Winning in a multicultural market: rapidly changing demographics bring opportunities. But are companies adapting fast enough to serve emerging markets?

Long heralded, the phenomenal potential of multicultural markets is now undeniably upon Corporate America. Hispanics accounted for about half of the growth in the U.S. population since 2000, according to a recent Census Bureau report. This year, the U.S. Hispanic population will top 44 million, with one-third of Hispanic households reporting more than $50,000 in annual income and the group as a whole representing $700 billion in buying power. Asian-American spending power is also climbing rapidly, estimated to reach $455 billion in 2007, an increase of nearly 300 percent since 1990.

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Clearly, a profound shift in demographics is under way--one that calls for equally dramatic changes in business strategies and practices. "Because the Hispanic-American, African-American, Asian-American and other segments are growing at two to three times the rate of non-multicultural populations, the business issue is no longer whether you need to develop strategies and tactics to target and service those segments," said Gary Berman, a partner at Si Change, a multicultural consulting firm. "It's how fast and effectively you can do that so that you are not left behind."

That conviction was echoed by CEOs gathered for a recent roundtable discussion on multicultural markets held in partnership with Si Change. Yet, while participants expressed a collective keen awareness of the need to address this cultural metamorphosis, views on how to meet that challenge varied. Following up on the roundtable discussion, Chief Executive asked several CEO participants to share their experiences with diversity initiatives and their takeaways from the discussion.

While "multicultural markets" encompass segments ranging from ethnicity and race to sexual orientation and geographic dispersion, the sector getting the most play today is the rapidly swelling Hispanic-American market. Known as the majority minority, this booming segment--expected to surpass $1 trillion in buying power in a few years--is spawning many multicultural marketing initiatives.

"Our research has found that retailers, shopping centers and packaged goods companies are beginning to cater to this growing demographic segment," reported Tara Weiner, managing partner, Greater Philadelphia, Deloitte & Touche USA LLP. "Hispanics outspend non-Hispanics in apparel, food and personal services. Their shopping patterns reflect younger, larger families who are incredibly brand loyal."

In targeting this majority minority, it's equally important to understand that the Hispanic market segment is actually a collection of smaller sectors. "People who check a box saying that they are Hispanic are from Brazil, Mexico, Cuba, Colombia or any number of Spanish-speaking countries," noted Weiner. "When talking about this market, we're actually talking about 20 or more different subcultures, each with its own unique characteristics. Additionally, some Hispanics have become acculturated to mainstream America, while others have not. Thus, while they all share a Spanish-speaking heritage, they are by no means a homogenous group."

Effective marketing to the majority minority, therefore, means reaching a deeper understanding of the segment's subgroups--Puerto Rican, Mexican, Cuban, Dominican--in terms of customs, accent, heritage, values and preferences. Yet, all too often, companies seeking to reach this booming sector do little more than translate advertisements and packaging text into Spanish or offer a Spanish-speaking option on their automated customer service line.

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"Saying 'Press one if you want to speak in Spanish' can actually be a turnoff," argued Jay S. Sidhu, CEO of Sovereign Bancorp. "It almost suggests you're a second-class citizen. That's why we say, 'Press one if you want to speak in English.'"

But Sovereign Bank's multiculturalism goes far beyond its automated service line. Its 100 percent Chinese-American staffed branch is the bank of choice in vibrant Boston's Chinese-American community. "People have such an affiliation with that bank that they will travel from New Hampshire to Boston to bank there," said Sidhu, who said the bank's appeal has just as much to do with understanding and serving the needs of Chinese-Americans as with tellers who speak Cantonese.

"It's about the comfort level of dealing with people they can relate to and trust, but also an environment that understands and respects their culture," Sidhu said. "Chinese-Americans, for example, will take care of their parents before they do anything else, so talking to them about saving for a vacation first is almost an insult."

KeySpan Services attempts to deliver a similar level of comfort to ethnically diverse customer segments in its Boston and New York markets. The company moved beyond bilingual customer representatives and bilingual billing statements to providing customer service in 25 languages and developing comprehensive multicultural marketing campaigns for Hispanic, Chinese and Korean residents in its service area.

"We didn't simply design a mailer in Chinese, we began with market research on what energy issues are important to Chinese-Americans and what type of advertisement appeals to them," said KeySpan CEO Wally Parker. "For example, some cultures prefer an ad with pictures and text they can skim, but the Chinese culture prefers a more detailed, informational ad."

The effort paid off, with the ad generating three times the response rate of a standard mail campaign. Recipients who called for additional information were greeted by a bilingual sales representative, and those who contracted with the company were serviced by Chinese plumbing and commercial contractors.

Like Sidhu, Parker cautioned that multicultural marketing campaigns must be handled with care and sensitivity. "You have to be careful not to go too far," he said. "If you speak to an ethnic community only in what you assume to be their native language, someone may say, 'My last name is Wong, but I am an American and I speak English.' We made our campaign bilingual to send the message: We understand that you may be steeped in your ethnicity and speak Chinese, but we also respect that you may speak and prefer to be spoken to in English."

Finally, while language alone won't make a multicultural marketing success, its absence can be a major fumble--and can open the door for more culturally attuned competitors. The media company Todobebe, which delivers information on health care during pregnancy and child rearing via its print, online and television outlets, was founded on a dearth of information on parenting and pregnancy in Spanish, said CEO Gillian Sandler.

At a time when the number of babies born annually in the U.S. to Hispanic parents is poised to cross the one million mark, that absence rated as a significant missed opportunity for existing media outlets. And it's one that companies serving parents-to-be continue to miss out on today. "The U.S. isn't set up to be a bilingual market yet," said Sandler. "So you have car seat companies without bilingual packaging even though they are selling in markets that may be more than 50 percent Hispanic, such as in Miami, which is 61 percent Hispanic, or California, which is 51 percent Hispanic."

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But signs suggest the tide is turning. "This is the first year that every company we're talking with acknowledges the market potential," she added. "Different companies are at different stages in getting it right and in allocating resources around it."

The HR Component

Several roundtable participants felt that the human resource component was paramount--that by developing diversity within, a multicultural customer focus would naturally follow. But diversity in the corporate ranks is just a first step, argued Sidhu. "If you're not even diverse in your employee base, you might as well forget it. But that's a kindergarten approach to multicultural marketing," he continued. "Of course, you have to graduate kindergarten before you go to high school and college. But it won't cut it on its own."

"Fostering a diverse work force internally is an appropriate, but insufficient response," agreed Berman. "Certainly, it helps to have individuals who have firsthand experience in the issues that face a particular group, but that doesn't necessarily mean that they will have the requisite skills to do a good job--nor does it mean they will be given the resources they need."

So what other cogs must be in place to tap the multicultural market phenomenon? Ideally, a company needs to be aligned around multiculturalism from top to bottom.

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"Every place a company or its brand interacts with a customer is an opportunity to develop loyalty," explained Berman. "You might have a good community outreach program and be a great corporate citizen who gives to communities--and that's fabulous. But if your customers call your customer hotline and can't get help in their own language, they will be alienated and disappointed. You need products, services, infrastructure and a long-term commitment to multiculturalism as a core business practice. It has to be at the table when priorities and budgets are established."

Alignment around a corporate culture that values diversity is paying off at Colgate-Palmolive, which has 20-plus years of multicultural marketing under its corporate belt. It's no accident that the company enjoys a 53.4 percent U.S. toothpaste market share among Hispanics, said Berman. "Colgate is the No. 1 brand in Latin America, and the company has leveraged and built upon that brand recognition in marketing to Hispanics in the U.S.," he pointed out. "Beyond Spanish-language advertising campaigns and packaging, the company has extensive work force diversity programs and sponsors numerous Hispanic community events."

Every senior manager on CEO Reuben Mark's team has spent time working in Latin America, and Mark himself speaks Spanish--as does the current president of the company and its former president. But perhaps most significant is a culture that values people and unique contributions.

"You can't necessarily change people's values," said Mark, "but you can make certain behavior valued in an organization. If, over time, certain kinds of conduct are rewarded and the opposing conduct is punished, people are squeezed out when they don't conform. And if you also hire in that image, there will be a Darwinian movement toward a corporate culture that values diversity."

RELATED ARTICLE: WHO'S WHO 

* Gary Berman is partner of Si Change Consulting, a multicultural marketing consulting company based in Coral Gables, Fla.

* Roy Fugazy is president of Fugazy International, a travel services provider based in New York City.

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* Suzanne Hogan is COO of Lippincott Mercer, a New York City-based design and brand strategy consulting firm.

* Edward M. Kopko is chairman, president and CEO of Butler International, a strategic outsourcing services company based in Fort Lauderdale, Fla., and chairman and CEO of Chief Executive Group.

* Sunil Kumar is president and CEO of Wayne, N.J.-based International Specialty Products, a specialty chemicals and products supplier.

* Reuben Mark is chairman and CEO of New York City-based Colgate-Palmolive Company, a consumer products manufacturer.

* Wallace P. Parker Jr. is president of KeySpan Energy Delivery and CEO and vice chairman of KeySpan Services, based in Brooklyn, N.Y.

* Michael I. Roth is chairman and CEO of New York City-based Interpublic Group of Companies.

* Gillian Sandler is chairman and CEO of the Miami, Fla.-based media company Todobebe Inc.

* Jay S. Sidhu is chairman, president and CEO of Sovereign Bancorp Inc., based in Reading, Pa.

* Tara Weiner is managing partner of the Greater Philadelphia region at Deloitte & Touche USA LLP.