Background

A native New Yorker might find it hard to imagine city life without the St. Patrick’s Day Parade or the Feast of San Gennaro, while Californians would certainly miss the pageantry and spectacle that is Cinco de Mayo in Los Angeles. With the new millennium rapidly approaching, a new America is emerging. Rather than the proverbial melting pot where recent arrivals go through assimilation and acculturalization, the United States has become more like a salad bowl where distinct cultural groups celebrate their individual identities. The Telecom Act of 1996 reinforced the universal service mandate, but the question before us is whether carriers will continue to project onto the universal service requirement a one-size-fits all notion of services. America is changing, but it is not yet clear that telecom carriers will keep pace.

The word “ethnic,” as defined by the New College Edition of the American Heritage Dictionary is “an adjective used to describe, or pertains to a social group within a cultural and social system that claims or is accorded special status on the basis of complex, often variable traits, including religion, linguistics, ancestral or physical characteristics.” Based on this definition, it is easy to understand why businesses are perplexed in targeting opportunities based on multicultural and ethnic diversity.

In this report, Insight examines the challenges and opportunities that ethnic groups present to the telecommunications industry. It identifies major ethnic markets and describes how various telephone companies address these unique markets as part of their overall consumer market strategy. We also provide guidelines and recommendations for targeting ethnic markets and we forecast telecom expenditures for these segments.

Ethnic consumer markets covered in this report include:

• Hispanic households,
• Asian households,
• African-American households, and
• Ethnic senior citizens.

The United States Is Becoming More Diverse

There are dramatic shifts occurring in the composition of the US population. According to the US Census, the population of African-Americans, Asians, and Hispanics will increase significantly over the next half century. Projections for these groups show their proportions growing faster than all other groups as a percent of the total US population.

The proportion of African-Americans is expected to grow moderately from 12.6 percent of the total US population in 1995 to 15.4 percent in 2050. The proportion of Asians will grow much more rapidly from 3.6 percent in 1995 to 8.7 percent in 2050, while the proportion of people of Hispanic origin will grow from 10.2 percent to 24.5 percent in the same period.

These population trends will have a dramatic impact on the telecom industry since ethnic consumers spend more money on local and long distance calls than Caucasian consumers. Hispanics are heavy users of international prepaid calling cards. And Asian consumers spend more on wireless services and the Internet than the average subscriber. With the population increasing for all of these ethnic groups, Insight believes the ethnic consumers telecom spending will also increase dramatically making ethnic consumers an increasingly important segment of the telecom market.

Reaching Ethnic Markets

Most ethnic and racial populations tend to be geographically concentrated. In many markets, ethnic groups account for the majority of the population. For example, the ten MSAs noted below account for 60 percent of the current US Hispanic population:

• Los Angeles,
• New York,
• Miami,
• San Francisco-San Jose,
• Chicago,
• Houston,
• San Antonio,
• Dallas-Ft. Worth,
• Albuquerque, and
• McAllen/Brownsville, Texas.

A starting point for an ethnic marketing segmentation methodology is to define ethnic groups by language, ethnicity and/or race. The Hispanic market is the easiest segment to define because of the common Spanish language, but all Asian-Americans share is race, since Chinese, Japanese, and Korean do not share the same language. Even within the Chinese-American market, the language spoken will vary with the individual’s place of origin, (e.g., Mainland China, Hong Kong, or Taiwan).

Yet all ethnic markets do have a set of market characteristics common to non-native speakers of English. The percentage of US residents over the age of five who speak a language at home other than English is actually on the rise. According to data compiled by Admerasia, Inc., in 1980, 23.1 million or 11 percent of the US population reported speaking a language other than English at home. In 1990, these numbers rose to 31.8 million, representing 14 percent of the US population speaking a language other than English at home. This market trend continues to grow and therefore requires that telecommunication service providers modify and provide basic in-language accommodations for their served markets.

Despite the increase in immigration and foreign languages spoken at home, marketers who take existing general market advertising and translate it verbatim to the target consumer language, are treading on shaky ground. In fact, in some cases the result can be disastrous. A case in point is the marketer who issued native-language coupons to Americans of Chinese descent offering $24 discounts with each purchase. The promotion went awry because the number two in some Chinese communities is close to the word for “easy.” The number four is close to the word “death.” Needless to say, “easy death” coupons were not well received.

In another case, a marketer offered green baseball caps as premiums during a Chinese New Year presentation. Among older Chinese generations, a man wearing a green cap signifies that his wife is cheating on him, and he’s trying to bring scorn on her. Obviously, it makes sense to have staff members who speak the language and understand the nuances of the targeted culture to guard against blunders like this.

To be successful in the ethnic markets, a company must appreciate the cultural nuances of different ethnic groups. For example, Korean-Americans are extremely homogeneous and ethnocentric. They prefer Korean language media and are extremely brand loyal, relying on word-of-mouth from other Korean-Americans to reinforce their brand choice. Chinese-Americans maintain deep cultural ties and place heavy importance on family and informal social groups. Personal acquaintances, trust, obligation, and kinship are fundamental business attributes and requirements. To succeed in these segments, companies must be viewed as part of the community and should have customer and sales representatives that reflect the community and its values.

Ethnic purchasing habits vary because each group views price, quality, and customer service differently. Businesses can gain a competitive advantage by providing products, services, and support which meet these cultural market needs. One company, AT&T takes into consideration certain buying habits of ethnic groups. Asians for example, are known to be early adapters of new technology, and they are known to have above average income. This information justifies above average promotional spending for high-tech services to the Asian community.

The Insight study found some major differences in how ethnic groups view the local and long distance carriers and the different products and services available. For example, when deciding on a telecom carrier, most ethnic consumers say customer service is the number one criterion while overall, consumers chose price as the number one criterion. Regarding technology, certain ethnic groups are less interested in the Internet and much more interested in interactive TV.

Long Distance Carriers Lead in Ethnic Marketing

International long distance represents the most obvious opportunity for ethnic marketing. New immigrants to the US spend a disproportionate amount of their income on international long distance calling. In some cases, new Americans spend as much as 50 percent of their income on international telephone calls to their country of origin.

Among all carriers, AT&T has the most sophisticated multicultural marketing strategy. MCI, Sprint, and GTE have rapidly demonstrated equally effective multicultural marketing strategies that now rival AT&T. GTE’s pending merger with Bell Atlantic should create an ethnic marketing titan considering their served markets and combined international portfolios. Another player is the newly formed joint venture between Telefonos de Mexico S.A. (Telmex) and Sprint, called Telmex-Sprint Communications, L.L.C., which received FCC approval on August 7, 1998. The FCC granted approval to this joint venture to begin providing long distance service between the US and Mexico, and other international locations. Telmex-Sprint plans to target the Mexican-American or Latino and Hispanic communities throughout the US.

SBC Corporation and Bell Atlantic have also developed significant multicultural marketing programs because of the high concentration of ethnic consumers in their regions. These efforts include a spectrum of activities to be viewed as good corporate neighbors, as well as tailored service and support programs.

The Insight study suggests that carriers who concentrate on maintaining a strong customer service relationship with ethnic consumers will not only win over more of this market but also hold on to it even as competition in the telecom industry keeps building. Bundled services is another strategy in retaining consumers: these services can be marketed and made available to consumers in-language. To succeed with these strategies, carriers must meet the ethnic consumers specific needs and tailor offers that once provisioned, make it difficult for consumers to switch carriers. Telecommunications marketing will mandate that companies know every aspect of their customers telecom needs. A customer will no longer be a faceless billed telephone number or BTN; those days are gone forever.

Back to Top