• by Roberto Siewczynski , Columnist, December 19, 2013

A client of mine frequently says, “We are really good at marketing to rich people.” It’s a helpful reminder because it challenges how you think about your shopper target, particularly when it skews lower income. 

Even as the economy rebounds, more than 46 million Americans (or 15% of the population) are living in poverty (annual income of $26,000 and below). This%age increases dramatically among the Latino population where 13.6 million Hispanics (25.6%) live in poverty. 

A second factor weighing on Latino income distribution is the expected growth of undocumented workers in the U.S. As the Pew Research Center recently reported, the number of immigrants in the U.S. without authorization edged up to 11.7 million in 2012 from 11.3 million in 2009, reversing a declining trend. Although this is attributed to the “recession ending,” it’s predicted that recovery will be longer among lower-income consumers. 

During October’s Shopper Expo keynote, Jocelyn Wong, CMO for a major value retailer, shared some interesting statistics about its shopper: 30% make less than $40,000 a year, and one-quarter use public transportation to get to the store. These data points offer deep implications for shopper behavior. These are shoppers who must sometimes choose between toilet paper and food. This “tradeoff mindset” helps marketers and retailers appreciate how they need to reset priorities to drive value/increase basket size among low-income Hispanic shoppers.

Addressing the trade-off mindset with Latino shoppers

In developing shopper programs for lower-income Hispanics, we have learned through our ‘NVista study and client programs that certain best practices can help “tradeoff” shoppers.

1. Make it about the occasion and the role of brands 

With less disposable income, many Latino households have tighter out-of-home entertainment budgets. Factor in the larger size of Latino households, the conclusion is that lower-income Latinos spend more family time together. Low-income moms, as revealed in one retailer’s research, want to make the best of these occasions and brands. As Wong said, “Don’t feel sorry for this consumer,” just help her make those moments more special. 

2. Take a hard look at your advertising vs. shopper mix 

Advertising through Hispanic mass media is very powerful because there is less fragmentation and competition, broader reach, and culturally relevant content. It’s a great place to build brand equity. But shopper vehicles with lower-income consumers can be more effective. It’s not just the emotional halo of advertising, but whether the value equation makes sense. With a price sensitive shopper, the emotional reward of a deal on a household brand like Clorox or Coke can have strong and favorable impact on a brand’s long-term equity. We see some brands way ahead of the curve — by oversampling brand trackers to specific shoppers they can take a much closer look at how shopper efforts impact brand equity. 

3. Secure the right partners

In considering Occasion-Based Strategies, partners become as essential as the idea. As private labels continue to proliferate with Latino retailers targeting lower-income shoppers, consider adding these brands to your occasion offering. More often than not, the retailer will support it, and you will help further your value proposition. In a recent analysis by Santiago Solutions Group of GfK-MRI data, the Hispanic base of private label buyers grew from 43% pre-recession (Spring 2006) to 56% post-recession (Fall 2012).

4. Tap into the right channels

Have you ever lived a day in the life of a low-income shopper? It can be quite illuminating. Think about this: you are taking public transportation, going to laundromats, cashing checks at check cashers, owning a pre-paid phone and using the circular as an essential tool in your store visit. There is a wide array of innovative suppliers and media providers that can dial into this shopper with non-traditional and highly targeted vehicles. 

All of which is to say that there is a separate set of rules that marketers and retailers need to follow to reach lower-income Hispanic shoppers. In many cases, retailers and brands are disregarding this shopper and, thus, continue losing share to private label and second-tier brands. Ask yourself this question: Can your shopper strategies afford to disregard this segment given our current long-term economic conditions?