AHAA Trends Report 2010

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Hispanic Share of Overall Ad Spend among Top 500 Advertisers in TV, Radio & Print.

2006-2010 Comparisons based on The Nielsen Company.

Study Designed and Analyzed for AHAA by Santiago Solutions Group.

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AHAA Trends Report 2010

  1. 1. AHAA 2010HISPANIC AD SPEND TRENDS REPORT Hispanic Share of Overall Ad Spend among Top 500 Advertisers in TV, Radio & Print. 2006-2010 Comparisons based on The Nielsen Company. Study Designed and Analyzed for AHAA by Santiago Solutions Group. association of hispanic advertising agencies Rev 11-01-2011
  2. 2. Introduction  This  study  marks  the  first  time  that  a  direct  correlation  between  overall  Hispanic  ad  spending  and  a  company’s  overall  revenue  has  been  found.  For  Best-­‐In-­‐Class  companies,  which  are  defined  as  U.S.  companies  with  a  consistent  Hispanic  allocation  of  marketing  dollars  of  more  than  14.2  percent,  this  study  found,  with  a  confidence  level  of  99  percent,  that  a  Best-­‐In-­‐Class  company  allocating  one  quarter  of  its  ad  spend  to  Hispanic  media  over  five  years  would  generate  annual  revenue  growth  of  6.7  percent.    As  the  evolution  of  the  U.S.  Hispanic  population  unfolds  over  the  coming  years,  many  advertisers  continue  to  take  a  hard  look  at  their  investments  and  propensity  for  growth  relative  to  the  Hispanic  consumer.  The  2010  Census  underscores  the  diversity  of  the  Hispanic  market  that  requires  and  demands  that  brands  and  industry  categories  reevaluate  their  stake  in  the  Hispanic  consumer  marketplace.    As  the  leading  voice  for  Hispanic  advertising,  AHAA  offers  this  Hispanic  Marketing  Investment  Trends  Report  to:   • Provide  marketers  with  a  snapshot  of  industry  performance;   • Engage  and  educate  various  industries  about  the  Hispanic  market  prospect;   • Benchmark  overall  and  industry  specific  allocation  shifts;   • Introduce  useful,  realistic  and  adaptable  approaches  for  setting  appropriate  resource  levels  by  major   product  categories.     Hispanic  Spend  Trends  among  Top  500  Advertisers  In  2010,  coming  on  the  heels  of  the  recession,  Hispanic  media  spend  by  the  Top  500  advertisers  stood  at  $4.3  billion,  only  $163  million  below  its  peak  in  2007  showing  a  strong  recovery.  However,  unlike  the  general  market  which  saw  budgets  slashed  during  the  2008  recession,  the  Hispanic  advertising  industry  has  remained  constant  at  five  to  six  percent  of  total  advertising  budgets,  from  2006  to  2010.  Showing  a  steep  turnaround  in  2010,  the  Top  500  reversed  the  previous  two  year  trend  returning  over  $500  million  to  Hispanic  media,  intensifying  their  ad  spend  by  14  percent  over  2009  levels.    • Hispanic  media  spend  by  the  Top  500  stood  only  $163M  below  its  peak  in  2007  showing  a  strong  recovery.  • The  Top  500  Advertisers’  Hispanic  media  spend  as  a  share  of  their  overall  ad  spend  stood  at  5.0%,  a  slight  share   loss  of  4  tenth  of  a  share  point  from  2009.   Page  1     Page 1
  3. 3.       Methodology  The  overall  study  was  developed  and  executed  by  the  Santiago  Solutions  Group,  a  growth  strategy  consultancy  with  methodological  review  by  Dr.  Cristina  Garcia,  professor  of  statistics  at  USC  from  2008  to  2011.  Total  and  Hispanic  advertising  spending  for  the  top  500  advertisers  was  tabulated  using  The  Nielsen  Company  data  for  each  of  the  years  2006-­‐2010.  The  Nielsen  Company  figures  include  Hispanic-­‐centric  media  (Spanish,  Bilingual  and  English)  across  network,  cable  and  spot  television  markets;  local  radio  markets;  national  magazines;  and  local  newspapers.  Using  this  data,  the  total  Hispanic  spend  out  of  all  advertising  was  calculated.    Santiago  Solutions  Group  analyzed  all  35,000  U.S.  advertisers  and  their  allocation  trends  to  Hispanic  media  for  five  years  between  2006  and  2010.  The  Top  500  Advertisers  were  grouped  into  five  levels  of  Hispanic  allocation  and  each  company  was  paired  to  the  available  published  revenue  data  for  the  five  year  period.  Various  regression  analyses  were  applied  to  identify  any  correlation  between  the  percentage  of  advertising  allocation  dedicated  to  Hispanic  and  the  company’s  compounded  annual  revenue  growth  rates.     Classification  of  Hispanic  Advertisers   Page 2For  purposes  of  this  study,  Hispanic  Advertisers  were  classified  according  to  their  Advertising  Spend  Levels  2  
  4. 4. years  between  2006  and  2010.  The  Top  500  Advertisers  were  grouped  into  five  levels  of  Hispanic  allocation  and   each  company  was  paired  to  the  available  published  revenue  data  for  the  five  year  period.  Various  regression   analyses  were  applied  to  identify  any  correlation  between  the  percentage  of  advertising  allocation  dedicated  to   Hispanic  and  the  company’s  cadvertisement  nnual  revenue  o  the  Hispanic  market  at  a  proportion  that  is  equal  to  or   • Best-­‐In-­‐Class:  Allocating   ompounded  a expenditures  t growth  rates.   greater  than  the  percentage  of  adults  in  the  United  S   tates  that  are  Hispanic  (according  to  the  2010  Census).   • While  2010  showed  a  major  spend  increase  in  Hispanic  media,  the  number  of  advertisers  ranking  in  the  top   Classification  of  Hispanic  Advertisers  • Best-­‐In-­‐Class:  Allocating  a>14.2%)  and  Lexpenditures  to  the  Hdecreased  from  95    to  80.     two  tiers,  Best-­‐In-­‐Class  (dvertisement  eaders  (6.4%-­‐14.2%),  ispanic  market  at  a proportion  that  is  equal  to  or  For  greater  than  this  ptudy,  Hispanic  dults  in  the  United  lassified  according  to  their  Advertising  he  2010  evels   purposes  of   the   s ercentage  of  a Advertisers  were  c States  that  are  Hispanic  (according  to  t Spend  L Census).  2• In  2010,  only  5%  of  the  Top  500  Advertisers  ranked  as  Best-­‐In-­‐Class,  Leaders  are  11%,  Followers  are  11%,    • While  2010  showed  a  mmajority  (57%)  was  iin  tHispanic  media,  the  number  of  advertisers  ranking  in  the  top   Laggards  16%,  while  a  ajor  spend  increase   n   he  Denial  classification.       • Best-­‐In-­‐Class:  Allocating  advertisement  expenditures  to  the  Hispanic  market  at  a  proportion  that  is  equal  to  or     two  tiers,  Best-­‐In-­‐Class  (>14.2%)  and  Leaders  (6.4%-­‐14.2%),  decreased  from  95  to  80.     greater  than  the  percentage  of  adults  in  the  United  States  that  are  Hispanic  (according  to  the  2010  Census).  •   In  2010,  only  5%  of  the  Top  500  Advertisers  ranked  as  Best-­‐In-­‐Class,  Leaders  are  11%,  Followers  are  11%,   • While  2010  showed  a  major  spend  increase  in  Hispanic  media,  the  number  of  advertisers  ranking  in  the  top   Laggards  16%,  while  a  majority  (57%)  was  in  the  Denial  classification.     two    tiers,  Best-­‐In-­‐Class  (>14.2%)  and  Leaders  (6.4%-­‐14.2%),  decreased  from  95  to  80.       • In  2010,  only  5%  of  the  Top  500  Advertisers  ranked  as  Best-­‐In-­‐Class,  Leaders  are  11%,  Followers  are  11%,     Laggards  16%,  while  a  majority  (57%)  was  in  the  Denial  classification.                                           Page  3   Page 3    
  5. 5. Correlation  between  Hispanic  Allocation  and  Revenue  Growth  Rate    • Forty  companies  showed  an  aggregate  Hispanic  allocation  of  over  14.2%  which  equals  the  percentage  of   adults  that  are  Hispanic  per  the  2010  Census.  In  order  to  create  a  Best  in  Class  set  for  the  regression  analysis,   companies  which  did  not  have  consistent  published  financials  such  as  venture  capital  firms,  companies  which   had  restated  their  earnings,  non-­‐profit  organizations  and  companies  which  grew  on  acquisition  sprees  rather   than  consumer  driven  growth  were  eliminated.  As  a  result,  the  final  set  of  Best-­‐In-­‐Class  in  the  analysis   included  the  following  14  companies:  AFC  (Church’s,  Popeye’s),  Allstate,  AutoZone,  Colgate-­‐Palmolive,   Collective  Brands  (Payless),  DirecTV,  Domino’s  Pizza,  EchoStar  Communications  (Dish  Network,  Dish  Latino),   Heineken  (Tecate),  JC  Penney,  Rent-­‐A-­‐Center,  SAB  Miller  (Miller-­‐Coors),  State  Farm,  and  Vivendi  (Universal   Music  Group).    • The  AHAA  analysis  found  that  there  is  indeed  a  strong,  positive  correlation  between  the  percentages  of   overall  ad  spend  allocation  to  Hispanic  media  and  a  company’s  revenue  growth.    The  percent  of  ad  spend   allocated  to  Hispanic  markets  is  a  very    important  determinant  of  the  company’s  overall  revenue  growth  rate   –consistent  ad  allocations  greater  than  14.2%  explain  about  half  of  best-­‐in-­‐class  companies  revenue  growth   rate.  As  of  October  2010,  a  statistically  significant  correlation  has  only  been  found  among  Best-­‐In-­‐Class   companies.    AHAA  will  continue  studying  data  to  unearth  more  learnings.     o Our  analysis  between  the  2006-­‐2010  aggregate  Hispanic  Allocation  Percentage  and  2006  to  2010   Compounded  Revenue  Growth  Rate  resulted  in  a  positive  correlation  of  approximately  .68.    By  taking   the  square  of  the  correlation  coefficient,  we  obtain  coefficient  of  determination  of  .47  for  consistent   Best-­‐In-­‐Class  companies.  That  is  to  say,  47%  of  the  variation  among  2006-­‐2010  revenue  growth  rates   of  consistent  Best-­‐In-­‐Class  companies  is  determined  by  2006-­‐2010  Hispanic  Allocation  Percentage.       o This  result  indicates  that  higher  2006-­‐2010  Aggregate  Hispanic  Allocation  Percentages  are  associated   with  higher  2006-­‐to-­‐2010  Revenue  Growth  Rates.  In  Fact,  Hispanic  allocation  alone  explains  about   half  of  the  variance  in  revenue  growth  over  a  5  year  period.  While  the  sample  size  is  small,  we  are  still   confident  about  our  results  since  additional  testing  continuously  supported  our  findings.  Further  the   results  are  consistent  with  what  many  Hispanic  marketing  leaders  already  experiencing.        • In  other  words,  the  AHAA  study  found  that,  in  general,  for  consistent  Best-­‐In-­‐Class  marketers…   ‒ a  5  percentage  point  shift  in  ad  spend  allocation  from  non-­‐Hispanic  towards  Hispanic  would  yield   between  1.1  and  6.6  percentage  point  increase  in  overall  corporate  revenue.   ‒ a  10  percentage  point  increase  in  Hispanic  allocation  will  yield  between  2.2%  and  11.2%  acceleration   in  annual  topline  revenue  growth  rate.    • That  is,  a  Best-­‐In-­‐Class  company  allocating  one  quarter  of  its  ad  spend  to  Hispanic  media  over  five  years,   would  generate  annual  revenue  growth  of  about  6.7%.  • Findings  were  found  with  a  confidence  level  of  99%.      • Ten  out  of  the  fourteen  aggregate  Best-­‐In-­‐Class  companies  in  the  analysis  work  with  a  Hispanic  specialized   Agency  so  it  is  not  surprising  that  these  companies  have  consistently  invested  and  have  positively  gained  from   rapid  growth  rates.    While  proper  investment  is  basic,  understanding  the  most  appropriate  cultural  insights  to   develop  integrated  strategies  from  communications  to  customer  experience  is  crucial  to  turning  ad  spend  into   sustainable  revenue  growth.       Page 4
  6. 6. Conclusions  Specialized  marketing  to  Hispanic  consumers  is  more  valuable  today  than  ever.  The  diversity  within  the  Hispanic  market—  age,  acculturation  level,  country  of  origin,  income,  education,  and  geographic  location—  underscores  the  importance  of  meaningful  creative  and  content  that  is  not  “one-­‐size-­‐fits-­‐all.”    Based  on  population  and  buying  power  alone,  Hispanic  consumers  are  among  the  most  desirable  target  markets.  The  U.S.  Hispanic  population  continues  to  grow  more  rapidly  than  the  non-­‐Hispanic  population  and  according  to  Census  figures  by  2014  one  person  out  of  every  six  living  in  the  U.S.  will  be  of  Hispanic  origin.    Even  through  a  deep  recession  and  softer  consumer  demand,  the  AHAA  study  revealed  a  direct  connection  between  consistent  and  appropriate  Hispanic  ad  spending  and  overall  topline  revenue  growth.  As  companies  recover  and  reinvest,  ad  spend  should  be  seen  more  broadly  as  a  corporate  investment  that  will  maximize  companies  growth  in  the  Hispanic  market.  Now  is  the  time  to  ensure  that  Hispanic  budgets  are  increased  and  optimum  allocation  to  target  Hispanics  is  secured.    According  to  the  AHAA  study,  a  company  allocating  one  quarter  of  its  ad  spend  to  Hispanic  media  over  five  years  would  generate  annual  revenue  growth  of  6.7  percent.  This  research  underscores  that  companies  can’t  just  pop  in  and  out  of  the  Hispanic  market  as  a  fad  and  see  benefits  –  real  bottom-­‐line  benefits  come  from  consistent  integrated  approaches.    While  the  AHAA  data  only  measured  above  line  advertising  expenditures,  as  leading  Hispanic  marketers  we  know  that  a  successful  Hispanic  program  must  be  multidimensional,  multi-­‐platform  efforts.  This  study  emphasizes  the  importance  of  right-­‐sizing  a  company’s  Hispanic  market  opportunity.  Right-­‐sizing  the  investment  levels  will  establish  attainable  Hispanic  revenue  and  ROI  goals.    In  addition,  Ad  spend  should  be  more  broadly  seen  as  marketing  investment  to  propel  companies  from  some  Hispanic  growth  to  full  potential  growth  with  campaigns  reflecting  the  most  appropriate  cultural  insights  and  developing  integrated  marketing  strategies  from  communications  to  customer  experience  .    Setting  the  proper  investment  for  the  potential  Hispanic  market  opportunity  can  play  a  significant  role  in  leading  companies  out  of  the  recession.  As  companies  recover  and  reinvest  after  the  deepest  part  of  the  recession,  now  is  the  time  to  ensure  that  Hispanic  budgets  are  increased  during  the  second  half  of  the  year  and  optimum  allocation  to  target  Hispanics  is  secured.       Page 5
  7. 7.   Hispanic  Allocation  Trends  by  Category  Increases  • At  $707M,  Packaged  Goods  advertisers  are  the  leading  investor  against  Hispanic  consumers,  increasing   $140M  in  ad  spend  over  2009  and  increasing  their  share  of  allocation  to  Hispanics  by  1.6  points  to  6%.     ‒ In  fact,  Consumer  Packaged  Goods  (including  Foods  and  Personal  Care)  continued  a  five-­‐year  trend  of   increasing  their  spending  toward  Hispanic  media  while  cutting  allocations  to  non-­‐Hispanic  media.  Since   2006,  CPGs  have  shifted  two  allocation  points  to  Hispanic  away  from  non-­‐Hispanic,  increasing  their  spend   to  51  percent  in  Hispanic  media  vs.  a  12  percent  increase  in  non-­‐Hispanic  media.  • The  converging  Telecom  and  Media  &  Entertainment-­‐Subscription  TV  categories  follow  closely  with  $502M  or   9%  and  $349M  or  13%  Hispanic  ad  spend  and  allocation  respectively,  investing  $850M  combined  in  2010  and   adding  $415M  to  Hispanic  media  over  2009.  As  an  aggregate,  they  surpass  Packaged  Goods  as  the  largest   category  in  dollars  spend  and  Hispanic  allocation.    • Hispanic  ad  spend  in  the  Auto  Insurance  category  increased  by  $97M  over  2009  to  12.5%  allocation  while   Non-­‐Hispanic  spend  decreased  by  $73M  over  the  same  period.  • With  a  remarkable  jump  in  Hispanic  allocation  from  0.5%  to  9.8%,  Fitness-­‐Sports  became  a  reemerging   category  in  the  Latino  community.  • From  2006  to  2010,  the  expenditures  by  Financial  Services-­‐  Tax  Preparation  &  Other  category  has  grown  by   9.6%  to  a  24%  allocation  of  overall  spend  to  Hispanic  in  2010.  • During  the  same  period,  Beer  advertisers  have  remained  loyal  to  the  Hispanic  community  as  they  allocated   15%  or  about  $150M  to  the  Hispanic  segment.  • The  Financial  Services  categories  have  tripled  their  focus  on  Hispanic  media  since  2009  reaching  $215  million   in  2010.  Similarly,  all  Insurance  categories  have  also  experienced  increases.  • 6  out  of  the  8  categories  gaining  at  least  2  points  in  Hispanic    allocation  did  so  by  not  only  increasing  the  spent   ad  spend  toward  the  Hispanic  market,  but  also  by  decreasing  the  dollar  invested  in  the  Non-­‐Hispanic  market;     Financial  Services-­‐Other,  Fitness-­‐Sports,    Insurance-­‐Auto,  Media  &  Entertainment  -­‐Subscription  TV/Radio,   Restaurants-­‐QSR,  Retail-­‐Specialty  Apparel  .    Decreases  • The  Automotive  categories  in  total,  manufacturers  and  retailers  combined,  have  shown  an  aggregate   decrease  of  approximately  $259M  since  2006.    In  contrast,  all  other  50  categories  in  aggregate  have  shown  an   upturn  of  $280M  or  +8%  in  the  same  period.      • Private  Investment  Firms’  ad  expenditures  on  the  Hispanic  segment  have  taken  a  sharp  fall  from  9.0%  in  2006   to  a  pedestrian  0.7%  in  2010.  • Similarly,  Non-­‐Profit  advertisers  took  a  nose  dive  of  10.6%  from  15%  allocation  in  2006  to  5%  in  2010.  • 16  categories  had  decreases  in  Hispanic  allocation  of  over  2%:  Travel  -­‐Air,  Lodging,  Car,  Cruise,  Retail-­‐Mass   Merch/Dept  Stores,  Retail-­‐Electronics,  Private  Investment  Firm,  Non-­‐Profit,  Financial  Services-­‐Credit  Cards,   Energy,  Direct  Consumer  Marketing,  Beverages  -­‐Non-­‐Spirits,  Automotive  Parts,  Automotive  -­‐Dealers  Assn,   Media  &  Entertainment,  Insurance-­‐Health,  Government  -­‐  Gambling  –  Lottery,  and  Apparel.   Page  7   Page 6  
  8. 8.     Page  8   Page 7  
  9. 9. Best-­‐In-­‐Class  Categories   • Three  out  of  fifty-­‐one  categories  ranked  as  Best-­‐In-­‐Class  in  2010:  Beer,  Direct  Consumer  Marketing,  and   Financial  Services-­‐Tax  Prep  &  Other.   • The  Beer  category  earned  a  Best-­‐In-­‐Class  standing  and  edged  1.2  share  points  in  allocation  to  15%.   • Direct  Consumer  Marketing  was  the  only  Best-­‐In-­‐Class  category  that  decreased  its  spending,  cutting  its   Hispanic  media  ad  spend  by  33%  over  its  pre-­‐recession  level  of  $118M  in  2006.        Leaders  Categories   • Among  Hispanic  allocation  Leaders,  the  Media  &  Entertainment  –Subscription  TV/Radio  category  hurled   the  most,  nearly  $246M  or  238%  since  2006.   o The  data  shows  that  the  Media-­‐Entertainment-­‐Subscription  TV/radio  category  has  become  a   consistent  Leader  advertiser  to  the  Hispanic  market  since  2006.   Page 8 Page  9  
  10. 10. • Both  Auto  Insurance  and  Media  &  Entertainment  -­‐Subscription  TV/Radio  went  from  being  Followers  in   2006  to  being  Leaders  in  2010  (almost  BIC),  with  a  combined  increase  in  Hispanic  allocation  of  17.5%.   • The  Restaurants-­‐QSR  category  showed  also  a  significant  increase  of  30%  or  $70M  in  incremental   investment  to  end  at  $301M  in  2010.   • The  Home  Improvement  &  Builders  category  rebounded  from  the  recession  dip  increasing  6%  over  its   2006  base  of  $91M.   • Among  2010  Leader  categories,  only  Government&  Lottery  and  Retail  Mass  Merchandisers/Department   Stores  experienced  decreases  in  overall  spending.    Follower  Categories   • Four  categories  among  Followers  increased  their  dollar  spend  since  2006,  led  by  Packaged  Goods   especially  Food  manufacturers  within  it  which  boosted  their  investments  in  Hispanic  consumers  by  44%   compared  to  only  16%  up  among  Non-­‐Hispanic  traditional  media.     • Both  the  Automotive  Manufacturer  and  Media  &Entertainment  categories  experienced  decreases  in   excess  of  $150M  each  over  2009.   • Among  Followers,  only  four  categories  experienced  decreases  in  Hispanic  allocation  from  2006  to  2010,   with  the  sharpest  decline  coming  from  the  Automotive  Industry,  manufacturers  and  retailers  combined;   with  an  approximate  decline  of  x%  in  Hispanic  ad  spend.   Page  10   Page 9  
  11. 11.  Laggard  Categories     • The  Financial  Services  category  has  increased  its  focus  on  the  Hispanic  segment,  with  both  the   subcategories  of  Investment  Firms  and  Banks-­‐Mortgages  showing  healthy  recovery.   • Amongst  Laggards,  the  Pharmaceutical  and  Automotive  Dealers-­‐Assn  categories  experienced  decreases  in   excess  of  $50M  each.        In  Denial  Categories     • Among  the  13  Denial  categories,  all  but  three  categories  of  Diet-­‐Supplement-­‐Vitamins,  Insurance-­‐Life,  and   Luxury  Brand,  experienced  decreases  in  Hispanic  allocation.   • The  Private  Investment  category  took  the  biggest  loss  among  Denial  with  an  approximate  decline  of   $86M.     Page  11   Page 10  
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