Since we have already written at length about the “Bright Side” of the connection between increased Hispanic dedicated media allocation, defined as advertising buys in any Hispanic-dedicated media channel regardless of language whether Spanish, Bilingual or English, and its impact on overall sales growth, we wanted to shed some light around the “Darker Side of the force”…the less talked about impact of slashing Hispanic allocations. Indeed, AHAA studies based on Nielsen Monitor Plus adSpend data coupled with company financials from their 10-K reports, have documented that brand owners who increase their Hispanic dedicated media allocation generate a lift in overall (Total Market) revenue growth rates. Or in more direct words, marketers that shift a share of their total AdSpend allocation from English media (Non-Hispanic-centric) to Hispanic dedicated media create a competitive advantage, a Total Market boost that is measurable as accelerated growth rate.

But, the inverse is also true and equally proven by the analysis SSG has performed for AHAA. As Obi-Wan Kenobi said, “It takes strength to resist the dark side. Only the weak embrace it.” Here is why…

Companies cutting Hispanic dedicated media allocation, while increasing allocation to English media, tend to suffer a reduction in their sales growth. In fact, the magnitude of the resulting slow-down can wipe out the average growth of the category as is the case in the Consumer Packaged Goods & Retail category (Read CPG Case Study below). The Cost of the Dark Side.

Across three major categories: CPG-Retail, Auto and Financial-Insurance Services, AHAA’s study demonstrated that a five point cutback in Hispanic media allocation yields a reduction in Total Market revenue growth rate of minus 1.8% per year. It is clear that there are numerous drivers to revenue growth, such as category macro trends, product innovation, pricing, channel, experience, distribution, positioning, and reputation among many others.

Despite all these drivers, direct targeting through Hispanic Media Allocation accounted for 18% of companies’ variation in revenue growth. This figure jumps to 28% amongst CPG-Retailers –clearly a major driver of corporate financial performance.

The Dark Side Is More Powerful Than You Know –Darth Maul

CPG-Retailers Case Study

Case in point, Consumer Packaged Goods & Retail marketers among the Top 500 advertisers in the U.S. invest on average 11% of their ad spend on Hispanic media. The study’s regression forecasting model uncovered that

on average for those CPG companies trimming five percentage points from Hispanic allocation over 5 years, saw their overall pace of sales revenue decline by -1.7 percent points annually.

Not a lot? Think again.

The average revenue growth among those CPG that did not change their allocation was only a mere 1.7% per year and for those shifting 5 points of allocation from Hispanic to English media, the resulting Total Market sales growth becomes zero –no growth at all! Case in point, General Mills and JM Smucker reduced Hispanic media AdSpend 3-4 points and their overall growth declined to -4% and -5% respectively. Indeed, something as small as a 5 percent of Hispanic dedicated allocation has major influence in overall sales momentum.

Automotive Case Study

Similarly, we also looked at a booming category –Auto (including manufacturers, dealers, dealer associations, services, tires, and parts) for clues on the impact of slashing Hispanic allocation on growth rates.

The Auto sector has been recouping sales at an accelerated annual pace of 7.8%, in large part fueled by the economic expansion of Multicultural Millennials, Hispanic, African-American, Asian American and Mixed Race segments who have grabbed 100% of all newly created jobs in the US since the end of the Great Recession. This category had increased Hispanic media allocation to 8.4% by 2014.

For Auto marketers like Penske, Genuine Parts, and Group1 Automotive and others augmenting Hispanic allocation five points, the overall growth rate averaged 8.9% and for companies that slashed their Hispanic dedicated media allocation by five points the average sales growth was only 6.7%. This means that shifting five allocation points away from Hispanic media, in general, results in a deceleration of 1.1% of total market sales revenue growth per year. Financial Services/Insurance Case Study

One final validation in an “emerging” category with historically very low Hispanic media allocation –Financial & Insurance Services, also revealed similar findings. Here the average Hispanic media allocation increased but

remained at only 5.5% as of 2014. On average companies experienced a 1.8% annual revenue growth rate. For those that hacked 5 points of Hispanic allocation, the estimated growth was negative 2.7% per year, however, for companies enhancing their Hispanic allocation by 5 points, the estimated growth was 6.4%. The study which was presented at the ANA Multicultural Conference last November (and available at AHAA.org) signals that companies like Wells Fargo, Regions Bank and American Family Insurance have been increasing their Hispanic focus while others like Bank of America have retreated their Hispanic efforts. The results of this category point out that the impact of reducing 5 points of Hispanic allocation for Financial/Insurance service firms is extremely significant, stripping 4.5 percentage points in overall annual growth rate.

Source: AHAA 2015 Hispanic Media Allocation Impact on TM Revenue Growth Study based on Nielsen Monitor Plus Data 2010-14 2016 © Santiago Solutions Group Inc.

What’s the learning?

Despite the fact that we only incorporated media mix AdSpend, allocations, and sales revenue across the top U.S. marketers in the study, the findings serve as a lesson for the need to reach a representative balance of resources between the segment opportunities beyond ad budgets and media mix. We know from experience that for Hispanic media allocation to have its fullest impact on overall company growth, the Hispanic strategy needs to be as fully aligned as possible with the company’s strategic initiatives and be embedded in the DNA across the entire thinking of the organization.

Strategically: Optimum overall revenue growth requires three factors in the marketing planning process:

1. source of current growth

2. potential ‘size of the prize’ for each segment

3. Brand-consumer insights that are highly relevant to each segment

Investing in dedicated media directed toward consumer segments in proportion with segment growth opportunity yields incremental revenue growth rates. Conversely, companies that allow their brands to slash meager budgets and continuously under-invest in the Hispanic segment are minimizing their growth potential at their own peril.

Yet, the Law of Diminishing Returns applies here. We know investing in any one segment is not a linear relationship and the optimum allocation varies by category, thus, we continue to further study the drivers and impact of allocation on overall. Stay-tuned for more. Until then…

Source: AHAA 2015 Hispanic Media Allocation Impact on TM Revenue Growth Study based on Nielsen Monitor Plus Data 2010-14 2016 © Santiago Solutions Group Inc.