The move toward ethnic marketing - includes related articles on marketing to minorities and sources of marketing data

Nation's Business, July, 1992 by William Dunn

At pleasant Co. in Middleton, Wis., designers and marketers are busy developing the first black doll in the company's popular American Girls Collection.

In Los Angeles, fashionable women stream into the Kayla Beverly Hills salon for makeup tips and cosmetics. Most are Asian-Americans, drawn by cosmetics specifically formulated for them.

Ten Miles away, on the 14th floor of a Los Angeles skyscraper, the eight staff members of the Gulf Atlantic Life Insurance Co. talk strategy--slipping from English to Spanish and back. The Hispanic-owned company targets the insurance needs of Southern California's Spanish-speaking residents.

At Prince Georges Plaza, in suburban Prince George's County, Md., near Washington, D.C., shoppers may choose among national chain stores and several small shops catering to the county's large, upscale black population. African Eye offers designer women's fashions from Africa, and Pyramid Books stocks its shelves with a wide range of titles dealing with African and African-American themes.

Across America, small businesses increasingly are seeking opportunities like these to serve the tastes and needs of the nation's burgeoning minority groups.

From 1982 to 1987, for example" the number of small, minority-owned firm--many of which serve their own ethnic communities--shot up. The total number of Asian-owned firms increased 89 percent, to 355,331; Hispanic-owned firms were up 81 percent, to 422,373; and African-American firms were up 38 percent, to 424,165.

The computer revolution, along with the increasingly sophisticated use of demographic information on racial and ethnic groups, is making the task of marketing to specific groups easier. Indeed, the growing availability of such information is propelling the move toward ethnic marketing.

"We've moved into an age of micromarketing and away from macromarketing," says Peter Doherty, an analyst for Impact Resources Inc., a marketing research firm in Columbus, Ohio. "What marketers are trying to do is identify segments within the marketplace where they can position their products."

Ethnic marketing isn't a fad. The underlying demographics, detailed in the 1990 Census, indicate that marketing to targeted minority groups is a sound business strategy.

The U.S. population grew from 226.6 million in 1980 to 248.7 million in 1990 This 9.8 percent increase in the past decade is the second-slowest growth rate in 200 years. But 30 percent of the growth that did occur came from immigration, and over 7o percent of the immigrants were Asian or Hispanic.

Asians are the nation's fastest-growing minority group, increasing 108 percent in the 1980s, to 7.3 million from 3.5 million. The Hispanic population grew 53 percent; its 7.7 million growth--to 22.3 million-was the biggest numerical gain of any minority group.

Blacks, who remain the largest minority, saw their numbers increase during the decade by 13 percent, to 30 million from 26.5 million. In contrast, the number of non-Hispanic whites grew by 4.4 percent, to 188.1 million from 180.3 million.

By 1990, 24.4 percent of the 248.7 million people in the U.S. were members of minority groups. This compares with 20.4 percent in 1980. The minority population could increase to almost 33 percent by 2030, according to a 1989 study by the Population Reference Bureau, a demographics-research organization in Washington, D.C. Although the income levels of the various groups vary greatly, Census Bureau figures show that all have significant market clout. Asian-Americans have the nation's highest household income and educational attainment--not just among minorities. In 1990, the median household income of Asian-Americans stood at $38,450, compared with the national median of $29,943 and the median $31,231 for white households, according to the Census Bureau.

Even though poverty rates for blacks and Hispanics remain troublingly high, Particularly when compared with the rates for whites and other minority groups, the black and the Hispanic middle classes have grown dramatically over the past two decades.

The Bureau of Labor Statistics calculates that in 1989-90 the typical black household spent $18,586, which included $6,257 for housing and utilities. With 9.3 million households, that adds up to a $172 billion market. Hispanic households that year spent an average of $23,432, including $8,001 for housing and utilities, making their 6 million households a $141 billion market.

Ethnic marketing generally refers to one of three strategies or to combinations of these strategies:

* Developing a particular product for a specific group.

* Stocking and marketing existing products of special interest to particular groups.

* Adjusting promotional and sales efforts to target a specific group.

Kayla, the Beverly Hills cosmetics company, and Pleasant Co., the Wisconsin doll manufacturer, have each designed and manufactured new products aimed at specific ethnic or racial groups.

"In my travels, I realized that Asians buy a tremendous amount of cosmetic products," says Michael Ghafouri, 39, a former Max Factor executive who launched Kayla in 1990. Within two years, Kayla's sales reached $8 million.