and based on
established buying patterns while friend-to-friend advertising
promotions reward one "friend" for referring one or
more friends, or relatives, to the advertiser. "What I'm
saying," Freydell insists, "is that ROI, as other elements
in the complex and dynamic Hispanic equation, must be seen in
a more flexible light."
Jumping Through Hoops
The Hispanic market's youthful makeup is both a blessing
and a curse for DM marketers, says Maria Almendáriz, director
of new business development for U.S. Hispanic at Los Angeles-based
In Clover Marketing. With a median age of 25.8 years (10 years
younger than for the U.S. population as a whole), Latinos have
more exposure to all types of media…and clutter. "They're
bombarded by phone, internet and 77 Spanish television channels
to choose from," says Almendáriz. "As a result,
brand loyalties and preferences are being formed now among these
young segments."
Standing out from that clutter takes a calculated
approach. Those firms that produce culturally-appealing products
and services, identify target markets by segments of the population
and learn the formulas behind the media, payment processing and
fulfillment of packages that apply to the Hispanic market, are
finding the most success, Almendáriz notes. Dan Casey,
executive vice president at Los Angeles-based WorldLink Media,
remembers a time when a media buyer had two choices for Latino
television: Univision or Telemundo. Now, to get a DM campaign
launched on television or radio, marketers have their pick of
the litter. "We're seeing a proliferation of Hispanic cable
and satellite channels, many of which were already established
in South America and moved separate feeds to the U.S.," says
Casey. "There are a lot more options than there used to be."
Growing right along with those opportunities
is the number of U.S. marketers targeting Latino consumers via
DM. The proof is in the numbers, says Saray, who has watched the
number of attendees at Directo's annual conference grow steadily
over the last few years. Also growing are the number of calls
that his firm receives each week from companies interested in
getting a piece of the Hispanic DM pie. Freydell sees the numbers
of marketers using DM growing exponentially over the next two
years, as corporations like Ford, AT&T and Sears all take
aim at the Latino consumer via DM efforts. Following in their
footsteps will be the nation's small to mid-sized firms, eager
to tap into the Hispanic market's buying prowess and growing size.
To effectively reach them, Freydell says marketers
will have to focus on developing long-term relationships with
multiple generations of Latinos, not just hitting them up for
the one-time deal. "Hispanic DM provides an opportunity to
advertise in a way that is personal and direct," Arevalo
adds, "and that communicates in a language that is understood
and is relevant to the Hispanic consumer."
