Hispanics on the Internet

After lagging behind in Internet usage for years, the Latino online population continues to surge. With half of U.S. Hispanics using the Internet - half bilingual and half Spanish-dominant- growing at fifteen to twenty percent per year, they outrank the Internet population of any Spanish speaking country in the world.  Despite these significant developments, relevant Latino Web content and advertising in Spanish is scarce.

Hispanics want more control, more choices

English content web sites can and do reach large numbers of Hispanics (52% of online Hispanics prefer to speak English), however most bilingual as well as Spanish-dominant Latinos would like to see more Web sites not only in Spanish, but web sites with content that is highly relevant to Hispanics.  According to a 2004 AOL study of online users, half of bilingual users would like more Web advertising in Spanish and cite that they might be more inclined to shop online if the advertisements were also in Spanish.

As current Latino users become more dependant on the Internet for information, shopping, banking, and communication, they will demand more relevant content and more of it in Spanish. They will want to exert increasingly higher levels of control through a broader and more robust menu of online choices. For financial services providers, according to comScore, Media Metrix, a New York-based company that measures Internet visitors, Spanish-language content can enhance credibility and make consumers more comfortable, ultimately creating a competitive advantage in customer acquisition and retention.

• of total Internet Hispanic users, 20% prefer use of Spanish, 28% preferred equal use of Spanish and English, 52% prefer use of English

Hispanics are more accessible than ever

The Internet represents the most promising communication and interaction medium for reaching Latinos as its use becomes ubiquitous and penetration continues to dramatically increase. Financial institutions can interact with Hispanics in ways that are far more effective and cost efficient now that the Latino Internet user population has reached critical mass.

Financial services providers, through the robust segmentation capabilities of the Internet, can surgically target Latino sub-segments in ways that would be financially prohibitive through other media. They can develop language appropriate messages based on the cultural background of users, or tailor a communication according to the level of banking sophistication of consumers (“banked” vs. “unbanked”, transactor vs. investor, etc.). Similarly, they can offer a highly targeted service that spans geography and satisfies the cross-border needs of a particular customer class. A service of obvious benefit to provider and user is in the area of international funds transfers. While half of Hispanic Internet users have family living outside the U. S., only five percent have sent money to them via the Internet, opting to send money by other means.

Hispanics to drive Internet use, online banking

Overall, Latinos using the Internet are younger, more affluent, and better educated than non-users and show online usage patterns and behavior that are relatively similar to the user population at large.  Moreover, half of them already conduct banking related transactions online, such as paying bills and opening accounts. Between 2003 and 2004, there was a 20% increase in the number of Hispanic visitors to major consumer bank Web sites compared to a 10% rise for the general population, according to comScore. Additionally, banking sites saw a 47% increase in page views by Hispanic visitors versus 26% increase for visitors at large. As online usage by current Latino users increases, and as new ones join the ranks, they will reward early online providers with their long-term loyalty.

As Internet use by adults in the U.S. begins to flatten, future growth will be driven somewhat by those that are more ethnically diverse. Substantial growth in overall Internet users is unlikely without more Spanish-language content and more compelling reasons for non-users to switch sides, particularly with Hispanics.

Competing in the Hispanic Market

The US Hispanic market is an intricate weave of national origins, racial blends, generational layers and assimilation trends.  And it is no less socially and economically stratified than the rest of American society.  Even the 24 million US Latinos of Mexican ancestry are, by themselves, an eclectic ensemble of ethnic, regional and social idiosyncrasies.  Therefore, it would be erroneous to think that the Mexican population is a homogenous entity that can be addressed via a one-size-fits-all approach.

The Hispanic market is an ocean of many tides and navigating its currents is a daunting but inescapable challenge.  Competitive strategies based on simplistic assumptions will only deliver scant results.  To reach exceptional levels of performance it is necessary to surmount trite and superficial views of Latinos.

Marketing to Hispanic consumers is not a translation chore

Language is just one aspect of a far more complex enterprise.  In fact, only about one third of Latinos are exclusively Spanish speakers.  Therefore, advertising in Spanish media will not suffice to build a loyal franchise of Latino customers.  It amounts to no more than an entry level effort.  Market leadership is reserved for those who venture beyond that easy threshold and engage a full complement of outstanding competitive practices.

Is there a broad platform to address Hispanics?
 
Its intrinsic diversity notwithstanding, the US Latino population does exhibit some essential commonalities that, if properly understood, can sustain a broadly based competitive strategy.  Certain values and attitudes typify most Hispanic consumers.  But in the financial services arena, these shared traits are less easy to discern than in other categories.
 
Many marketing messages fail in Latino markets because the sender ignores the fact that most Hispanics are still building the necessary financial acumen to respond.  This appears not to be an educational attainment issue.  Several studies on the subject have shown that Latino college graduates tend to be less financially diversified than their non-Hispanic counterparts.  Their participation in the securities markets still remains below their investment capacity.  In our view, this behavior has less to do with academic achievement and more with Hispanics’ particular sense of existential priorities and with culturally influenced notions of how wealth is created and preserved. 

Extended, enduring familial links that reach back to the country of origin is also a characteristically Hispanic trait. This explains why Latinos spend more in long distance calls than most other demographic segments.  Firms who realize the financial services implications of this will earn the loyalty of many Latinos by responding with innovative, accurately targeted offerings.

To see the big picture, focus on the local

In financial services, competition is for the most part a grassroots level endeavor. More market share is won or lost at the branch or sales office level than anywhere else. Therefore, the complexion of the Latino population in each market geography must be recognized and addressed.  The high ground will be held by financial institutions whose strategies follow, marketplace by marketplace, the contours of Hispanic diversity.

To make deep inroads into the Latino market, competitors must simultaneously execute close fitting tactics in multiple trading areas.  This requires Hispanic marketing and sales competencies that permeate large swatches of their organizations.  It also requires the capacity to swiftly adjust and re-align product lines.

It all sounds portentous because it is.  But the pay-off can be disproportionately rewarding. Much of the expected growth in the financial services industry will come from Hispanics as they increase their use of financial services.

The inner diversity of the US Hispanic market poses a formidable challenge for national brand marketers. Yet, for regional and local financial institutions, it actually represents an unusual opportunity to compete on level terms with the money center behemoths.

The Trap of Benign Neglect

About half of Hispanics do not have a real preference regarding the use of either “Hispanic” or “Latino” as a broad descriptive term.  However, among the close to fifty percent that do express a preference, the difference within this group further muddies the definition issue.  In California, New York and Florida, “Hispanic” is preferred by a ratio of two to one over “Latino”, while in Texas, it is almost a six to one ratio.  In New Jersey, however, it is much closer, with a 27% vs. 20% preference. Among US-born, “Hispanic” is preferred over three to one vs. “Latino”. As the debate continues, marketers must be mindful of the use of broad labels and sweeping categorizations, given the emotional aspects surrounding this issue.

Spanish, English, Spanglish?
 
There is a large base of literature concerning the relationship between income vis-à-vis age, language proficiency and educational level.  Therefore, it is worrisome to note that the Brookings Institute has found that in markets such as the Washington, D.C. metro area, “Limited English Proficient” (LEP) Hispanics increased by almost eighty percent between 1990 and 2000. This means that a thorough understanding of current and future language dynamics of Spanish dominant households (47%) vs. bilingual households (28%) vs. English households (25%) is critical for marketing success.

Additional important considerations in the development of a Hispanic market communication strategy is the shrinking of bilingualism and the use of “Spanglish”.  Bilingualism tends to disappear over time, with only 22% of the second generation born in the US being able to speak both languages. At the same time, the use of “Spanglish” becomes more widespread across all Hispanic groups and exhibits unique national and cultural characteristics in different enclaves, such as the Texas border area, the South Bronx, South Florida, etc.   

Are all Mexicans the same, or for that matter, Puerto Ricans, Cubans, etc.?
 
Most Hispanic immigrant groups tend to be composed of distinct cohorts with different arrival dates.  The differences within these vintages influence their attractiveness to the financial services industry, given that they can exhibit varying long-term profitability potentials.  For instance, the descendants of the Mexican families that arrived in this country prior to the 1620 Mayflower landing obviously have very different socio-economic characteristics from those who arrived during any of the subsequent five migration waves.  Similar observations can be made about the Puerto Rican factory workers that arrived in New York City after WW II vs. those professionals currently leaving the island and migrating to Central Florida.  Recent research shows that the first three waves of Cuban migrants (1960-1975) had already surpassed the US-born average earnings after only 22 years in this country vs. the last two less successful waves.  When marketing to Hispanics it is important to have a thorough understanding of the dynamics of each national group as well as those of the cohorts within each group.

Are Hispanics still geographically concentrated?
 
Latinos have traditionally concentrated in cultural pockets throughout the United States; however, that concentration is shifting.  The geographic dispersion currently taking place within the US Hispanic population further complicates the challenge of identifying and targeting high potential Hispanic markets.

Although, Mexicans continue to be concentrated in California and Texas, in Florida the Cubans are no longer a majority due to a strong influx of Puerto Ricans, Mexicans and South Americans. New York, New Jersey and Chicago show similar dynamics, with Puerto Ricans no longer the dominant Hispanic group. Presently, 28 cities have a Hispanic population of over 100,000. More specifically, even though ten traditional markets such as New York City, Los Angeles, and Miami, etc. have been “home” to most Hispanics, a Pew Center study identifies 61 “new Latino destinations” which have exhibited rapid growth since 1990.  Markets such as Ft. Lauderdale and Orlando in the recent past have absorbed significant numbers of Puerto Ricans from the Northeast and from Puerto Rico, as well as other nationalities fleeing Miami’s high-priced housing market.
 
Why South Florida?

Understanding the Latino market based on its cultural, financial, labor and business stratification, among others, is critical for organizations targeting specific sub-segments.  As an example, the economic and political success of Cuban immigrants in South Florida during the past forty years, and the more recent Latin American influx of high net worth immigrants, make this geographic area center stage for any Hispanic high net worth strategy.
  
Although Cubans only represent three percent of the Hispanic population, they control ten percent of all small businesses in the US as well as 14% of the revenue.  This incidence of successful businesses translates to increasing wealth and political power.  It is estimated that of the 75 wealthiest Hispanics in the US, one-third are Cuban.  In Miami, where they represent about fifty percent of the population, they control the city’s import/export business, construction and the services industry.  The heads of Miami’s largest bank, real estate development company and top law firm are all Cuban-born or of Cuban descent.  The same applies to politics.  The Mayor of Miami, Florida’s State Attorney and three of Florida’s Congressmen as well as a Senator are Cuban-American.

Strengthening the economic power of this Hispanic geographic center is the steady migration over the past decade into South Florida of highly educated, well-trained professionals and aggressive entrepreneurs from Latin America. For instance, sixty percent of Venezuelans and forty percent of Colombians  who have recently migrate to South Florida are college graduates, according to StatMark, a Miami, Florida market research firm.

Why the entrepreneurial segment?
 
Over 1.2 million small businesses in the U. S. are owned by Hispanics, and the number of Hispanic-owned firms is growing at twice the rate of all other firms, according to the Small Business Administration. This unprecedented growth is expected to continue for years to come.

However, the financial services industry has not kept pace with this rate of growth when it comes to serving the borrowing needs of Hispanic entrepreneurs. Many of them are often confronted with significant borrowing hurdles which place undue pressure on an otherwise viable business endeavor.

Clearly, the challenge for financial institutions lies in discerning potentially profitable credit prospects among Hispanic-owned businesses - from single proprietor shops to billion dollar firms.  Furthermore, different markets have different small business profiles.  Geographically, California’s Hispanics account for thirty one percent of the State’s population vs. Florida’s eight percent.  Still, California and Florida are tied with an equal number of firms in the U.S Top 100 Hispanic Companies list.  In terms of revenue, Florida’s Hispanic companies dominate, with about one-third of total revenue.