Editor’s Note: Juan Tornoe is a marketing consultant and trend watcher. See his blog at juantornoe.blogs.com.
Recently I've been pondering about how will Hispanics, specifically Hispanic immigrants, be affected with the current crisis, how will their buying habits shift, and most importantly to you, how will this affect all those marketing to Latinos.
A few weeks back I received a message asking how to "build the case for continued Hispanic market outreach in these times of economic crisis." Then I participated on an online forum where we discussed, among other things, "the financial value of the Hispanic Segment". Right after that I received another invitation to participate in a panel where we will discuss "Investing in the Hispanic Market." You can tell that this is a hot topic for everyone (you, me, and the guy in the cube or office next to you), so I decided to share with you my thoughts on this "Hot Issue".
As you've heard me say before, the Latino community is way too diverse to gather them into one single group and come up with a rational, practical and true conclusion. It is a completely different reality for a 3rd Generation Latino Baby Boomer living in Santa Fe, NM than for an immigrant in its early 30s who's starting a family in Houston, TX. The former's experience is way more similar to that of the "average American" that the latter's will ever be.
I have purposely focused this analysis on Latino Immigrants.
First, let's get one thing out on the open, documented or not Hispanic immigrants came to America in search of a better future for them and their families that for whatever reasons their native country could not offer. For the most part, they bet all their chips on the United States believing it is The Land of Opportunity. So, the U.S. is going through a rough patch right now… Seriously, this is NOT a big deal if you have lived in Latin America for a good part of your life. Most Latinos will have a "been there, done that" attitude towards it, tighten up their belts, and face the crisis diving head first into it in comparison to the average American who's been living in abundance (relatively, at least) for their entire life and now are facing vast uncertainty.
Let's take a look at some of the stumbling blocks brought by the current economic crisis:
The Crumbling Stock Market: To which many of my fellow Latino immigrants are immune to and ask, like I did the first time I heard the term, "401 ¿Qué?" Seriously, Hispanic immigrants were not heavily invested (if invested at all) in financial instruments that have nosedived in recent months: 401Ks, IRAs, Mutual Funds, Stocks, Bonds, CDs. They have not seen a sudden and dramatic loss in equity as the average American is experiencing.
Looming Credit Card Debt: It has been widely reported in the news that Latinos are not big credit card users. According to recent data from Experian Consumer Research 58% of the Hispanic population have not used a credit card in the past 30 days, 42% of Latinos don't like the idea of being in debt, and 31% often pay cash for the things they buy, (and these numbers take into consideration ALL Latinos, not only immigrants). You can be sure that credit card debt is not at the top of the list of problems stressing out Hispanic immigrants.
Problem Banks Rising to a 13-Year High: For as long as I've followed trends in the Hispanic market banks have been striving to gain more Latino Customers. A recent report from Synovate indicates that nearly 23% of all Latino families lack any type of bank account, while the National Council of La Raza says that up to half do not have a checking or savings account. Again, these numbers represent the entire Hispanic population; for Latino immigrants the percentages, I assure you, are higher. So as many Americans are losing their sleep over the banking crisis, many Latino immigrants are comfortably resting on their very own "Mattress" bank. For Hispanic immigrants it is mostly a cash economy, banks and credit cards companies are not part of their everyday life.
Rising Unemployment Rates: According to a June 2008 Pew Hispanic Center report, "the unemployment rate for Hispanics in the U.S. rose to 6.5% in the first quarter of 2008, well above the 4.7% rate for all non-Hispanics mainly due to a slump in the construction industry." Absolutely true, but contrary to your average gringo (and I say this in the nicest possible way), losing your job is not uncommon or a big deal in the reality Latino Immigrants lived before coming to America. If they lose their job, they look for another one, even if at a lower wage, in a different industry or in the underground economy. According to a late 2007 study commissioned by the Federation of Latin American Banks, "… although 70 percent of migrant workers reported increased difficulty finding employment in today's economy, only 10 percent reported unemployment, and 68 percent found jobs within three months." The fact that the Pew Hispanic Center reports that the leading sources of jobs growth for Hispanics were business services and hospital and other health services supports these statements and shows the resilience of the Latino workforce.
The Mortgage Crisis: According to the latest figures from the Bureau of Labor Statistics' Consumer Expenditure Survey (2006), half of Latinos rent vs. owning their homes, compared to 30% of non-Hispanics. While more than half of General Market consumers hold a mortgage, only 26% of Latinos do (Synovate, 2008). Although it most certainly sounds alarming that, as reported by the Center of Responsible Lending, about 40% of all subprime loans were issued to Latinos and that 1 in 12 mortgages to Hispanics will end up in foreclosure, these facts lose impact when, as deducted from the numbers above, you take into account that only 24% of the entire Latino population holds a mortgage. Again, if you focus on Hispanic Immigrants, who are more likely to rent than to own their dwellings, this situation's impact is even less dramatic.
Remittances going Down: More than half of Hispanics send money to their family and friends outside the U.S., almost a third of them send it at least on a monthly basis. Given the current economic crisis, it has been estimated that remittances could contract between 3% and 8% in 2008; signaling a temporary redistribution of remittances money while employment patterns recover. Which means Hispanics will send probably less money, less often, to their loved ones in order to be able to continue functioning in this society. The message to their families will be, "Less is better than nothing" given the fact that, as the director of the University of California, San Diego's Center for Comparative Immigration Studies, Wayne Cornelius said, "… immigrants who have lived in the U.S. a few years will stay put because the job prospects are worse back home…" Furthermore, the remittances contraction might not even reach the mentioned numbers, given that Latinos will seek informal channels to transfer money back home, with options such as sending pre-paid cards to family members, a less costly alternative which yet offers more safety than cash to those at the receiving end.
Immigration Slowdown: Even though there are clear signs that the United States has become less appealing given the current economic downturn and the increase in raids against illegal immigrants, the pressure to seek job opportunities in America is not winding down. It is certainly true that there are less Latin American Immigrants coming to U.S. (Mexican emigration has dropped 42% over the last two years), yet the fact is that they are still coming, in lesser numbers than before, but they keep coming nonetheless. For those who continue coming, staying behind would be even worse… for them and well as for their families. All in all, immigration numbers will be lower until the benefits of coming to the U.S. outweigh the risks for those who are currently thinking it twice before heading north.
Concluding, I am in NO way trying to imply that Hispanic Immigrants are immune to an economic recession. They are feeling and will certainly feel the squeeze in the months to come, just the same as they've felt it in the past while living in their home countries. It won't be a novelty in their lives. They've survived through various crises and have successfully emerged from them. To a certain extent they know what to expect, know how to react, and know that they won't last forever. This gives them a somewhat more positive perspective regarding current events, which in turn means that they will hold back less, in comparison to the Average American, when considering acquiring new products or services.
So, to answer the question in the mind of many, "Should I be marketing to Latinos right now?" I respond with an emphatic "YES!" as well as with a couple questions of my own, "Why haven't you started doing so?" or "Why did you stop?" depending on your situation. As many companies withdraw into their trenches, this is the perfect opportunity to make your brand the one that Hispanic immigrants think of first and feel the best about whenever they have a want/need of your product or service category.
Latino Immigrants, for the time being, will be buying less of everything, but in comparison they will be buying more that their non-Hispanic counterparts. From where I stand, it makes perfect sense to reach out to them right now.