AHAA Trends Report 2010

AHAA 2010HISPANIC AD SPEND TRENDS REPORT

association of hispanic advertising agencies

Hispanic Share of Overall Ad Spend among Top 500 Advertisers in TV, Radio & Print. 2006- 2010 Comparisons based on The Nielsen Company.

Study Designed and Analyzed for AHAA by Santiago Solutions Group.

Rev 11- 01- 2011

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Introduction

This study marks the first time that a direct correlation between overall Hispanic ad spending and a company’s overall revenue has been found. For Best-‐In-‐Class companies, which are defined as U.S. companies with a consistent Hispanic allocation of marketing dollars of more than 14.2 percent, this study found, with a confidence level of 99 percent, that a Best-‐In-‐Class company allocating one quarter of its ad spend to Hispanic media over five years would generate annual revenue growth of 6.7 percent. As the evolution of the U.S. Hispanic population unfolds over the coming years, many advertisers continue to take a hard look at their investments and propensity for growth relative to the Hispanic consumer. The 2010 Census underscores the diversity of the Hispanic market that requires and demands that brands and industry categories reevaluate their stake in the Hispanic consumer marketplace. As the leading voice for Hispanic advertising, AHAA offers this Hispanic Marketing Investment Trends Report to:

• Provide marketers with a snapshot of industry performance; • Engage and educate various industries about the Hispanic market prospect; • Benchmark overall and industry specific allocation shifts; • Introduce useful, realistic and adaptable approaches for setting appropriate resource levels by major

product categories.

Hispanic Spend Trends among Top 500 Advertisers

In 2010, coming on the heels of the recession, Hispanic media spend by the Top 500 advertisers stood at $4.3 billion, only $163 million below its peak in 2007 showing a strong recovery. However, unlike the general market which saw budgets slashed during the 2008 recession, the Hispanic advertising industry has remained constant at five to six percent of total advertising budgets, from 2006 to 2010. Showing a steep turnaround in 2010, the Top 500 reversed the previous two year trend returning over $500 million to Hispanic media, intensifying their ad spend by 14 percent over 2009 levels. • Hispanic media spend by the Top 500 stood only $163M below its peak in 2007 showing a strong recovery.

• The Top 500 Advertisers’ Hispanic media spend as a share of their overall ad spend stood at 5.0%, a slight share loss of 4 tenth of a share point from 2009.

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Methodology

The overall study was developed and executed by the Santiago Solutions Group, a growth strategy consultancy with methodological review by Dr. Cristina Garcia, professor of statistics at USC from 2008 to 2011. Total and Hispanic advertising spending for the top 500 advertisers was tabulated using The Nielsen Company data for each of the years 2006-‐2010. The Nielsen Company figures include Hispanic-‐centric media (Spanish, Bilingual and English) across network, cable and spot television markets; local radio markets; national magazines; and local newspapers. Using this data, the total Hispanic spend out of all advertising was calculated. Santiago Solutions Group analyzed all 35,000 U.S. advertisers and their allocation trends to Hispanic media for five years between 2006 and 2010. The Top 500 Advertisers were grouped into five levels of Hispanic allocation and each company was paired to the available published revenue data for the five year period. Various regression analyses were applied to identify any correlation between the percentage of advertising allocation dedicated to Hispanic and the company’s compounded annual revenue growth rates.

Classification of Hispanic Advertisers

For purposes of this study, Hispanic Advertisers were classified according to their Advertising Spend Levels

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Methodology

The overall study was developed and executed by the Santiago Solutions Group, a growth strategy consultancy with methodological review by Dr. Cristina Garcia, professor of statistics at USC from 2008 to 2011. Total and Hispanic advertising spending for the top 500 advertisers was tabulated using The Nielsen Company data for each of the years 2006-‐2010. The Nielsen Company figures include Hispanic-‐centric media (Spanish, Bilingual and English) across network, cable and spot television markets; local radio markets; national magazines; and local newspapers. Using this data, the total Hispanic spend out of all advertising was calculated. Santiago Solutions Group analyzed all 35,000 U.S. advertisers and their allocation trends to Hispanic media for five years between 2006 and 2010. The Top 500 Advertisers were grouped into five levels of Hispanic allocation and each company was paired to the available published revenue data for the five year period. Various regression analyses were applied to identify any correlation between the percentage of advertising allocation dedicated to Hispanic and the company’s compounded annual revenue growth rates.

Classification of Hispanic Advertisers

For purposes of this study, Hispanic Advertisers were classified according to their Advertising Spend Levels

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• Best-‐In-‐Class: Allocating advertisement expenditures to the Hispanic market at a proportion that is equal to or greater than the percentage of adults in the United States that are Hispanic (according to the 2010 Census).

• While 2010 showed a major spend increase in Hispanic media, the number of advertisers ranking in the top two tiers, Best-‐In-‐Class (>14.2%) and Leaders (6.4%-‐14.2%), decreased from 95 to 80.

• In 2010, only 5% of the Top 500 Advertisers ranked as Best-‐In-‐Class, Leaders are 11%, Followers are 11%, Laggards 16%, while a majority (57%) was in the Denial classification.

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Correlation between Hispanic Allocation and Revenue Growth Rate

• Forty companies showed an aggregate Hispanic allocation of over 14.2% which equals the percentage of adults that are Hispanic per the 2010 Census. In order to create a Best in Class set for the regression analysis, companies which did not have consistent published financials such as venture capital firms, companies which had restated their earnings, non-‐profit organizations and companies which grew on acquisition sprees rather than consumer driven growth were eliminated. As a result, the final set of Best-‐In-‐Class in the analysis included the following 14 companies: AFC (Church’s, Popeye’s), Allstate, AutoZone, Colgate-‐Palmolive, Collective Brands (Payless), DirecTV, Domino’s Pizza, EchoStar Communications (Dish Network, Dish Latino), Heineken (Tecate), JC Penney, Rent-‐A-‐Center, SAB Miller (Miller-‐Coors), State Farm, and Vivendi (Universal Music Group).

• The AHAA analysis found that there is indeed a strong, positive correlation between the percentages of

overall ad spend allocation to Hispanic media and a company’s revenue growth. The percent of ad spend allocated to Hispanic markets is a very important determinant of the company’s overall revenue growth rate –consistent ad allocations greater than 14.2% explain about half of best-‐in-‐class companies revenue growth rate. As of October 2010, a statistically significant correlation has only been found among Best-‐In-‐Class companies. AHAA will continue studying data to unearth more learnings.

o Our analysis between the 2006-‐2010 aggregate Hispanic Allocation Percentage and 2006 to 2010 Compounded Revenue Growth Rate resulted in a positive correlation of approximately .68. By taking the square of the correlation coefficient, we obtain coefficient of determination of .47 for consistent Best-‐In-‐Class companies. That is to say, 47% of the variation among 2006-‐2010 revenue growth rates of consistent Best-‐In-‐Class companies is determined by 2006-‐2010 Hispanic Allocation Percentage.

o This result indicates that higher 2006-‐2010 Aggregate Hispanic Allocation Percentages are associated

with higher 2006-‐to-‐2010 Revenue Growth Rates. In Fact, Hispanic allocation alone explains about half of the variance in revenue growth over a 5 year period. While the sample size is small, we are still confident about our results since additional testing continuously supported our findings. Further the results are consistent with what many Hispanic marketing leaders already experiencing.

• In other words, the AHAA study found that, in general, for consistent Best-‐In-‐Class marketers… ‒ a 5 percentage point shift in ad spend allocation from non-‐Hispanic towards Hispanic would yield

between 1.1 and 6.6 percentage point increase in overall corporate revenue. ‒ a 10 percentage point increase in Hispanic allocation will yield between 2.2% and 11.2% acceleration

in annual topline revenue growth rate. • That is, a Best-‐In-‐Class company allocating one quarter of its ad spend to Hispanic media over five years,

would generate annual revenue growth of about 6.7%. • Findings were found with a confidence level of 99%.

• Ten out of the fourteen aggregate Best-‐In-‐Class companies in the analysis work with a Hispanic specialized

Agency so it is not surprising that these companies have consistently invested and have positively gained from rapid growth rates. While proper investment is basic, understanding the most appropriate cultural insights to develop integrated strategies from communications to customer experience is crucial to turning ad spend into sustainable revenue growth.

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Conclusions

Specialized marketing to Hispanic consumers is more valuable today than ever. The diversity within the Hispanic market— age, acculturation level, country of origin, income, education, and geographic location— underscores the importance of meaningful creative and content that is not “one-‐size-‐fits-‐all.” Based on population and buying power alone, Hispanic consumers are among the most desirable target markets. The U.S. Hispanic population continues to grow more rapidly than the non-‐Hispanic population and according to Census figures by 2014 one person out of every six living in the U.S. will be of Hispanic origin. Even through a deep recession and softer consumer demand, the AHAA study revealed a direct connection between consistent and appropriate Hispanic ad spending and overall topline revenue growth. As companies recover and reinvest, ad spend should be seen more broadly as a corporate investment that will maximize companies growth in the Hispanic market. Now is the time to ensure that Hispanic budgets are increased and optimum allocation to target Hispanics is secured. According to the AHAA study, a company allocating one quarter of its ad spend to Hispanic media over five years would generate annual revenue growth of 6.7 percent. This research underscores that companies can’t just pop in and out of the Hispanic market as a fad and see benefits – real bottom-‐line benefits come from consistent integrated approaches. While the AHAA data only measured above line advertising expenditures, as leading Hispanic marketers we know that a successful Hispanic program must be multidimensional, multi-‐platform efforts. This study emphasizes the importance of right-‐sizing a company’s Hispanic market opportunity. Right-‐sizing the investment levels will establish attainable Hispanic revenue and ROI goals. In addition, Ad spend should be more broadly seen as marketing investment to propel companies from some Hispanic growth to full potential growth with campaigns reflecting the most appropriate cultural insights and developing integrated marketing strategies from communications to customer experience . Setting the proper investment for the potential Hispanic market opportunity can play a significant role in leading companies out of the recession. As companies recover and reinvest after the deepest part of the recession, now is the time to ensure that Hispanic budgets are increased during the second half of the year and optimum allocation to target Hispanics is secured.

Hispanic Allocation Trends by Category

Increases • At $707M, Packaged Goods advertisers are the leading investor against Hispanic consumers, increasing

$140M in ad spend over 2009 and increasing their share of allocation to Hispanics by 1.6 points to 6%. ‒ In fact, Consumer Packaged Goods (including Foods and Personal Care) continued a five-‐year trend of

increasing their spending toward Hispanic media while cutting allocations to non-‐Hispanic media. Since 2006, CPGs have shifted two allocation points to Hispanic away from non-‐Hispanic, increasing their spend to 51 percent in Hispanic media vs. a 12 percent increase in non-‐Hispanic media.

• The converging Telecom and Media & Entertainment-‐Subscription TV categories follow closely with $502M or 9% and $349M or 13% Hispanic ad spend and allocation respectively, investing $850M combined in 2010 and adding $415M to Hispanic media over 2009. As an aggregate, they surpass Packaged Goods as the largest category in dollars spend and Hispanic allocation.

• Hispanic ad spend in the Auto Insurance category increased by $97M over 2009 to 12.5% allocation while Non-‐Hispanic spend decreased by $73M over the same period.

• With a remarkable jump in Hispanic allocation from 0.5% to 9.8%, Fitness-‐Sports became a reemerging category in the Latino community.

• From 2006 to 2010, the expenditures by Financial Services-‐ Tax Preparation & Other category has grown by 9.6% to a 24% allocation of overall spend to Hispanic in 2010.

• During the same period, Beer advertisers have remained loyal to the Hispanic community as they allocated 15% or about $150M to the Hispanic segment.

• The Financial Services categories have tripled their focus on Hispanic media since 2009 reaching $215 million in 2010. Similarly, all Insurance categories have also experienced increases.

• 6 out of the 8 categories gaining at least 2 points in Hispanic allocation did so by not only increasing the spent ad spend toward the Hispanic market, but also by decreasing the dollar invested in the Non-‐Hispanic market; Financial Services-‐Other, Fitness-‐Sports, Insurance-‐Auto, Media & Entertainment -‐Subscription TV/Radio, Restaurants-‐QSR, Retail-‐Specialty Apparel .

Decreases

• The Automotive categories in total, manufacturers and retailers combined, have shown an aggregate decrease of approximately $259M since 2006. In contrast, all other 50 categories in aggregate have shown an upturn of $280M or +8% in the same period.

• Private Investment Firms’ ad expenditures on the Hispanic segment have taken a sharp fall from 9.0% in 2006 to a pedestrian 0.7% in 2010.

• Similarly, Non-‐Profit advertisers took a nose dive of 10.6% from 15% allocation in 2006 to 5% in 2010.

• 16 categories had decreases in Hispanic allocation of over 2%: Travel -‐Air, Lodging, Car, Cruise, Retail-‐Mass Merch/Dept Stores, Retail-‐Electronics, Private Investment Firm, Non-‐Profit, Financial Services-‐Credit Cards, Energy, Direct Consumer Marketing, Beverages -‐Non-‐Spirits, Automotive Parts, Automotive -‐Dealers Assn, Media & Entertainment, Insurance-‐Health, Government -‐ Gambling – Lottery, and Apparel.

Best-‐In-‐Class Categories

• Three out of fifty-‐one categories ranked as Best-‐In-‐Class in 2010: Beer, Direct Consumer Marketing, and Financial Services-‐Tax Prep & Other.

• The Beer category earned a Best-‐In-‐Class standing and edged 1.2 share points in allocation to 15%.

• Direct Consumer Marketing was the only Best-‐In-‐Class category that decreased its spending, cutting its Hispanic media ad spend by 33% over its pre-‐recession level of $118M in 2006.

Leaders Categories

• Among Hispanic allocation Leaders, the Media & Entertainment –Subscription TV/Radio category hurled the most, nearly $246M or 238% since 2006.

o The data shows that the Media-‐Entertainment-‐Subscription TV/radio category has become a consistent Leader advertiser to the Hispanic market since 2006.

• Both Auto Insurance and Media & Entertainment -‐Subscription TV/Radio went from being Followers in 2006 to being Leaders in 2010 (almost BIC), with a combined increase in Hispanic allocation of 17.5%.

• The Restaurants-‐QSR category showed also a significant increase of 30% or $70M in incremental investment to end at $301M in 2010.

• The Home Improvement & Builders category rebounded from the recession dip increasing 6% over its 2006 base of $91M.

• Among 2010 Leader categories, only Government& Lottery and Retail Mass Merchandisers/Department Stores experienced decreases in overall spending.

Follower Categories

• Four categories among Followers increased their dollar spend since 2006, led by Packaged Goods especially Food manufacturers within it which boosted their investments in Hispanic consumers by 44% compared to only 16% up among Non-‐Hispanic traditional media.

• Both the Automotive Manufacturer and Media &Entertainment categories experienced decreases in excess of $150M each over 2009.

• Among Followers, only four categories experienced decreases in Hispanic allocation from 2006 to 2010, with the sharpest decline coming from the Automotive Industry, manufacturers and retailers combined; with an approximate decline of x% in Hispanic ad spend.

Laggard Categories

• The Financial Services category has increased its focus on the Hispanic segment, with both the subcategories of Investment Firms and Banks-‐Mortgages showing healthy recovery.

• Amongst Laggards, the Pharmaceutical and Automotive Dealers-‐Assn categories experienced decreases in excess of $50M each.

In Denial Categories

• Among the 13 Denial categories, all but three categories of Diet-‐Supplement-‐Vitamins, Insurance-‐Life, and Luxury Brand, experienced decreases in Hispanic allocation.

• The Private Investment category took the biggest loss among Denial with an approximate decline of $86M.

AHAA Trends Report 2010

Business

Transcript of AHAA Trends Report 2010