Follow the Growth: It’s Time to Review Resource Allocation Towards Hispanic Marketing

   By Isaac Mizrahi – Co President, Chief Operating Officer

A couple of months ago, The Coca-Cola Company—one of the benchmarks of the marketing discipline around the world—was the latest corporation to announce the revamping of the Chief Marketing Officer (CMO) position into Chief Growth Officer (CGO). This trend was well documented by the Russell Reynolds Associates report, “The Emergence of the Chief Growth Officer in Consumer Packaged Goods” in February 2016, where the move was described as “a powerful role charged with finding new pathways to growth.”

Interestingly enough, here in the U.S., several companies starving for any meaningful growth are ignoring one of the best opportunities available in the market: leveraging multicultural segments’ insights, mainly from the large Hispanic segment, to deliver relevant ways to sell their products and services.

This dichotomy can be observed by a number of brands that decided to reduce or eliminate their segment-specific efforts to adopt the myopic version of “Total Market,” where a top-down “one-size-fits-all” strategy, developed mostly by non-experts in multicultural marketing, is adopted.

But something has been changing over the past few months. There’s a movement of brands that took the “Total Market” approach and are suddenly revamping their Hispanic marketing programs by rehiring experts and dusting off old Hispanic marketing plans. The reason? They simply failed in securing growth on their search for efficiencies and synergies and want to grow again.

A recent analysis conducted by Alma’s Marketing Science and Analytics team shed some much needed light into what some marketers are starting to realize—that Hispanics represent a disproportional slice of their categories’ growth.

By tapping into the Simmons Market Research database, the team was able to demonstrate the power of tapping into the Hispanic segment to drive growth in several business categories. Let’s review some of their findings.

If you take the automobile category as a starting point and look at car ownership breakdown (new and used), Hispanics represented 13.7% of all U.S. auto owners back in 2012, and in 2016 this number grew to almost 15%. This is driven by Hispanic automobile ownership fast growth rate of 14% between 2012 and 2016, while non-Hispanic ownership grew less than 5% in the same period.

These numbers are how most marketers look at the Hispanic segment business opportunity, and one may think that if Hispanics represent approximately 18% of the population, these auto ownership numbers are really not that special.

But here’s where things get really interesting. If you consider the number of incremental auto owners added between 2012 and 2016, the Hispanic segment added almost 4 million new car owners, while non-Hispanics added approximately 8.5 million.

This means that almost 1/3 of all incremental car owners in the U.S. in the past few years came from the Hispanic segment. In 2016 alone, this number grew to 54% (e.g. the majority of incremental car owners in the U.S. came from the Hispanic segment).

These are the results when you further expand the analysis and look at a range of different categories comparing the same metrics, penetration, growth, and incremental growth share:

These additional 11 categories demonstrated the same pattern observed in the auto ownership analysis:

•    Hispanic penetration has grown from 2012 to 2016
•    Hispanic segment is growing faster than non-Hispanic
•    When compared to its size vs. total population (18%), the Hispanic segment represents a disproportional source of incremental users, and in two cases (shopping mall visits and cola soft drink consumption) they represented 100% of the growth

We don’t believe this is a coincidence, since this pattern reflects a combination of Hispanic population growth combined with improvements on disposable income driven mostly by a stronger job market, and the effects of improvements on educational attainment achieved by the segment as a whole, which positively impacts salaries and income.

Therefore, the Hispanic segment may be one of the best growth opportunities in the years to come, and marketing budgets could benefit from a growth-oriented allocation. Unfortunately, Hispanic marketing investments still represent a small percentage of U.S. marketers’ budgets, as demonstrated by a study commissioned by the Association of Hispanic Advertising Agencies (AHAA) conducted by the Santiago Solutions Group in 2014. The study showed that the average CPG and retail companies invested only approximately 11% of their total marketing budgets in the Hispanic segment.

So, whether you’re a CMO or a newly appointed CGO, I suggest you take a lesson from Eliot Ness’ strategy to convict Al Capone, “Follow the Money,” or, in this case, “Follow the Growth.” Understand the Hispanic marketing opportunity starting from a business assessment, and then consider consumer insights, creative strategy, and creative execution. Leave the constraints of “Total Market” behind, and put your money where the growth is.

Originally published on Forbes.com.