Companies miss Hispanic market.

This spring 21st Century Insurance Group launched an all-out blitz to target Hispanic consumers.

No surprise, considering Hispanics comprise 32 percent of the population in California, where 21st Century does most of its business.

What is surprising is that 21st Century's decision to cast its fate with the Hispanic market makes it a minority in corporate America.

"Just about every single company out there is interested in doing something ethnic, but not every company knows how to develop the resources or infrastructure to deal with a different consumer group," said Terry Soto, president of About Marketing Solutions Inc., a Burbank-based consultancy that specializes in ethnic marketing. "They end up talking about it a lot, but not really doing much."

Those food and packaged goods companies that were earliest into the market have continued to increase their efforts.

"It's a major initiative," said Anne Fox, vice president of advertising and media at Nestle USA in Glendale. "It's been one of our initiatives over the last three or four years. We know the importance of the market."

And even new entrants, like 21st Century, report dramatic success.

"It's been the most tremendously successful initiative we've had in years," said John Ingersoll, marketing vice president for the Woodland Hills-based auto insurer.

Despite those successes, marketing expenditures directed to the Hispanic market trail the actual size and demographic clout of the market, according to a just-released study by the Association of Hispanic Advertising Agencies.

The study, which set benchmarks for different product groups based upon population, income and consumption trends, concluded that companies should be devoting 7 percent to 13 percent of their total marketing and advertising budgets to the sector. Yet, actual spending ranges between 1 percent and 6 percent.

"I think it's simply lack of education," said Enrique Gil, president of Ethnic Marketing Group Inc., a Valencia advertising agency that has worked with Nestle and Tropicana, among others.

Those working in the area cite a number of often mistaken beliefs to explain the low levels of activity. Some marketing officials believe it would be too difficult to recruit the Latinos they need to bring the right cultural perspective to their effort. Others say they are not convinced that the statistics represent actual customers for their products. Many companies simply have not kept up on the most recent data available about the Hispanic marketplace, and they believe Latinos do not have sufficient buying power to warrant the effort.

"A lot of their attitudes about this and their reluctance to start spending against this market is based on a lot of assumptions that may not be based on reality anymore," said Carlos Garcia, president of Garcia Research Associates, a Burbank company that conducts Hispanic market research. "They may have done some research 10 years ago."

The most current research belies those beliefs.

This year, Hispanic buying power in California alone soared to $170.6 billion from $76.3 billion in 1990, according to the Selig Center for Economic Growth at the University of Georgia. Nationally, the group is expected to account for $926 billion in spending by 2007.

"Over the 17-year period, 1990 to 2007, the nation's Hispanic buying power will grow at a compound annual rate of 8.7 percent," the report concluded. "The comparable rate of growth for non-Hispanics is 4.8 percent."

But capitalizing on that promise is easier said than done, even for those companies that are convinced of the payoff.

Staffing, distribution systems and operations support must all be in place before the first Spanish language ad can even run. That might mean anything from Spanish-speaking sales representatives to an entirely new distribution chain. It can take years and tens of millions of dollars to set up the infrastructure needed.

"It literally hits every part of the organization where the consumer is likely to have an impact," said Soto. "When there are 20 other priorities, the one a company least understands is the one most likely to get pushed to the back."

When 21st Century first set its sights on the Hispanic market, officials said they were not sure what they would find.

"We're not trying to sell Coca-Cola," said Ingersoll. "We're trying to sell policies to the right kind of driver. What we were unsure about was what the consumer profile was going to be, maybe their driving record would be different."

Even after thoroughly researching the market, using focus groups and other tactics, 21st Century's work was just beginning. The company had to recruit and train Latino sales and customer service representatives, set up a Spanish-language Web site that could do everything its English site did--right down to allowing customers to compare policies against other insurers, get quotes and translate all its documents--30 to 40 forms--into Spanish.

"People said, if you're going to talk to me in Spanish, the next thing I better get is in Spanish," said Ingersoll to explain the need to set up a completely bilingual operation.

It took only about 60 days to get the operation up and running, a timetable Ingersoll says is practically unheard of.

"I've been at other companies that launched Latino campaigns, and it took two years," he said.

It took Health Net of California about a year to set up its Salud con Health Net program, a lower-cost coverage that allows Mexicans living in the U.S. or their families in Mexico to avail themselves of health care services on both sides of the border.

Health Net did not set up a separate sales and customer service workforce, but its existing employees received specialized training.

"Internally, we conduct a lot of cultural competency training and education," said Ana Andrade, associate vice president of Latino programs for Health Net. "So you do have to make an investment in the infrastructure."

Most of the potential membership for Salud con Health Net is not accustomed to paying up front for coverage in the event they need services later. Those and other cultural differences meant Health Net could not simply translate its marketing materials from English to Spanish.

"When we were developing commercials and advertising pieces, we came up with the slogan, 'Covered on all sides,"' Andrade said. The idea was to convey that the program covered participants on both sides of the border.

But, "in Spanish, it sort of means you're naked."

"When you are trying to focus on a particular cultural or ethnic group, it's not just taking things in English and translating them," said Lisa Kalustian, a Health Net spokeswoman. "You have to have that cultural context so you are communicating in a way that will resonate with the community."

Cultural issues can be compounded by the differences in the Hispanic marketplace created by country of origin or socioeconomic status. That--combined with the increasing cost of Spanish-language media, which in some cases approaches the cost of general market media--has led some companies to employ ever more sophisticated tactics.

"On the research side, people are starting to spend serious bucks on segmentation studies and qualitative studies as in focus groups," said Garcia. "As media budgets rise, a poor choice of positioning means you're going to waste a lot of money. And people don't have money to throw around anymore."

Blue Cross of California this year began an effort designed to better target its advertising and marketing dollars, in part switching from a statewide focus to an emphasis on Southern California where the concentration of Hispanics is greater.

"We are not approaching the Hispanic market as an all-inclusive, single audience," said Michael Chee, Blue Cross spokesman. "'There are multiple layers to the Hispanic purchasing community in the state. And even though there's been tremendous growth in their economic influence, there is only a certain aspect of the Hispanic consumer likely to be interested in a product like ours."