As Obi-Wan Kenobi said, “It takes strength to resist the dark side. Only the weak embrace it.” Here is why… Companies cutting Hispanic dedicated media allocation, while increasing allocation to English media, tend to suffer a reduction in their sales growth. In fact, the reduction of the growth is sometimes so large that it could wipe out nearly the entire annual growth attained by all competitors in a category.
The Cost of the Dark Side: Across CPG-Retail, Auto and Financial-Insurance Services categories: a five point cutback in Hispanic media allocation yields a reduction in Total Market revenue growth rate of minus 1.8% per year.
What’s the learning? A near proportional balance of opportunity and investments yields incremental growth rates for products and services. Companies that allow their brands to slash meager budgets and continuously under-invest in the Hispanic segment are minimizing their growth potential at their own peril.
What is Digital Marketing? Advantages and Disadvantages
The Dark Side of Cutting Hispanic Media Allocation
1. Since we have already written at length about the “Bright Side” of
the connection between increased Hispanic dedicated media
allocation, defined as advertising buys in any Hispanic-dedicated
media channel regardless of language whether Spanish, Bilingual
or English, and its impact on overall sales growth, we wanted to
shed some light around the “Darker Side of the force”…the less
talked about impact of slashing Hispanic allocations. Indeed,
AHAA studies based on Nielsen Monitor Plus adSpend data coupled with company financials from their 10-K
reports, have documented that brand owners who increase their Hispanic dedicated media allocation
generate a lift in overall (Total Market) revenue growth rates. Or in more direct words, marketers that shift a
share of their total AdSpend allocation from English media (Non-Hispanic-centric) to Hispanic dedicated media
create a competitive advantage, a Total Market boost that is measurable as accelerated growth rate.
But, the inverse is also true and equally proven by the analysis SSG has performed for AHAA. As Obi-Wan Kenobi
said, “It takes strength to resist the dark side. Only the weak embrace it.” Here is why…
Companies cutting Hispanic dedicated media allocation, while increasing allocation to English media, tend to
suffer a reduction in their sales growth. In fact, the magnitude of the resulting slow-down can wipe out the
average growth of the category as is the case in the Consumer Packaged Goods & Retail category (Read CPG
Case Study below).
The Cost of the Dark Side.
Across three major categories: CPG-
Retail, Auto and Financial-Insurance
Services, AHAA’s study demonstrated
that a five point cutback in Hispanic
media allocation yields a reduction in
Total Market revenue growth rate of
minus 1.8% per year. It is clear that
there are numerous drivers to revenue
growth, such as category macro trends,
product innovation, pricing, channel,
experience, distribution, positioning,
and reputation among many others.
Despite all these drivers, direct targeting through Hispanic Media Allocation accounted for
18% of companies’ variation in revenue growth. This figure jumps to 28% amongst CPG-
Retailers –clearly a major driver of corporate financial performance.
2. The Dark Side Is More Powerful Than You Know –Darth Maul
CPG-Retailers Case Study
Case in point, Consumer Packaged Goods & Retail marketers among the Top 500 advertisers in the U.S. invest
on average 11% of their ad spend on Hispanic media. The study’s regression forecasting model uncovered that
on average for those CPG companies trimming five percentage points from
Hispanic allocation over 5 years, saw their overall pace of sales revenue
decline by -1.7 percent points annually.
Not a lot? Think again.
The average revenue growth among those CPG that did not change their
allocation was only a mere 1.7% per year and for those shifting 5 points of
allocation from Hispanic to English media, the resulting Total Market sales
growth becomes zero –no growth at all! Case in point, General Mills and JM
Smucker reduced Hispanic media AdSpend 3-4 points and their overall
growth declined to -4% and -5% respectively. Indeed, something as small as
a 5 percent of Hispanic dedicated allocation has major influence in overall
sales momentum.
Automotive Case Study
Similarly, we also looked at a booming category –Auto (including
manufacturers, dealers, dealer associations, services, tires, and parts) for
clues on the impact of slashing Hispanic allocation on growth rates.
The Auto sector has been recouping sales at an accelerated annual pace of
7.8%, in large part fueled by the economic expansion of Multicultural
Millennials, Hispanic, African-American, Asian American and Mixed Race
segments who have grabbed 100% of all newly created jobs in the US since
the end of the Great Recession. This category had increased Hispanic media
allocation to 8.4% by 2014.
For Auto marketers like Penske, Genuine Parts, and Group1 Automotive and
others augmenting Hispanic allocation five points, the overall growth rate
averaged 8.9% and for companies that slashed their Hispanic dedicated media allocation by five points the
average sales growth was only 6.7%. This means that shifting five allocation points away from Hispanic media,
in general, results in a deceleration of 1.1% of total market sales revenue growth per year.
Financial Services/Insurance Case Study
One final validation in an “emerging” category with historically very low Hispanic media allocation –Financial &
Insurance Services, also revealed similar findings. Here the average Hispanic media allocation increased but
remained at only 5.5% as of 2014. On average companies experienced a 1.8%
annual revenue growth rate. For those that hacked 5 points of Hispanic
allocation, the estimated growth was negative 2.7% per year, however, for
companies enhancing their Hispanic allocation by 5 points, the estimated
growth was 6.4%. The study which was presented at the ANA Multicultural
Conference last November (and available at AHAA.org) signals that
companies like Wells Fargo, Regions Bank and American Family Insurance
have been increasing their Hispanic focus while others like Bank of America
have retreated their Hispanic efforts. The results of this category point out
that the impact of reducing 5 points of Hispanic allocation for
Financial/Insurance service firms is extremely significant, stripping 4.5
percentage points in overall annual growth rate.