In many ways, direct marketing is the stepchild of Hispanic marketing - a small part of business at some Latino advertising agencies. There are relatively few agencies of any kind that dedicate themselves only to Hispanic direct marketing and most clients do either little or no direct marketing to Latinos. Many companies that test direct marketing programs among Hispanics don't end up launching full-fledged campaigns. And, there is no way to know how much is invested on all direct marketing to Hispanics in the U.S.
Yet, by all anecdotal accounts, direct marketing to Hispanics is growing. More marketers of all types are at least experimenting with direct marketing to acquire and retain customers, as well as to increase sales and cross-sell products and services. According to a study by the Direct Marketing Association (DMA) - Reaching the U.S. Hispanic Market: Consumer Attitudes and Buying Behavior - 77 percent of Hispanics received direct-mail credit card offers in 2005, up from 49 percent in 2004 (HMW Archives 6/5/06. Turned On By Direct Marketing).
At Latin-Pak, a ten-year-old Hispanic direct marketing firm, revenue increases every year and roughly 60 percent of the company's clients offer repeat business, says CEO Vincent Andaloro. Carmen's Cupones y Consejos, a glossy co-op direct mail program targeting Latino consumers, expects to increase the frequency of mailings from the current five times a year to between 8 and 10 times annually in the coming years, says company president Shayne Walters.
On the agency front, several Latino shops have dedicated departments working primarily on direct efforts. At New York-based The Vidal Partnership, millions of direct-mail pieces are mailed each month, says Alberto Ferrer, the agency's director of direct and digital marketing. "Direct mail is growing pretty quickly and is most of our direct marketing business," he adds. "If you consider the internet as part of direct marketing, then our largest segment is direct mail followed by online, and then television." In Houston, López Negrete Communications shows direct marketing as "a growing percentage of our revenue," says Moisés Piedra, the agency's director of direct marketing.
In The Driver's Seat.- The growth in direct marketing efforts aimed at Latino consumers is driven by several factors - primarily a client's quest for a return on investment.
"Everybody is looking for return on investment on their marketing spend, and they have a difficult time doing it with brand advertising, broadcast television and other forms of mass advertising," says César Melgoza, president of Geoscape International, a provider of market data and intelligence.
It's relatively simple to measure the results of direct marketing through the numbers of calls and sales via toll-free numbers and codes on direct mail pieces. "Business is increasing as direct mail becomes more recognized for its ability to drive and deliver measurable return on investment," says Walters.
Another reason for growth: Latinos view direct mail more favorably than non-Hispanics. According to the 2006 DMA study, 49 percent of Hispanics said they receive the right amount of advertising by mail or wouldn't mind receiving more - up from 38 percent in 2004. Seventy-two percent of Latinos say they always read direct mail, 40 percent say they get only 10 pieces of direct mail a year, and 39 percent say they want to receive more.
"Latinos overall receive less mail and are not as jaded toward it," says Karla Fernández, president of K. Fernández & Associates, a multicultural marketing communications firm offering direct marketing services. "While Hispanics use television for product information, with mail they can study it together and they don't have to wait for the television commercial to run again," says Fernández. "Most direct mail offers are bilingual. Maybe a parent speaks Spanish and a child speaks English and they compare offers to see if they are the same."
Under The Radar.- Industry experts say it's not clear how much direct advertising targets Hispanic families nationwide. The reason: direct marketing companies, advertising agencies and corporations don't report their direct advertising spending, and there is no way to estimate it.
"You can go to Univision or Telemundo to see how much a spot costs," says Vidal Partnership's Ferrer. "But you can't get similar information from the postal service or companies that do direct marketing. I couldn't tell you how much mail my competitors are mailing."
Adding to the problem, some companies account for Hispanic direct marketing under their promotion budgets - not their advertising and marketing budgets. Ferrer believes that, because direct marketing spending goes largely unreported, more of it reaches Hispanics than is widely believed. "One of the beauties of direct mail is that it's under the radar," he notes. "You can spend millions of dollars on a target without the competition knowing what's really going on."
That's the case with some large telecommunications and financial services companies that do direct mail on a massive scale to all consumers, including Latinos, according to one industry insider. "Credit card companies mail big numbers to Hispanics," says the insider. "One major company was mailing 80 million pieces a year, but numbers like that never get reported."
What's What?- Direct marketing comes in several forms. However, direct mail is the backbone of the industry, accounting for most of the activity. The next-largest segment is direct-response television advertisements, or 'infomercials." "There is a lot of Hispanic-focused direct response activity in television and a tremendous amount of infomercials and long-format commercials, especially on Spanish-language local cable channels," says Carlos Torres, a partner with Directo Hispano, a New York-based direct marketing firm launched two years ago. "Direct response television is healthy and growing."
Other direct marketing efforts include direct response print advertisements, email advertisements and publication inserts, all of which involve the use of toll-free numbers. Industries that are turning to various forms of direct marketing include telecommunications, wireless, auto makers, internet service providers, retailers, electronics product companies, insurance and financial firms, book publishers, restaurants and cable television firms.
There are also many local and national direct response merchandisers like Inglés Sin Barreras, a program for learning English, which pitch products mostly through local and national television advertisements. A handful of direct mail houses specialize on Latino consumers. Latin-Pak, for instance, reaches more than eight million Hispanic households weekly.
"About 55 percent of our business comes through advertising agencies, mostly Hispanic," says Latin-Pak's Andaloro. "We are supporting Hispanic agencies behind the scenes with our expertise, and they look like heroes to their clients." Carmen's Cupones reaches more than three million Hispanic households a week with coupons, offers and consumer advice and tips. Mailings include more than 75 clients, among them Staples, AOL, MoneyGram and Kraft Foods, says Walters, from Carmen's Cupones.
The Hispanic Agency Connection.- More Hispanic advertising agencies are offering at least some direct marketing services. Zubi, Bravo, López Negrete and Vidal Partnership are among the growing number Hispanic agencies with direct marketing capabilities.
López Negrete's direct mail program for Bank of America began with mailings in Los Angeles and is now set to roll out nationally this year, says Piedra. The program seeks to acquire new customers with offers for credit cards, mortgages, checking accounts and other services.
At Vidal Partnership, its largest direct mail client is Sprint. "We do a lot of mailings for acquisitions of new clients, up-selling new products and services to current customers, extending contracts and retaining customers," says Ferrer.
Over the last 18 months, more traditional Hispanic agencies have begun to add direct marketing capabilities, observes Fernández. "I suppose it will get more heated as times goes on," she points out. "Everybody is fishing for the same pool of dollars."
Adds Melgoza: "A number of agencies have created units or hired individuals that focus at least some attention on direct marketing. He notes that many agencies don't offer the direct marketing expertise while others are just now developing it. Overall, not a lot of Hispanic advertising firms specialize in direct marketing for Latinos. "Usually it is an offshoot of other services they offer," says Melgoza.
Some active in the industry point out that Hispanic agencies are being driven to direct mail because clients are asking for it, not because the agency team embraces the medium, says Walters of Carmen's Cupones. Others, however, disagree. "We want to offer our clients more options to integrate ourselves as part of the overall mix of television, radio and other media," adds Piedra, from López Negrete.
Still At The Bottom.- Even as direct marketing catches on with advertising agencies, it remains at the low end of the marketing totem pole. Here's why, according to industry experts: even the most successful direct mail campaigns yield only a one- to two-percent customer response rate. Some marketers that don't get such numbers during a test mailing hesitate to invest in a full campaign.
"Some people don't like the low response rates and the expense," says Torres of Directo Hispano. "The key to success lies in the ability to leverage a Hispanic mailing with a general market mailing to cut costs. That's the best way to do it." He explains that a low response rate for a 500,000 piece mailing to Hispanics could leave a client in the red. But if the Latino initiative is done as part of a mailing to five million, then the Hispanic portion costs less. "That's the way big companies do it," says Torres.
Other reasons for direct marketing's lack of star status: Some marketers that get successful tests fail to follow up on them due to cuts in their Hispanic marketing and promotion budgets. Add to that a lack of commitment to direct marketing and a paucity of expertise. "Direct marketers must offer clients the proper execution so that they get results," says Andaloro. "That doesn't always happen."
Melgoza cites some common mistakes in Hispanic direct mail efforts:
• The messaging isn't tied to the overall marketing strategy
• They make certain offers to the wrong demographic and wrong segments.
• They don't do their homework to know who responds to certain offers and in which language.
• They may not be able to know why a mailing worked or why it didn't.
Some companies seek to measure the effectiveness of direct mail by measuring customers' immediate response to a mailing. However, the value of new customers should be measured over time because some companies acquire a high number of consumers but can't keep them. "You need to get the right person to be a customer and keep them to justify the cost of acquiring them," says Melgoza. "Not a lot of people pay attention to the whole cycle of acquiring and retaining customers through direct mail."
Brand Marketing Still Dominates.- Industry insiders point out another reason for the slow acceptance of direct mail as a major medium for marketing to Latinos: Brand marketers dominate Hispanic marketing and are wedded to traditional television, radio and print advertising.
That's why Directo Hispano takes an approach that links brand advertising and direct marketing. Traditionally, marketers have taken a brand-oriented approach toward direct marketing, and direct marketers have taken their own route, says Torres.
"Any direct response campaign must have a brand element and every brand campaign must have a direct response element," says Torres. "It's not enough to provide consumers with knowledge of a brand. The response must also be accurately measured. That's where direct marketing comes in." As an example, Torres points out Directo Hispano's ongoing AARP campaign to recruit Latino members. Direct-response television, mail, radio and print advertisements touted AARP's programs. Before launching the campaign, Directo Hispano and AARP tested formats, length of the ads and messaging, and also tested advertisements with and without campaign spokeswoman Cristina Saralegui (HMW Archives 5/8/06. AARP Teams Up With Cristina).
When Scooter Store, a maker of power chairs for the disabled that is one of the largest television direct response advertisers in the nation, wasn't getting a good response for its Hispanic campaigns, they turned to Fernández for an assessment effort. A key finding: In the non-Latino market initiative, employees who handled customer acquisition and service using scripts were used to speaking to the end user of the scooter. But Hispanics with disabilities have several caretakers such as an uncle, sibling or child, and the scripts didn't allow for that, Fernández recalls.
"A lot of advertisers think they can adapt calling scripts and direct mail pieces that they use for the general market to Hispanics," says Fernández. "But Hispanics might have very different questions and need to be serviced differently." As a result, the Scooter Store modified its Latino outreach, testing several letters and offers written in Spanish. "That's what good direct marketers do but, for some reason, when they do Hispanic, many tend to think it has to work immediately or not at all," says Fernández.
Words Of Advice.- Michael Saray, president of Michael Saray Hispanic Marketing in New York and past chairman of the DMA's Directo Council on Hispanic Marketing, points out that by following certain steps, companies can ensure success with direct marketing efforts to Latinos.
Here's a summary of the "Hispanic Direct Marketing: A Five Step Program for Success" presentation Saray will make next week at the DMA's Directo Days conference in New York:
• Assess your market and determine your target demographic. "In the general market, nobody says they are going after the general market." They go after a segment, such as old people, young people, those with high incomes or big families. People should use the same approach with Hispanics and clearly define their segment.
• Have the commitment and resources. "So many people try to do something on the cheap. They simply translate their English direct mail campaign without testing it or designing it for Hispanics, when they take several tries to get it right for the general market."
• Don't use "fear" tactics because they aren't good motivators for Hispanic consumers. For instance, don't sell life insurance by saying people need it to avoid leaving a family stuck with bills in the event of the breadwinner's death.
• Be clear in your explanations. An approach where you explain things well usually pays dividends. "It might cost some in direct marketing response rate, but it will get you more loyal customers in the long run."
• Use bilingual direct mail offers. "It works well with family-oriented decision making in Latino homes." This allows for a better discussion of the offer within the family. Plus, we know that Hispanics compare the English and Spanish offers to make sure they're getting the same deal.
He also suggests avoiding mailing lists that target Latinos by surname. Such lists falsely assume that all Hispanics have Spanish surnames, Latino direct mail executives say, and waste money because they end up in the mailboxes of people who are not truly Latino. Additionally, such lists exclude the many Hispanics that don't have traditional Spanish surnames.
Says one industry insider, "Old habits die hard. It's cheaper to do in the short term, but it's more expensive in the long term due to errors in mailing, lost revenue, wasted postage and lower return on investment." Some marketers buy "vertical lists" - lists of consumers from Hispanic-oriented businesses such as magazines, including People en Español or Latina.
Often, direct mail companies that specialize in the Hispanic market develop their own specialized databases. Carmen's Cupones, for example, has its own proprietary database of Latinas age 25 to 50 with a minimum household income of $25,000 per year and children - up to 18 years of age - in the home. The company randomly verifies people on the list by telephone to make sure it's accurate.
At Geoscape International, a direct target database enrichment system identifies Hispanic targets by taking into account more than surname - self-reported heritage; first, middle and last name; and immigration and settlement patterns, explains Melgoza.
Nowhere To Go But Up.- Direct marketing to Latinos can only continue to grow due to the expanding Latino population, the willingness of Hispanics to embrace direct mail and the need of marketers to measure their return on investment.
"Hispanic direct marketing will get a lot larger, especially with television and radio advertising costs rising," says Fernández of K. Fernández & Associates. "Some advertisers are precluded from spending a lot on those media due to expense, but need to reach Hispanic consumers."
Little by little, more marketers who are unfamiliar with direct marketing or doubt its effectiveness will at least test the waters with small-scale projects, industry insiders predict. "Marketers need to prove to themselves that it works for them. As soon as they know they can get a lower cost per lead, lower cost per call, lower customer conversion rates, etc. then more money will move," Geoscape's Melgoza predicts.
More marketers will begin to design direct marketing programs especially for Hispanics instead of simply translating their English-language campaigns into Spanish, offers Andaloro, from Latin-Pak. And direct marketers will eventually do a better job of making their campaigns culturally relevant to Latinos by taking into account their unique needs.
Direct marketing, especially direct mail, will steadily become a part of the marketing mix that Hispanic advertising agencies offer to clients. Some companies that try direct marketing to Hispanics will like the results they get and stick with it, while others won't. But the net result should be an increase in the amount of Hispanic direct marketing, industry experts agree.