When the U.S. Census Bureau released the results of its year 2000 headcount, sociologists shivered in ecstasy over data that revealed one of the great demographic earthquakes in American history: While the white population of the United States grew by just 5.9 percent between 1990 and 2000, the African-American, Hispanic and Asian populations surged by nearly six times as much—a combined total of 35 percent.
One-third of all U.S. consumers—about 87 million souls—belong to a nonwhite racial or ethnic market. To make inroads into this lucrative market:
Business owners took immediate notice. Almost overnight, Home Depot stores in Western states replaced their in-store, English-only signage with bilingual signs in English and Spanish. Asian- and Spanish-language buttons suddenly popped up on ATMs. And multicultural marketing firms flourished.
Though cross-cultural marketing has long been on the insurance industry’s radar, continuing, critical analysis of emerging markets still represents new growth opportunities for both insurers and advisors.
As Lorraine Brock, vice president of diverse markets for Nationwide Insurance, puts it: “We’re not abandoning traditional markets. But we are trying to take notice of what’s happening within emerging markets. We’re working to put our brand name and image at the top of the minds and hearts of people in those communities.”
Individual advisors can translate Nationwide’s goal for diverse markets into their own consumer-level practices. But marketing to niche demographics requires understanding both broadly applicable principles and cultural specifics. Advisor Today interviewed experts who understand both.
The big picture
Today, fully one-third of U.S. consumers—about 87 million souls—belong to a nonwhite racial or ethnic market. Total minority buying power is estimated at $1.3 trillion, or 18.5 percent, of all U.S. buying power, according to American Multicultural Marketing (AMM), a cross-cultural advertising and marketing firm with offices in New York, Boston and Santa Barbara, Calif. That’s a jump in financial firepower of over 100 percent since 1990, compared with an increase of just 67.4 percent for the white population during the same period.
Several insurance carriers, including New York Life, Allstate, Nationwide, MetLife and Prudential, are making strong inroads into racial and ethnic markets. Nationwide, for example, is reaching out to African-American consumers by advertising on local urban radio stations, and in minority publications such as Ebony, Essence, Jet, Black Enterprise and American Legacy.
Through its agent force, the company also is taking a local, hands-on approach, getting involved with racial or ethnically oriented groups, such as Hispanic and Asian chambers of commerce, and faithfully attending local festivals and community events.
“It can’t be just a home-office program back here in Columbus,” says Brock. “These activities have to be executed at the community level and our agents are the key deliverers.”
In reaching out to diverse markets, Scott Boore, managing general agent for Colonial Supplemental Insurance in Northern California, has diversified his own staff. Planted smack between Berkeley and Oakland, the region his office serves resembles a demographic rainbow: white, Filipino, Hispanic, African-American, and people from many different Asian countries.
Still, Boore says, “When I took over the MGA position, too many people looked like me: middle-aged white guys. They were competent, but that alone really wasn’t serving the community we have here. We needed a broader mix, not only to serve clients, but to educate ourselves as well.”
Boore had observed that people often feel more comfortable buying financial services products from people who look like them. So he hired new staff that fit the bill. Still, similar skin-color does not trump competence, he says: “If the agent is not deemed competent, the ethnic background becomes moot.”
Larry Moskowitz agrees. An executive at Kang & Lee, a New York advertising firm that specializes in cross-cultural marketing, Moskowitz remembers focus groups his agency conducted for Allstate in 2001 and 2003. They uncovered what they called “a latent consumer dissatisfaction” with the way insurers and agents had been communicating with them thus far. In particular, Chinese-American consumers wanted to be approached in a way that treated them as intelligent consumers of insurance products.
Meanwhile, they also wanted to be sure of a company’s—and an agent’s—reputation. As with most immigrant communities, that means those who wish to do business with Asian Americans had better get them talking amongst themselves.
“Word of mouth in the ethnic community is everything,” says Moskowitz. That’s why, in a campaign it designed for Allstate, Kang & Lee emphasized that one in eight households choose Allstate. “One in eight implies that, hey, one of my neighbors might use these people,” Moskowitz says.
Ethnic consumers’ reliance on their neighbors’ buying experiences can translate into a rich source of referral business—or not—depending on the agent’s grasp of cultural specifics.
The African-American market
High on African Americans’ list of specifics: respect. “The issue of respect is very important,” says Brock. “Producers … need to be aware of the importance of respect in dealing with the African-American consumer. It’s something that’s valued, appreciated and looked for.”
The desire for respect is related to America’s racist past—and, sometimes, present. For white people, particularly those who have lived most of their lives in egalitarian parts of the country, an illusion exists: that racist treatment of blacks dissolved with the Civil Rights Act of 1964.
That’s not how Scott Boore remembers it.
“I grew up in the South,” he says. “You can’t tell me that the life experiences of the African Americans I grew up with were the same as mine. They weren’t. They weren’t treated the same.”
Boore remembers forming his first close friendship with an African American during college in the 1970s. “A group of us went out to a bar together and we all got thrown out because they wouldn’t serve him. It was absolutely shameful. People like [my friend] are my peers today, people in their early 50s.”
While struggling for respect, African-American consumers have also struggled for economic parity. According to LIMRA’s 2005 report on marketing financial services to African Americans, today’s generation marks the first time that black households have reached middle-class status in great numbers.
African-Americans’ median household income is $27,910, still well below that of white ($44,366), Hispanic ($30,735), and Asian/Pacific Islander households ($51,205). But as their economic situations have improved, so has their desire to direct some discretionary dollars into asset protection and investment.
|THE FEMININE SIDE|
To keep female prospects from becoming statistics—and to build a diverse book of business in the process—MassMutual’s Michelle Friedlander, RHU, suggests a number of strategies for working with women:
In educating African-American consumers, LIMRA recommends that advisors show how insurance and investment products can move them toward goals they tend to deem economically and culturally important: caring for elderly parents and relatives, providing for extended family, giving back to church and community, and financial independence.
The Asian-American market
When his clients ask him about potentially lucrative markets, Moskowitz has this to say: “If you’re looking for a high-net-worth group of people who don’t have to be convinced about savings and investments, who own their own cars and use credit responsibly, then the Asian market is kind of like fishing in a barrel.”
In other words: a sure thing.
As noted above, the median household income of Asian Americans is significantly higher than that of nonHispanic whites. In addition, Asians are 68 percent more likely to own a business than the general market, and 23 percent more likely to own a home.
And while many Asian Americans live up to their stereotypical image of frugal money managers, they don’t want to be appealed to on the basis of stereotypes. “You get a lot of companies that kind of think the solution is to show how Chinese they are, which results in a lot of ads that feature red lettering and kung fu,” Moskowitz says. “You don’t have to press every ethnic button. A better approach is to create bridges to immigrants’ lifestyle and concerns, but treat them first as consumers.”
Allstate, for example, approaches Asian consumers simply by explaining its products and services. And while that seems like a no-brainer, it actually differentiates the company from other firms that stay busy trying to out-Chinese the Chinese.
Meanwhile, as with other ethnically defined markets, Asian consumers are particularly concerned with relationships. To them, “the agent is the company, even if it’s an independent agent,” says Moskowitz. Asians appreciate having “someone down the block” who is answerable and accountable. Many, Kang & Lee found, even prefer to deliver their premium checks to their agents in person, rather than by mail or the internet. Were an advisor to tell them, “After I sell you this policy, you can take care of most customer service issues on the internet,” they would consider it bad form. Similarly, Asian customers will rely more heavily on the agent than on web searches for education about financial services products.
The Hispanic market
Latin American immigrants may be among the most optimistic of American consumers, says Javier Ismodes, vice president of Latino marketing with Genworth Financial in Richmond, Va. “They believe if you come here and work hard, you can get wherever you want to go. They still view America as the Land of Opportunity.”
That may be why, at more than 41 million strong, Hispanics are the largest and fastest-growing ethnic group in the United States. They also are a diverse market unto themselves: Hispanics in the West have often emigrated from Latin America, and are culturally different from Hispanics in Miami, who often come from Cuba, or those in New York, who are often of Puerto Rican descent.
Hispanic buying power has more than tripled in the past 15 years, to $686 billion. The Selig Center for Economic Growth at the University of Georgia projects that figure will balloon to $992 billion by the end of the decade.
Yet despite their growing financial punch, there is a significant gap in financial-services knowledge among Hispanic consumers—and a corresponding gap in market penetration. “We work with Hispanic consumers on home ownership, insurance safety nets and retirement solutions,” Ismodes says. “We notice that in all those facets there is a need for more education.”
Why? Because so many Hispanics are first-generation immigrants from Latin American countries where there is not as much emphasis on financial planning as there is in the United States. “As a culture, many Hispanics tend to think more in terms of ‘today’ than ‘tomorrow,’ even among the affluent,” Ismodes says.
Part of the reason: Saving for retirement is not a high priority. When Hispanics retire in their countries-of-origin, they are part of a larger family. According to cultural norms, younger generations take care of their elders.
If you want to see this fact come roaring to the forefront, just try discussing long-term care insurance with a Hispanic immigrant. “Don’t even mention the term ‘nursing home’ to Hispanic clients!” Ismodes says. “It scares them.”
To close the education gap, Genworth established a web-based financial services education center, www.midinero.com. (English translation: mymoney.com) Advisors hoping to build business in Hispanic communities should have a wealth of similar bilingual, Spanish/English educational materials at the ready.
Educating Hispanic clients about insurance products can go a long way toward selling them something they are more interested in than insurance: yourself.
“Hispanic consumers are more interested in the relationship than the price or the product,” Ismodes says. “If they like the agent, they will probably buy the product even if it’s priced higher than a competitor’s. If you have a good rapport [with the prospect] and provide good service, you will make the sale even if you don’t have the most competitive product.”
That’s because the Hispanic client is looking for trust—an element they often found lacking when dealing with financial institutions in their countries of origin. Because of this, Hispanics also tend to favor face-to-face transactions.
For advisors, that’s a double-edged sword. Some advisors sparkle in person, while others do better on the phone. If you’re one of the latter, better hone your interpersonal skills before attempting to crack the Hispanic market.
“We have learned that it takes longer to acquire the Hispanic customer,” Ismodes says. “You will have to do more work, visit the customer more times. But the customer will be more loyal than in the general market.”
Lynn Vincent is a contributor to Advisor Today.