Taming the Metrics Monster in the Hispanic Direct Marketing Industry.

Lured by the appeal of quick riches, many direct marketers who jump onto the Hispanic bandwagon often stumble upon a seemingly insurmountable barrier and, instead of negotiating the obstacle course, retreat, abandoning in the process promising programs.

After a decade and a half involved in some of the nation’s most ambitious direct marketing programs — in the telemarketing, finance and insurance sectors, to name a few — more than once, we’ve seen marketers throw in the towel after “unacceptable” results. An unfortunate byproduct of their “disappointment” has been to simply walk away from a high potential and still underserved market.

At the same time, we’ve come across highly successful programs, generously rewarding a consistent, strategic approach.

Based on our experience, the key hurdle that has killed (or mortally wounded) several Hispanic direct marketing programs has been a lower than expected return on investment (ROI).

In an industry where everything is tested and measured, does that mean that the Hispanic direct marketing industry has no room for expansion? Are Hispanic direct marketing programs destined to never amount to more than a series of periodic and mostly unsuccessful tests?

Not in the least. When targeted and addressed properly, Hispanics continue to be a highly responsive segment, with a growing demand for a host of products and services. The key to success lies in flexibility; flexibility in the program’s implementation, and flexibility in the metrics.

Disappointment in marketing, as in many other of life’s endeavors, is often the result of inflated expectations. And that’s certainly the case of many direct marketers who start Hispanic programs. The sequence of events could be as follows:
In their search for new markets, they become interested in the Hispanic segments. Preliminary research will confirm that an opportunity exists.

Then, as part of their due diligence they come across some amazing data, like Hispanic response rates being 50% higher than those of the general market. Or that, in their quest for relevant information, Hispanics appreciate a full mailbox. And so they take the dive.

After the first mailing they realize that response rates aren’t that much higher than the General Market. And that makes some go wobbly; while others jump ship right there and then.

Those who continue to mail successfully, however, take a more flexible approach to the metrics. They see metrics in light of the market’s uniqueness, often defined as a “market within a market.”

The following example illustrates the “problem” and how flexibility saves the day.

In General Market mailings, where universes are far larger, response rates between 0.05 and 0.75 can bring substantial revenue. In a 3-million-piece mailing, a 0.05 response rate can mean 150,000 sales. And if you divide that by the cost of the mailing, you’ll have Costs Per Acquired Customer parameters that you can happily live with and bring in a positive ROI.

Now use the same figures in a Hispanic mailing of 300,000. The same response rate of 0.05 would bring in 15,000 sales. And that substantially changes your entire scheme, dragging the ROI to unacceptable levels.

So while in the General Market a 0.05 response rate may lead to popping the champagne, in the Hispanic market it could make some want to jump out the window.

Does that mean that direct marketing for Hispanic audiences is a losing proposition? Do smaller universes doom a Hispanic Direct-to-Consumer program even if response rare at parity with the General Market?

Not in the least. The answer is flexibility: drop your production costs.

By combining efforts with the General Market, and leveraging all volume efficiencies, some mailers are managing highly successful Hispanic programs. Using the above example, adding a 300,000 Hispanic mailing to a 3M General Market mailing, will decrease substantially the Hispanic cost per piece thanks to efficiencies of scale. The 300,000 Hispanic pieces will cost a fraction of what they would have cost on their own.

Wait a minute, one might add, what about a Hispanic-specific creative?

Develop your own creative, executed against a segment-specific creative strategy. Your sole parameter/mandatory is to remain within the same format as the general market. That will lower your costs substantially, which in turn will give a breath of life to the program. And that in no way limits the package’s creativity; in fact, by including that into the creative strategy as one more mandatory, an experienced direct marketing creative team should have little problems clearing that hurdle.

A somewhat similar approach can be used for DRTV. The idea is to drop Hispanic production costs by working, where possible, in conjunction with the General Market. That requires interagency collaboration and a seamless communications structure. But it is entirely possible.

Does that exclude solo programs? It shouldn’t. What it means is that solo programs will be costlier than combined ones and that marketers should consider other elements such as lifetime value, and part of a hopefully long-term relationship.

A final thought: over the past 20 years, the Hispanic markets (and we emphasize the S because Hispanics are far from being a homogenous group) have radically changed the ways and means of marketers all around. Not even the visionaries of a quarter of a century ago would have imagined that “Hablamos Español” would become ubiquitous signage in souther cities like Raleigh, North Carolina.

And change continues to roll-in. The credit card industry, after a decade of attempting to find a way to tap into the “Unbanked” Hispanic segment, are now considering what was simply unthinkable years ago: changing the FICO scoring parameters. The February 3 issue of Hispanic Trends features an article on helping Hispanics buy their homes. Here’s a quote, “Recently, however, there has been interest in developing alternative credit scores – including interest by Fair Isaac Corp., the developer of the widely used FICO credit score,” said Allen Fishbein, director of credit and housing policy with the Consumer Federation of America. “I think the mortgage industry realizes they may not be serving many credit-worthy borrowers who could become homebuyers” Fishbein said.

If flexibility is extending to FICO, shouldn’t metrics follow suit?

by Carlos F. Torres
Partner, Chief Creative Officer
Directo Hispano
<ct*****@di************.com
(212) 935-9353
(917)670-8956
http://www.directohispano.com