Automotive Leaders Discuss Impact Of The Cultural Demographic Shift On Their And All U.S. Industries11/21/2015 06:00AM
Our changing cultural demographics represent a significant growth opportunity for U.S. industries. Yet few understand the opportunity, if they see it all. Those who do – the very few – seem to understand it intuitively as they convert the wave of diversity of thought being introduced by employees and consumers into opportunities previously unseen. Those who don’t – the majority – are having a difficult time of it, failing to put enough investment in the right resources and not executing properly to achieve the desired outcomes they want and should be getting at this stage of the game. It all comes down to a leadership issue, and without buy-in from the top – or courageous leaders in the middle of the organization – half-hearted initiatives are doomed to fail and leave companies spinning their wheels.
Such is not the case with two leaders from the automotive industry that I recently spoke with about the cultural demographic shift and the leadership role they have taken in this area to help their respective organizations to evolve: Fred Diaz, Senior Vice President for U.S. Sales & Marketing and Operations at Nissan Motor Company Ltd., and Gina Jorge, Multicultural Marketing Manager at American Honda Motor Co., Inc. According to Ad Age Hispanic Fact Pack 2015, Nissan and Honda are among the 50 largest spenders in Hispanic media, a group that in 2014 increased spending in the Hispanic market by 17.6% to $3.8 billion. The cultural demographic shift™ across the U.S. – spearheaded by the burgeoning Hispanic population – affects all of us, and the unique knowledge and perceptiveness they bring from the automotive industry has broader implications that is applicable and transferable to all industries and consumers across the board.
The big question is: Are U.S. industries prepared for the shift? If not, how are we going to be able to operationalize the shift and incorporate it into our business models so that we can serve the unique needs of America’s changing and evolving consumer – an absolute must if we are going to grow and compete in the 21st century marketplace? It’s a burning platform that needs to be addressed quickly, especially when you consider that the top three market leaders across every major industry is sitting on an opportunity gap averaging $10 billion.
All too often, industry leaders are substituting resources and taking a short-term compliance approach – thus making themselves vulnerable to new competitors. They are stuck in uncertainty and so the cultural demographic shift gets cast aside into a cost-center – while the opportunity to see it as a profit center lies dormant. Those leaders and organizations making a commitment to strategically invest - in what is the last remaining true growth opportunity are not just winning new consumers – they are attracting emerging top-talent that is more diverse and multicultural than ever before.
An article in Automotive News (Sales to Hispanics Outpacing the Market, by Lindsay Chappell, May 18, 2015) drove home the point that Hispanics in particular are the key to growth not only now but well into the future. According to the article, “Spanish-speaking or Hispanic culture-identifying buyers are crucial to automotive brands' success. Last year, Hispanic buyers delivered 96 percent of Ford and Chevrolet's combined year-over-year retail sales growth, 33 percent of Nissan's, 35 percent of Toyota's and 100 percent of Honda's, according to IHS Automotive's Polk market data unit.”
Despite these statistics, Fred Diaz says that a lot of people in business are still uncomfortable talking about multicultural marketing, seeing the need but perhaps not realizing how crucial it has become. But all of you have to do is look at the numbers, as Nissan has done.
“More than a third (38%) of our total sales is to people of multicultural descent, and that number is fast approaching 50%,” says Diaz. “Over the last six months, I’ve seen the multicultural market represent sales growth as high as 90%.”
This shouldn’t be news to anyone, explained Diaz, and if it is, you’ve missed the boat. But not completely; it’s never too late to course correct and embrace the multicultural marketplace with complete and total passion, from the top of the house on down and back up again, as Nissan has done. Just look at where they are now compared to six years ago. From FY09 to FY15, their media budget for U.S. Hispanics alone – not including other multicultural groups – has increased a whopping 227%.
Gina Jorge concurs that leadership on this issue has to come from the top. At Honda’s annual dealer conference, multicultural markets was one of the top three keynote themes this year. The changing landscape caused by the seismic cultural demographic shift is resonating so strongly with top leadership that it is being addressed with dealer networks nationwide. The multicultural retail sales mix is nearing the one-third mark faster at Honda than in the total auto industry (31% vs. 27%) with a breakdown that is 15% Hispanic, 9% Asian, and 7% African American.
“The multicultural customer has basically been fueling all of Honda’s growth year to date,” says Jorge. “It has become of utmost importance to our current and future sales to build relationships with our multicultural customers and provide them with a dealership experience that connects them personally and culturally with our brand – not only now but for years to come.”
Fred Diaz has a four-point approach for doing just that: embracing the multicultural consumer and building relationships with them.
First, they are aware of the opportunity on a daily basis, and with that awareness he and his team have become evangelists for multicultural marketing so that the message permeates throughout the company and everyone embraces the strategy and is working together to move the company in the direction it needs to go. As awareness spreads throughout the company, it will bring out the champions in-house who want to have a voice and be spokespeople for the brand at local events within the community.
Says Diaz, “We take our marketing intelligence very seriously, dissect it and digest it, so that when we speak to our consumers – whether it’s the Hispanic, African American, Asian or LGBT community – we have brand research in our back pocket that understands what they want and need from an automotive company.”
Secondly, they adapt to changes and do it quickly when it comes to their multicultural consumers. Their multicultural marketing budget receives the largest increase year after year (15%) and they continue to have great focus on diversity in the workplace so that dealership networks and in-house staff echo their consumer groups and can communicate with them on their terms – whether in language or in culture. Everything done at the national level is rolled out to their eight regions across the U.S. so that everyone has access to the same resources and intelligence from the latest research.
Next, they execute and seize the opportunity. That means engaging with media agencies that know and understand how critical the multicultural market is to their strategic business plan going forward. This includes minority-owned agencies with strong relationships with media giants such as BTE and Univision.
“With great attention to detail, we communicate with consumers on multiple touchpoints, including TV, digital, social media, and mobile,” says Diaz. “Minority groups and Hispanics in particular consume their media digitally via mobile and social media. Knowing this is an opportunity to reach consumers where and how they want to be reached. It’s not about them coming to us, but about us going to them on their turf – and speaking to them on their terms.”
Finally but perhaps most importantly, they are authentic. Anyone can say they want to do multicultural marketing, but if you don’t do your research and take these consumers seriously, your lack of authenticity will be evident to the point where you risk being inappropriate and even offensive. This is often the case with those companies who take an advertising spot made for the general market and simply translate it into Spanish for the Hispanic market, for example.
Instead, you want to convey that you know and understand your consumers – that you want to get to know them, and not make them feel like all you want is their money. According to Diaz, if you want to do business with the multicultural consumer, it’s your responsibility to make a deeper connection with them first and earn their trust. If you move too fast or say the wrong things, you’ve already lost them.
Gina Jorge of Honda agrees that the responsibility is on U.S. industries to change and adapt to the cultural demographic shift. She sees that responsibility clearly in the automotive industry, given that a vehicle is the second if not the largest purchase most people will make in their lifetimes.
“When communicating to Hispanic consumers in particular, it’s important to understand that a new car is not just a mode of transportation, but it represents a measure of achievement and success,” says Jorge. “So you want to make the experience of buying a car a positive one, and recognize how it’s celebrated in the community. We’ve worked hard at that, and as a result a majority of our multicultural customers say they actually enjoyed the experience and would return to the dealership where they purchased their vehicle.”
Operationalizing this type of knowledge can help other companies and industries see results like this. But Diaz says he still sees too many mistakes being made, particularly with companies jumping on the bandwagon, and then just as quickly jumping off when budgets have to be cut and multicultural marketing is the first to go.
“Keeping everything in the general market is the wrong thing to do and customers know when you fail to make a commitment to them,” says Diaz. “You might get away with unfulfilled promises once or twice, but after that, you’ve lost credibility and will have to work twice as hard to get it back.”
His advice: Check your budget. If you’re not dedicating 20-25% to multicultural marketing, you’re underfunded. That number goes up to at least 30-35% when you include your digital and social media budget – where it’s critical to tap into the word of mouth influence of multicultural communities. In fact, according to the Ad Age Hispanic Fact Pack, 25% of Hispanics say they use social sharing/networking sites to tell people about companies and products they like, and 22.6% use them to follow their favorite brands or companies, both slightly higher than non-Hispanics and the general population.
Once you make that kind of commitment, you want to make sure you are spending your budget rightly when it comes to the multicultural market, and connecting with them at all levels of the value chain. According to Gina Jorge, this means creating relationships and emotional connections with your brand not just through your marketing and advertising messages, but also at the dealership once your customer is in the store looking to buy a vehicle. How are they treated at the dealership; that is, are they aware of cultural nuances that will help make the customer experience more personally relevant so that they can form real connections and relationships? It’s not something that is intuitive to everyone, but it is something that can be taught.
According to Jorge, “The fact that we made this one of the main topics of discussion at our most recent dealer meeting shows how important it is that we connect and build relationships with our multicultural customers at the retail level. Our growth depends on it, and that means communicating openly about it to our internal associates and our dealer network, conducting conferences around the country to educate them and provide them with the tools they need to be successful, and bringing in subject matter experts from partner organizations to provide additional support and help present a business case for why it’s so critical to the business.”
What will it take for other top brands to recognize and prepare for the changing demographics across the country? You don’t have to be in the automotive industry to know the cultural demographic shift affects business nationwide, industry-wide. We know the numbers, but what do we do with them? The goal of any business is to build genuine relationships with their customers, and that transcends any industry. This requires four critical steps that my organization has proven to help brands seize the cultural demographic shift opportunity:
- Educate Leadership: Define and commit to what you are solving for - to help your products and brands evolve so that the marketplace doesn’t pass your organization by. When leadership is not properly informed or educated, compliance becomes the default and makes your organization vulnerable to the competition.
- Over-Deliver Value: Don’t just sell – selling without understanding unknowingly creates tension. Get intimate with the business to best understand and authentically serve the unique needs of your consumers. Educate them about why the opportunity benefits their family, lifestyle necessities and their desire for societal advancement.
- Embrace Mutuality: Convert diversity of thought into opportunities previously unseen to benefit everyone. Allow for a more intimate relationship with your brand. Encourage reciprocity and the mutual sharing of ideas that allows your customer to play an extended role in your brand’s growth and evolution.
- Give Your Customers a Platform to Strengthen Your Brand’s Evolution: Give your customers a platform that strengthens their influence and helps your brand further evolve. This intimate approach is a reflection of your leadership’s commitment to your customer’s unique needs and their desire to have greater societal impact. Consumers that represent the cultural demographic shift are the most effective “innovation and ideation labs” because of the specific and predictable ways their culture influences how they think, act and are motivated to buy. Their culture shapes their values and predictable behavioral tendencies. They know exactly what they want and the experience they desire from brands. When you empower them with a platform that allows them to share their intellectual capital and know-how about how your brand can best serve them - this in turn – not only strengthens your competitive advantage and ability to sustain your marketplace success, but will also help define the broader significance your brand has created for all of its customers.
Those who fail to see the opportunity are afraid of what they do not understand. They make the mistake of focusing on short-term results instead of investing in the time it takes to form authentic relationships with the multicultural consumer. It’s a long-term strategic investment that must be made if your company is going to grow and compete in the new 21st century marketplace.
This is simply another form of change management and it requires change agents who understand the difference between treating multicultural marketing as a cost center versus a profit center – a long overdue investment that leaders like Fred Diaz and Gina Jorge are introducing as they embrace diversity of thought to meet the unique needs of their customers. Their leadership in making sound business decisions is in turn creating a roadmap for endless possibilities for those in the automotive world that can be applied equally by others across all industries.