Commentary

Marketing Premium Brands

Premium brands, whether they are traditional luxury brands in the fashion category such as Coach and Prada, or those in more traditional categories, such as automotive, spirits or retail, rarely, if ever, pursue the U.S. Hispanic market.

The main reason is Hispanics have markedly lower income levels than the general market. According to 2011 Pew Hispanic Center data, the median annual income for a full-time employed Hispanic individual was $30,000, compared to $45,000 for a non-Hispanic white. That figure drops to $25,000 for foreign-born Hispanics. Many high-end luxury products have price tags too high for this median Hispanic consumer, particularly one that would be pursued with a traditional Hispanic marketing strategy of Spanish language ads run on Spanish language media.

When you get beyond cost-prohibitive premium brands such Porsche, Louis Vuitton and Moet & Chandon, there is another challenge facing premium brands vis-à-vis the Hispanic market. The challenge is psychographic, not demographic. 

In reality there is a large and growing upscale Hispanic market. In the past 10 years, Hispanic households with incomes of $75K+ more than doubled to 3 million, according to Packaged Facts’ “Upscale Latin Consumers in the U.S. Report”. More than 28%, or 3.9 million Hispanic households, have income of more than $62k/year. Eleven percent have annual income over $100K. More than 45% of those households were foreign-born, according to Pew Hispanic, 2011.

Among premium brands that a large and increasing number of Hispanics can afford, the major barrier is a perception that these brands are “not for us.” I’ve seen this perception gap in research across various industries and product categories. This psychographic barrier can be fatal for premium brands, driving a wedge between them and a surging Hispanic consumer population. This barrier often creates a conundrum for premium brands, which cannot lower their price or make their brands more “accessible” at the risk of losing their hard-earned and profitable premium positioning. 

The good news is that premium brands can be successful with the Hispanic market without compromising their premium brand positioning. The first step is to focus on the right segments of the Hispanic market. Effective segmentation provides the foundation for an effective marketing of premium brands to Hispanics. Segmentation based on demographics is a good starting place, identifying Hispanic consumer groups that align with a premium brand’s price points and distribution. 

However, psychographic segmentation can provide a more powerful opportunity to connect premium brands with just the right Hispanic consumers. Specifically, many premium brands have aspirational brand characteristics that align well with numerous Hispanics. The aspirational qualities of these brands, if effectively evoked, can bridge the perception gap afflicting so many premium brands.

While aspirational messaging and positioning may not be a one-size-fits-all solution for every brand, it is an example of how premium brands can engage Hispanics effectively. The key is understanding the barriers faced by a brand barriers within the Hispanic market, finding that brand’s shared values with the right Hispanic consumers, and using them to bridge the gap.

4 comments about "Marketing Premium Brands".
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  1. Carlos Pelay from Media Economics Group, August 1, 2013 at 3:09 p.m.

    Hi Jose,

    You're probably right that Hispanic advertising for upscale brands is not that common online or tv, but those advertisers/brands do use Hispanic magazines to target upscale segments. For example, in the past 12 months there was $3.3 million in advertising by jewelry/watches brands in Hispanic magazines (Cartier, Gevril, Technomarine, Tous, Bulova, e.g.) + a similar amount in co-branded ads by high-end jewelry retailers. There are also luxury brands active across other categories like liquor (Korbel, Buchanan's Scotch Whiskey), and automotive (Lexus, Lincoln).

    Within the personal care/beauty category (#1 category in Hispanic magazines) there is also quite a bit of spending by what one might consider luxury or premium beauty brands also (Clinque, Lancome, Chanel, etc).

    Saludos,

    Carlos Pelay
    @MediaEconomics

  2. Jose Villa from Sensis, August 1, 2013 at 8:02 p.m.

    Thanks for the comment and data Carlos! It's nice to see data showing that some luxury brands are indeed targeting the Hispanic consumer. However, $3.3 million in cumulative spend across numerous numerous jewelry/watch brands in magazines leaves a lot of room for improvement. Magazine ad spend is nice indicator of the existence of some activity, but I think that the likely dearth of investment in other Hispanic media indicates a relatively untapped opportunity.

  3. Carlos Pelay from Media Economics Group, August 2, 2013 at 7:03 a.m.

    Hi Jose, no argument here - there is definitely room for improvement - especially in the Hispanic market where TV soaks up an inordinately large share of dollars. But it does show that - as your article recommends - with the right segmentation and targeting those luxury and premium brands can (and are) reach the Hispanic upscale segment.

  4. Farnaz Wallace from Farnaz Global, LLC, August 5, 2013 at 11:26 a.m.

    Great post, Jose....the key to the right segmentation analysis for luxury brands, as for any other brand, is based on needs and values. Income and lifestyle trumps race and ethnicity every time. Thanks for sharing great stats.

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