Long-term need, short-term fix
Editor’s note: Gary Berman is CEO of Market Segment Research, Coral Gables, Fla.
Multiculturalism is a comprehensive, company-wide strategy that is too often measured using the next quarter’s results. No matter what you call it - multiculturalism/diversity/urban/ethnic/Hispanic/targeted...(you get the idea) - it is an emotionally-charged issue whose funding is often driven by factors such as avoidance of sanctions rather than growing the bottom line. Consequently, asset allocation decisions of time and money are not always made using a dispassionate, objective analysis of the organization’s business and competitive environment. Multicultural marketing is a long-term project that’s typically looked at from a short-term perspective. And therein lies the paradox.
What is the solution to the paradox? Research. Objective and analytically forward-thinking models designed to drive decisions regarding multiculturalism.
Companies seeking to grow their business by enhancing their focus on multicultural and other targeted segments must answer the following frequently-asked ethnic and segment marketing questions, an indispensable exercise for marketers seeking direction in this area.
1. Which segments should I target (so I don’t dilute my efforts)?
One needs first to identify quantifiable “attractiveness criteria” in order to score segments, relative to one another and to the mass market. Research must assess, among other factors, the extent to which potential segments are sufficiently sizeable and growing (size and growth here include the absolute population; the percentage of some broader total represented by the segment; historical population growth; future growth potential, and current share, by key product); the extent to which potential segments are identifiable (the ability to score a database, to procure lists, and to access through community-based organizations); the extent to which potential segments have distinct needs or are inaccessible via existing general/mass market strategies (language, unique product needs or purchase motivators, unique channel preference array, and unique media and communications vehicles); the extent to which potential segments are reachable (availability of traditional and new media, and media consumption by vehicle); and the extent to which potential segments are profitable (current monthly spending, other category-specific measures of profitability).
Questions must be incorporated into the survey device to answer all of the above questions. The categories and criteria therein must then be weighted (based upon their relative importance in determining a potential segment’s attractiveness) before a final recommendation relative to segment selection is possible.
2. What equity does my brand have with ethnic and targeted customers, and how does that equity predict market share (so I know if my efforts are paying off)?
Various brand equity tools have been developed to help in this area. Brand equity tools should quantify the strength of brands in key target segments, help understand what drives purchase behavior for individual brands and specific categories, and help predict the impact that various marketing actions would have on a brand’s standing.
3. What is the revenue opportunity associated with the ethnic and targeted segments for my brand or category (so I know if it’s worth the effort)?
An opportunity-sizing tool enables marketers to estimate the total market potential of each product for all potential segments. Based upon this market potential, budget allocation decisions and relative product priority decisions may be made. The first component of this tool requires a calculation of the total number of potential segment members regardless of their purchase propensity (e.g., total number of multicultural segment consumers). The second component, derived from primary research, identifies the percentage of segment members who purchase annually within each product. The third line, then, is a calculation of the actual number of segment members who purchase each product annually (derived by multiplying line one by line two). The fourth line, also derived from primary research, identifies the dollar volume of annual purchases, by product (among annual purchasers). The final line, then, represents the total dollar market size (derived by multiplying line three by line four). That is, the dollar value represents the total value of annual purchases, by a segment, of each product. If share data is available, it may then be applied to this revenue opportunity to reflect a specific brand’s total dollar volume within a segment.
4. What essence of my brand must I NOT modify from segment to segment (so I don’t damage my brand by tampering with it too much)?
When a brand is positioned in (i.e., presented to) a particular market segment, all elements of the brand may be modified to appeal to that segment with the exception of the brand DNA. The brand DNA, then, is that consistent, immutable component of a brand which remains constant from segment to segment. It is altered only with disastrous consequences for the brand. The brand DNA is reflected in all strategies, advertising activities and integrated marketing activities. In primary research, each product must be rated on a variety of product attributes. It is the attributes where a brand consistently performs well (i.e., is rated highly), across all of the products, that make up the overall brand DNA. That is, these product attributes are described as being “like the brand.” Running regression analysis and factor analysis-type multivariate techniques can uncover brand DNA. One of the advantages of formulating a brand DNA analysis strategy is that the analysis goes hand-in-hand with other research tools such as linear regressions that, for example, measure importance of image and brand performance.
5. What are my brand’s (and my competitors’) key strengths and important weaknesses, in each ethnic and targeted segment (so I can market more effectively)?
Segment members must rate key product attributes. This is an exercise that can start out as a simple quadrant analysis based solely on importance ratings of attributes which are then cross-compared with brand and competitor performance on the those same attitude statements. This analysis is a big-picture snapshot of what attributes are important (or not) and where the brand stands on each measured attribute. Such an exercise using product or service attributes identifies attributes that can then be leveraged to a company’s benefit and which attributes need work due to high importance and low performance. This data then can be used for more precise and actionable data use. At the master brand level (i.e., for both included brands and core competitors), multivariate analysis can be performed to derive such factors as key drivers (product or service attributes) regressed with purchase intent, likelihood to purchase and other input variables.
6. What portion of my customer base are brand loyalists, defectors, acquirers and rejecters (so I can target them in a meaningful way)?
Loyalty segmentation allows for highly discrete, marketing-actionable segments. It also enables marketers to develop appropriate programs for and profiles of sub-segment members, including loyalty/retention programs and win-back programs. A loyalty segmentation tool must recognize that there are four categories of customers (from a loyalty perspective), as determined by a combination of actual, past and reported future behavior: those who ARE current brand users and WILL consider using the brand in the future; those who ARE current brand users but WILL NOT consider using the brand in the future; those who ARE NOT current brand users but WILL consider using the brand in the future; and those who ARE NOT current brand users and WILL NOT consider using the brand in the future. This exercise is also an ideal analysis to use with cultural in-language segments where loyalty can be affected by acculturation levels.
7. What’s the relationship between assimilation/acculturation levels and behavior as it relates to my brand (so I can target them in a meaningful way)?
Acculturation and assimilation measurement is a complex idea when it comes to marketing to cultural segments. The things that affect acculturation are many and should not only be measured based on current language usage, media usage, but also cultural factors, attitudes and even the history of what consumers bring from their countries of origin. Using acculturation scales is a good way to start in looking at acculturation levels because language is the one key, identifying factor that a cultural segment has unlike the Anglo marketplace. This gives a macro view of those who are not all acculturated, those somewhat acculturated and those who are very acculturated. This method is usually used when budgets are limited and an attempt is being made to reach the masses with in-language communications. While using acculturation scales is a good start, it is inherently limited in its scope.
The New Americas Model is one way to describe multicultural assimilation and acculturation. Instead of segmentation based solely on language, ethnicity and indirect indicators (such as length of residence and generation), which are routinely used in ethnic market research and consulting, the New Americas Model includes additional factors - ethnic tolerance and pride, need to blend, values, and ethnic preservation of attitudes - as important components. These profiles break down segments into groups with different behavior, attitudes, media consumption, lifestyles, and financial resources. Acculturation research is ever-changing, because the things that drive acculturation are not only increasingly non-static, but the way we look at them is becoming more complex.
Benchmark wave
One piece of primary research is adequate to answer all of the questions described herein. Samples may need to be split depending upon the number of products being investigated, and the survey would need to be replicated for each potential segment being considered.
Another benefit of a survey of this type (really an awareness and usage study specifically designed to answer the marketing questions posed above) is that results may serve as a benchmark wave against which segment progress may be measured in subsequent research waves.
Adjust accordingly
It is no longer news to corporate America that the demographic makeup of their customer base is changing rapidly and that they must adjust accordingly. The question of whether or not an organization should invest in a long-term multicultural business-building strategy must be resolved one way or the other by shifting the mindset from avoidance of sanctions and a focus on short-term investment to using an empirically based, rational approach to answering key questions that will support the decision.
The time to act is now, because one thing is certain: your competitors are no doubt working on their own way to solve the paradox.