Diverse Appeal

By Tara Seals

Posted: 3/2004

Diverse Appeal
Telecoms Find Targeting Ethnic Markets Translates to Revenue
By Tara Seals

Suddenly it was everywhere the AOL
mascot was staring out at me from billboards across Phoenix, as part of a giant
ID card with the tagline, Se Habla Espanol. I began getting CDs in the mail
too (1,045 Horas Gratis!), and the occasional marketing e-mail.

Obviously, America Online Inc. was launching a major campaign to
go after the Hispanic market. And no wonder: census data from 2000 show 35
million Hispanics, 10.2 million Asians (including 1.8 million Indians) and more
than 28 million African-Americans, among other demographic groups. These U.S.
ethnic consumers will spend more than $65 billion on local, long-distance,
Internet access and wireless service by 2005, which is about half the current
expenditures for all U.S. telecom consumers, according to a 2003 study by Global
Advertising Strategies Inc. Accordingly, service providers are lining up to tap
into this buying power.

For its part, the Hispanic niche is pulling ahead of the general
population in online use, making it a particularly likely target for
ISPs. According to a 2003 poll conducted by AOL and pollster RoperASW,
U.S. Hispanics spend 43 percent more time online at work (13.5 hours) and 13
percent more time at home (9.5 hours) than the average user. The poll had a 6
percent margin of error.

A barrier in the Spanish community was a lack of Spanish
content, says Ray Cadillo, an analyst with Insight Research. Even if you had
Internet access and you spoke Spanish, there wasnt much out there. Thats
changed, and now the Hispanic segment, in terms of Internet access, is the
fastest growing.

Microsoft Corp. has collaborated with Telefonos de Mexico SA
(TelMex) to create MSN Mexico, for example. And AOLs offer is an entirely new
Spanishlanguage service.

AOLs Mouse campaign uses mass television, radio and print
advertising to woo Hispanics, including ads on the top Spanish-language TV
networks, Univision, Telefutura and Galavision. The campaign represents the
first time AOL has developed multimedia advertising that has been strategically
designed to speak to the Hispanic market, says Mary Ann Donaghy, an executive
director at AOL. The spots focus on family, education and entertainment, along
with keeping in touch with people who live far away.

Wireless carriers also are stepping up to the plate to target
this population, which IDC says makes up about 4.5 percent of cell phone users
in the United States. Nextel Communications Inc. for instance created an ethnic
department last year, with a separate budget, to create in-language advertising,
marketing collateral and so on. A push for the Hispanic dollar launched in
2003.

Verizon Communications Inc. also launched a Hispanic-focused
marketing campaign last year. Diversity is part of what Verizon stands for,
like excellence and commitment to service, says Oscar Gomez, head of Verizons
Office of Diversity & Business Compliance. The diversity of our customers,
communities, workforce and supplier partnerships distinguishes us from the
corporate crowd. Im excited about how far weve come, but Im even more
encouraged by where I see us going.

The large players arent the only communications companies
targeting the Spanish-speaking population, the nations largest ethnic minority
at 14 percent of the population. Residential IP telephony company Vonage
Holdings Corp. just launched a Spanish version of its Web site, and has hired
Spanish-speaking customer care representatives to respond in-language to e-mails
and phone calls. Its also marketing reduced rates to Spain and Latin America,
such as 5 cents per minute to Barcelona, and getting the word out
online.

Regular local and long-distance service is also in high demand
from the Hispanic market. Vycera Communications Inc. specializes in offering
local and long-distance services to Spanish-speaking consumers. It recently
expanded its coverage area from California into Texas. Its service bundle,
Economy Line Plus, is a flat-rate local calling plan with heavily used features
such as caller ID, call waiting and call waiting ID, for as little as $13.95 per
month. It also includes long distance and a collect-calling alternative called
Linea Mexicana, which lets callers place collect calls to the U.S. from Mexico
using an automated attendant, while saving up to 45 percent over traditional
collect calls from Mexico, the company says.

Meanwhile, the number of African Americans online is around 10
million, about 8 percent of the Internet population, according to Nielsen/NetRatings.
Internet services such as BlackVoices.com and BlackPlanet.com
cater to this segment, aggregating African-American-focused news and
entertainment to a portal and offering e-mail service. AOL last year launched a
section of its site targeted to Blacks called Black Focus. Unlike AOLs Hispanic
initiative, Black Focus is not a separate service, merely a different content
area of the AOL main site. While a digital divide remains, correlated largely along
economic rather than ethnic lines, African-Americans spent about $13.6 billion
on communications last year, according to a Target Market News report, The
Buying Power of Black America, based on an analysis of the Department of
Commerces Consumer Expenditure Survey.

These latest findings demonstrate how resilient the black
consumer market is, says Ken Smikle, president of Target Market News.
African-Americans still are showing a rise in income and they are having a
tremendous impact on the marketplace, especially during this economically slow
period. Marketers and manufacturers cannot afford to take them for
granted.

BE SENSITIVE

Ethnic marketing can give carriers or channel
partners dealing with thinning margins and vanilla service options a targeted,
growing customer base. The reason were interested in looking at the patterns
and requirements and spending patterns to ethnic communities is that the
fundamental driver in most cases is an understanding that telecommunications is
a commodity, says Bob Rosenberg, president at Insight Research. So unless a
carrier or a channel partner is willing to specialize, the only thing youve got
to sell on is on the basis of price, or customer service.

Pouring money into television and radio advertising isnt
enough, however. For all the mass-market initiatives referenced here, success
with ethnic communities depends on culturally sensitive marketing.

In-language support from a customer service point of view is
very important, having a presence in the community is very important, explains
Cadillo. The way different ethnic groups purchase is important. Theyre
more face-toface as opposed to online or via an 800 number, although thats
beginning to change. But generally [they are] much more hands on and more
personal; thats where the emphasis is.

Nextel, for instance, has launched a series of in-language
advertisements, in heavily Hispanic areas such as San Antonio. But it also has
begun sponsoring soccer tournaments and other events popular with Spanish
speakers.

Derek Gietzen, Vyceras co-founder, president and CEO, says
Vyceras coverage expansion reinforces an ongoing corporate goal of offering
U.S. Hispanics value-added telephone services that meet their unique calling
patterns and preferences. We are extremely pleased to extend our local and long-distance
service bundle to Texas, which is a heavily populated Hispanic area with a
growing demand for competitive telephone services and rising trans-border
telecom traffic, he says. Vycera is well positioned to bring the best overall
mix of valueadded calling plans to this vital market. Vycera plans to extend
its bundled services to other geographic areas and U.S. Hispanic markets
throughout 2004.

You cannot translate brochures from one language to another and
expect that to work, says Rosenberg. You really have to have an understanding
of a culture and a sensitivity to its hot buttons. Thats the first
rule.

One such incident where a company got it wrong was a telephone
service for the Chinese-American community. Apparently in the Chinese culture,
if you give a man a yellow hat, it means hes been cuckolded by his wife,
explains Rosenberg. So [one company] produced a mass advertising campaign and
tried to give away yellow hats to old Chinese gentlemen as a promotion and it
just didnt work, obviously.

An example of getting it right would be when AT&T Corp.
launched a 10- 10-XXX dial-around service for long distance, with a tagline of
lucky dog. The carrier changed the tagline for the Hispanic and Asian
markets. In those cultures a dog is the worst of the worst, the dirtiest
thing, says Rosenberg. So what had been a bulldog logo was changed to an
elephant and called Buen Suerte, and in the Asian market the logo was changed
to a smiling Asian man. All references to a lucky dog were removed.

Also, different ethnicities generally favor varying types of
services. For instance, Asian-Americans have the highest penetration for
Internet access of any group in the nation, and are early adopters of technology
in general. Indian and South Asian communities, on the other hand, tend to spend
a sizable amount on international long distance. Carriers carrier DataAccess
India Ltd. is capitalizing on this trend. India is a terminating market, with
most of the minutes originating out of North America for every one minute
coming out of India, four go in, says Ashu Misra, president and CEO of
DataAccess. Consumers pay anywhere between 22 cents and 34 cents [per minute]
to call home.

Misra says the opportunity for carriers targeting Indians and
Pakistanis in the United States is noteworthy since the demographic is one of
the largest spenders on the long distance, with an average household bill
running anywhere between $150 to $300 per month, compared with an average U.S.
familys bill of $25 or less. Here in the U.S. [long distance] is practically
free, and cellular plans let you call for free on nights and weekends, says
Misra. So I look at it like a lot of these companies wont have a lot of those
minutes and revenue they used to get from the U.S. domestic calling, retail
sector, other than the enterprise market. But international long distance, that
is one thing thats growing very, very fast. As teledensity goes up, more and
more people call.

Teledensity is a large driver for international long distance
from the States as countries continue to deregulate their monopolies and grow
wireless penetration. I came here 15 years ago, and I make one call a week, every
week, says Misra, noting he used to plan the call for when everyone was
available in the house. Because at that time, AT&T used to charge $3.95 for the
first minute and successive minute usage of $1.95, so I would make sure I got
the best bang for the buck. Nowadays I call my cousins, sisters, nephews and
nieces, and they all carry with them mobile phones, so something comes in my
mind, I just pick up the phone and call, and I dont have to plan.

That sort of calling increase is common in these economies,
prompting DataAccess to look at other markets, such as Bangladesh or the Middle
East. Our goal is to go directly after and offer the ethnic markets a
quality route at a better price, Misra says. In less than a year and a half
weve been able to bring the termination cost down 50 percent.

As far as getting the word out goes, mass marketing using
television, radio and billboards may be the most effective way to cover large
portions of the ethnic population. However, more targeted approaches also work.
There are much more targeted attempts being made now, especially in the area of
direct mail, says Rosenberg. Thats something that traditionally has been
underutilized in the ethnic markets. It could be as simple as delivering a
brochure or a pamphlet in language that is culturally sensitive. Thats on the
rise.

Cadillo adds print advertising is an option. Theres a variety
of periodicals and magazines that can be used to target specific groups, and
Internet portals, he says. If companies really want to reach people, the avenues
are there.

Cultural sensitivity can also show the way to the appropriate
method. The reality is that ethnic advertising rarely does the whole job,
especially when theres a need to change perceptions or educate prospects, says
Drew Neisser, CEO at Renegade Marketing Group. He advocates guerrilla-marketing
techniques. For instance, Citibank wanted to market an online money transfer
product to Filipinos. Renegade designed programs to reach into those
communities, walked them through the online registration process and established
a long-term relationship.

Marketing need not be complicated, but it sure needs to be
focused on welldefined targets, on insights that inspire action and on solutions
that meet clearly delineated objectives, says Neisser.

Regardless of approach, the message is clear: Ethnic groups
represent a highly lucrative market for telecom services. Census projections
show the face of America continuing to diversify, becoming, Cadillo says, a
country with minority majorities. Just given the demographics theres large
growth, and its presenting an opportunity, says Cadillo. The carriers out
there can no longer ignore these markets if theyre going to be successful
capturing their share.