A profitable course of study

Editor’s note: David R. Morse is president and CEO of New American Dimensions, a Los Angeles research firm. This article is adapted from his book Multicultural Intelligence: Eight Make-or-Break Rules for Marketing to Race, Ethnicity and Sexual Orientation, published by Paramount Market Publishing Inc. (www.paramountbooks.com).

In his best-selling book, Emotional Intelligence: Why It Can Matter More Than IQ, Daniel Goldman argues that it is emotional intelligence - factors such as self-awareness, altruism, personal motivation, empathy and the ability to love and be loved - that determines success in life. I would propose that in the New America, another type of intelligence, multicultural intelligence, or MQ, is what will separate the winners from the losers.

We’ve found that companies, like people, have an MQ, and we’ve developed a battery of questions to measure it:

  • What percentage of your employees owns a passport and has visited a foreign country in the last three years?
  • What percentage of your management team is non-white or gay?
  • How many speak a language in addition to English?
  • Does your company offer diversity training?
  • Do you have a multicultural advertising agency?

In the New America, the most successful businesses are the ones who do their homework and have a clearly articulated multicultural strategy. They identify a multicultural segment - be it Hispanic, African-American, Asian or LGBT - as a strategic priority and get the people in their organization to rally around the cause.

A few years ago, I was involved in a project sponsored by the Coca-Cola Retailing Research Council, a group of supermarket executives who commission a study each year to benefit the supermarket industry. My company was hired to identify best practices: What the most successful supermarkets were doing to attract and retain Hispanic, African-American and Asian-American customers.

In collaboration with Terry Soto, of About Marketing Solutions, our partner on this project, we came up with six. I recall that the first - “Think like your ethnic consumers so you can serve them better” - was the most powerful and far-reaching, applicable to any marketer in any field.

We found that the best retailers were the ones who shopped the market. They went to stores that specialize in ethnic consumers to see what they were doing right. They got a feel for the stores - how they were laid out, what products and brands they carried, and how those were priced. When it came to gathering information, they were like sponges. They interviewed distributors, wholesalers and manufacturers, most of whom are normally generous when it comes to sharing information; it is vested self-interest.

The best retailers had a simple approach to information-gathering. They obsessively talked to consumers - on the street, in their stores and in focus groups. They endeavored to answer such questions as:

  • What is important and unimportant to this consumer?
  • What are their unmet needs?
  • Where are they currently shopping? If they’re not shopping at my store, why not?
  • Where do they get information when it comes to making purchase decisions?
  • What brands are they currently using? Why these brands? Why not others?
  • How do they feel about my store? Does it deliver on things that are important to them? Where am I missing the boat?
  • Are my products at the right price point for this consumer?
  • What would it take for them to shop at my store?

Requires a commitment

Ultimately, the most successful retailers are those who realize that developing a relationship with multicultural consumers requires a commitment of time, money and other resources. But the real key to marketing success with any consumer group is to have a genuine interest in the customers, what their needs are and how your company might fill those needs. Multicultural consumers are no different.

Good market research can do so much more than prevent costly mistakes. It can help you identify needs that your consumers have - unmet needs that your company might be able to meet. And good research does not always mean telephone surveys or using focus group facilities. We’ve done research in bars and barbershops, on buses and basketball courts, and inside people’s bathrooms and bedrooms. For the latter, we pay high incentives. The reason is basic. The better you understand someone, the better you can market to him or her. And if they’re different than you, the more likely you are to make mistakes and to have your communications misread.

Now, I conduct market research for a living, and I do believe that hiring a firm like mine - notice I didn’t say my firm - can be an important step toward fully understanding your multicultural consumers. But in many cases companies can boost their MQs by taking advantage of the many free information resources that are out there. Such as:

Let’s start with the U.S. Census. Unlike surveys, which are based on statistical samples, the Census is an actual counting of everyone in the country, including citizens, non-citizen legal residents, long-term visitors and illegal aliens. It has even begun to include estimates of people who might not normally be counted, such as homeless and migratory people.

The Census tracks race, Hispanic origin, country of birth, income, educational levels, language use and a slew of other variables down to very small geographical groupings called census blocks (there were eight million census blocks in the 2000 census).

In addition to offering a number of relevant publications, some other marketing uses of census data are to:

  • Measure the size of ethnic markets from national to local and sub-local.
  • Identify top markets for a given ethnic group.
  • Understand what percentage of a multicultural market, say Hispanics, is foreign-born.
  • Determine which areas of a city or state might represent opportunities, based on the demographics of residents.
  • Develop weighted sampling plans for market research studies.
  • Explore how your target group has changed over time.
  • See projections of the U.S. population, by ethnicity, through the year 2100.

The Census tracks race and Hispanic origin separately, since in the eyes of the Census, Hispanics are not a race. The Census does not track religion or sexual orientation because the constitutional mandate for a census does not include these categories.

However, if you are interested in the LGBT market, the Census does track unmarried partners; and if they happen to be of the same sex, then it can be safely assumed that the couple is gay or lesbian. The 2000 Census showed that nearly a million people fell into this category. It’s a flawed, gross underrepresentation of the gay population since not all gays are in partnered relationships. In fact, some studies have shown that it severely undercounts the number of gays who are partners, despite the efforts of LGBT activists to get them to check the box - but it does give a good proxy and is useful for understanding areas with a high concentration of gays.

A couple of other useful governmental sources of information are the Consumer Expenditure Survey and the Current Population Survey. The Consumer Expenditure Survey is conducted by the United States Department of Labor and administered by the Census Bureau. It consists of two surveys, an interview and a diary survey, which provide in-depth information on how Americans of different ethnic groups spend their money.

The Current Population Survey is a national, monthly survey of 60,000 households, conducted by the Census Bureau for the Bureau of Labor Statistics, which uses the report to estimate the number of unemployed people in the United States. I like it because it’s an easy tool to query, and is the only governmental source I know of that provides visibility to the third-generation, since it asks the birth country of one’s father and mother. If you’re interested in what percentage of, for instance, the Asian population is first-, second- or third-generation, this is the place to look.

A great source of free information on the Hispanic population is the Pew Hispanic Center, a non-partisan research organization that conducts frequent studies on a range of topics including demography, economics, education, identity, immigration, labor, remittances and politics. Additionally, The Center regularly conducts public opinion surveys on social and public policy issues relating to Latinos. Its 2002 National Survey of Latinos is one of the best Hispanic studies I’ve seen, ever, and it’s available online for downloading.

In addition to professional journals, many of which can be found online, we can all benefit from the writings of academics who are under the yoke of the adage, “Publish or perish.” There’s a ton of research coming out of America’s universities on the subject of multicultural marketing. For instance, the Lewis Mumford Center for Comparative Urban and Regional Research is a good source for information on assimilation and the emerging second generation. The University of Georgia’s Selig Center for Economic Growth is the definitive resource for information about purchasing power and the multicultural economy.

Once you’ve exhausted the free information available, you might want to consider subscribing to syndicated studies. Both ACNielsen and Information Resources Inc. have consumer panels of African-American and Hispanic consumers. These are valuable sources to obtain detailed information on what consumers are buying, where they buy it and how much they’re paying. They also have data that provide details of what gets scanned at the checkout counter in stores located in heavily Hispanic or African-American neighborhoods.

In terms of top-notch survey data, both Simmons Market Research and Scarborough Research offer a Hispanic study, a gay and lesbian study, as well as significant reads of African-Americans in their general market survey.

Data is harder to come by for Asian-American consumers. The fact that they skew foreign-born and speak myriad languages has, unfortunately, been an obstacle for researchers. New America Media does do a study with a substantial in-language sample for Asians and a focus on media. In 2004, Arbitron began to survey Chinese radio listeners in New York and Los Angeles. As the Asian-American population continues to grow, and as marketers get increasingly savvy about this burgeoning market, the amount of available information will grow as well.

Sorely needed

Another step toward an improved MQ is diversity training. To many white Americans, the very word “diversity” is enough to conjure up images of quotas, time-wasting training programs and a tyrannical political correctness.

That diversity training can go too far does not detract from the reality that it is sorely needed in today’s business world. The problem, in my opinion, is that too many people put it into the category of being the right thing to do and ignore the fact that it is also the smart thing to do.

Examples of costly corporate mishaps, due to a lack of diversity awareness, are many. In 2005, Macy’s East agreed to pay New York State $600,000 to settle a racial profiling suit. According to the complaint, African-American and Latino shoppers were routinely followed, questioned, and searched by security guards. Suits against JCPenney and Dillard’s were also filed that year. That June, retailer Abercrombie & Fitch agreed to pay $40 million for focusing its employee recruitment on white fraternities and sororities, relegating minority applicants to back-of-the store jobs.

In 2007, Time did a story called “Employee Diversity Training Doesn’t Work.” In it, the magazine cited a study by Frank Dobbin of Harvard, Alexandra Kalev of the University of California, Berkeley, and Erin Kelly of the University of Minnesota, which found no real change in the number of minority managers after companies began diversity training. In the words of Dobbin, “Companies have spent millions of dollars a year on these programs without actually knowing ‘Are these efforts worth it?’ In the case of diversity training, the answer is no.”

What the study found was that when diversity programs had teeth, when people were held accountable for results, the results were more substantial. The article cited an example from General Electric under former CEO Jack Welch, the ultimate no-nonsense manager, who implemented a diversity strategy that included appointing a chief diversity officer, Deborah Elam. The results were impressive, and by 2005, the percentage of women and minorities making up the ranks of senior management increased dramatically. According to Elam, “Training just to train is not enough. You’ve got to have accountability at the top.”

One company that found significant value from diversity training was Denny’s. It hired a diversity guru and spent millions on its diversity initiative. Unfortunately, this was a result of a PR fiasco in 1994 after one of its restaurants asked a group of African-American Secret Service agents to pay for their meal in advance. Denny’s paid $54 million after being hit with two class-action lawsuits filed by more than 250,000 customers.

According to Essence magazine, within a year, all but one of the senior executives was gone, and the mostly white, male board of directors was overhauled. The company began diversity training and an analysis every three months of who was hired, fired and promoted to ensure that discrimination was not rearing its ugly head. Results of the study were presented to the board of directors and the NAACP. Importantly, the diversity initiative is tied to Denny’s rewards-and-recognition program.

In consumer studies, African-Americans tend to rank “respect” as second only to price in terms of importance. Given the reality of race in the marketplace, it’s easy to see why. Denny’s is proof that good intentions coupled with effective action can lead to results. In 1996, a third of African-Americans gave Denny’s a positive rating for respectful service; today, they estimate that number to be around 80 percent.

Diversity training can be extremely effective in helping companies uncover discrimination of a more subtle variety that might be handicapping their best efforts.

A large financial institution asked my company to run some focus groups among its Asian-American employees to find out why so many of them were leaving, despite the fact that they represented an inordinately high number of new hires. When we interviewed some Asian-Americans who had not left the company, they resoundingly expressed what Jane Hyun calls “The Bamboo Ceiling,” the fact that Asian-Americans are pathetically underrepresented in the ranks of management. When we interviewed white members of the company’s management, several expressed their conception that Asians were much better “number crunchers” than managers. Clearly, this attitude was being conveyed, if not verbally, then in terms of the low promotion rate.

In cases like this, it’s usually not a case of intentional discrimination. Rather, it’s a misreading of cultural cues. Asian-Americans are often taught from the time they are young to keep their noses to the grindstone, be humble and not blow their own horns. Non-Asians, by contrast, learn to be aggressive, to speak up on their own behalf and that the squeaky wheel gets the grease.

Acquire the knowledge

No matter your MQ, it can always be improved. Conducting market research, walking stores, talking to customers, absorbing what academics and other researchers have to offer and diversity training are all means to acquire the knowledge and wisdom that will increase your understanding.

It’s something that has never been a high priority for Americans. Rather, the image of the “ugly American” doing business abroad with limited cultural sensitivity and even less language ability has been the norm. That will all change soon. For in the New America, MQ will not only be required of those engaged in international affairs, it will be required of all of us.