As the Hispanic market continues to evolve, more and more clients are asking about the right approach to the Latino market. How to find the best segmentation model is one of the most frequently asked questions. I always reply with another question: what are you trying to solve?
It’s because a one-size-fits-all solution doesn’t work when it comes to segmentation. Clients must be very careful when being approached by companies trying to sell their own “proprietary Hispanic segmentation” model. Most of these predetermined segmentation models are not based on a specific product or category. Rather, they can be too generic.
The Usual Suspects
Originally, language was the default variable to segment U.S. Latinos. Well, though hard to believe, language still seems to be the first thing many companies think of when it comes to Latino marketing.
Focusing on language preference doesn’t help you understand who the consumer is in terms of identity and behavior. It might definitely have an impact on media selection but it shouldn’t dictate your strategy. It doesn’t make much sense. It’s like, let’s say for a general market campaign you decided to create different messages based on the various English dialects (e.g., lowlanders vs. New Englanders).
Country of origin comes second to language. U.S. Hispanics are not all the same: like Mexicans and Puerto Ricans. But, as marketers, we need to get past those differences and find common threads. For example, if you are a Mexican beer you might think about targeting Mexican Americans. But the realities of Mexicans living in the U.S. are certainly different from those living in Mexico. Do they want to stay connected to their heritage or seek new experiences? And if that’s the case, why limit your sales only to Mexicans? Why not expand your potential market by targeting other Latinos too?
Actually, the marketplace has become more complex and the usual variables might be completely aligned with the Latino population dynamics.
Acculturation, Important but Misleading
In the past few years, acculturation has become one of the most overused variables in the Latino market. This segmentation approach assumes that people within the same level of acculturation (a.k.a. level of adaptation to American culture) will behave the same. I agree that acculturation plays an important role and needs to be considered. But as I discussed in my previous column, acculturation is not a linear process anymore.
Let’s see some examples of how acculturation can be misleading.
Assumption: High-acculturated Latinos earn more money than lower-acculturated Latinos.
Fact: Foreign-born Latinos make up 55 percent of Hispanic households with an annual income of over $100,000.
Assumption: More acculturated Latinos have a very similar behavior to the general population.
Fact: Take sports as an example. More acculturated Hispanics have a higher tendency toward American sports, but that’s in addition to sports from their native countries. They add rather than replace.
Assumption: Differences in acculturation level implies different mindsets.
Fact: There are more similarities than you might think, according to these statements based on Experian Simmons data.
Tell Me How You Behave and I’ll Tell You Who You Are
When I approach Hispanic segmentation for any of our clients, I always stress the importance of behavior on top of other approaches. It’s critical that the model is based on how a consumer behaves specifically to your product category. Attitudes toward religion might not be relevant when it comes to selecting a mobile phone carrier.
How individuals have behaved in the past can be a far more accurate predictor of future behavior than others discussed above. And, at the end of the day, that’s the sole purpose of segmentation: to group people trying to predict how they will respond to a specific marketing effort.
Behavioral segmentation allows you to identify the relationship between different variables (attitudinal, psychographics, interests, technology adoption, media consumption, connection to Latino culture, etc.).
Then, as a second step, you can cross tab segments against the “usual suspects” (language preference, acculturation, country of origin, and other demographics).
I’m not saying just go for behavioral models. What I’m saying is that you should go beyond language and acculturation. Build a specific model for your brand that combines all variables that have an impact on your business. Test and learn.
Questions Your Segmentation Model Should Answer
- Is it relevant? Whatever the approach you decide to use, make sure that the segmentation is based on your specific category and the business challenge you are trying to solve.
- Is it actionable? Segmentation models only works if they can affect/have an impact on strategy, messaging, and media selections.
- Is it predictive? Your model should help anticipate consumer behavior.
- Are segments substantial? Though Latinos have contributed to more than 50 percent of U.S. population growth, they represent 16 percent of the total population for now. Having models that segment Hispanics in seven different groups would make it impractical and difficult to justify the resources needed.
- Does it make sense? At the end of the day, everything is about business smart. If your segmentation model makes strategic sense, go for it.