If the buying power and homeownership rates of minorities increase as predicted, remodelers across the country who want to break into this lucrative market will need to understand the needs of and target Hispanic, African-American, and Asian customers. Remodelers in California, Florida, and Texas have already begun to make adjustments, as have contractors in large metropolitan areas.
A Growing Market The Selig Center for Economic Growth at the University of Georgia tracks the buying power of minorities, defined as personal income that is available, after taxes, for spending on goods and services (also known as disposable income).
By 2009, the Selig Center reports that the combined buying power of minorities (African-Americans, Asians, Native Americans, and Hispanics) will jump by 242%. The Department of Commerce looks even further down the road. It projects the purchasing power for minorities as their populations increase. According to the DOC's Minority Business Development Agency, minority share of the total U.S. population will increase from 29% in 2000 to 46% in 2045. Minority share of the U.S. economy will grow accordingly from a projected $1.3 trillion in 2000 to $4 trillion or more by 2045.
One consequence of this increased purchasing power: higher minority homeownership rates. According to the State of the Nation's Housing 2004 report from Harvard University's Joint Center for Housing Studies, minority homeownership rates have increased significantly in the past 10 years. From 1993 to 2003, Hispanic rates grew 7.4%, black homeownership rates rose 5.8%, and Asian/Other rates went up by 4.6%.
Overall rates, however, are still low compared with white homeownership, prompting government and industry to work together in recent years to reduce barriers and close the gap. The Bush administration's program, introduced in June 2002, has a goal of increasing minority homeownership by 5.5 million by the end of the decade. According to a HUD report, if this happens, it will stimulate an additional $256 billion in economic activity in the form of construction and remodeling jobs, spending on household goods, and other benefits to the housing sector. The report projects that 825,000 of the predicted 5.5 million new minority homeowners will likely purchase a new single-family house and more than 1 million new homes will be needed for the homeowners who sold their houses to minority buyers. In addition, 110,000 manufactured homes will be assembled for minority buyers.
The transition to homeownership is associated with purchasing new appliances, furnishings, and making alterations and repairs. The government's goal, if reached, would increase spending on home improvement, appliances, and furnishings by almost $36 billion — including $17 billion for remodeling, repairs and alterations.
Reaching Out Remodelers can't afford to ignore this future remodeling boom. Even if the predictions are taken conservatively, remodelers across the country will find a larger number of minorities among their potential customers. Jeff Humphreys, director of the Selig Center, says it is mostly large Fortune 500 companies that use the minority buying power data. “I understand why small companies have been slower to use a targeted approach,” he says. “But in some areas of the country, they are missing an opportunity. A generic message is likely to be ignored by these [minority] groups.”
Developing a less generic message requires making changes, such as using images of minorities in print or video advertising, supporting ethnic events, and offering foreign language support on your Web site. “Developing this language support is not trivial. It shows your potential customers you are serious,” says Clifford Tong of Diverse Strategies, a marketing firm in Oakland, Calif., that specializes in ethnic marketing.
Michael McCutcheon, president of Mc-Cutcheon Construction, works in the San Francisco Bay area. When he was creating a Web site and needed generic photos of people, he made sure to reflect the diverse mix of his target market. Roy Larson, a Hispanic marketing expert and owner of Larson Hispanic Research and Consulting in Dayton, Ore., describes this as putting out the welcome mat. “The key word is inclusion,” he says. “Anyone who lifts a finger to include Hispanics — the payoff is tremendous.”
Marketing consultant Paul Montelongo says one of the measures of success among immigrants is a new home or a renovated living environment. Montelongo, the former owner of two remodeling companies in south Texas, says his awareness of multicultural sales and clients became more acute in the mid-1980s in his Texas market. “If you're in a community that has a high concentration of any of those different cultures, it is to your advantage to learn their influences and how to sell to them,” he says.
McCutcheon says finding a connection with a client is what leads to repeat business. “Making deeper connections is more of a challenge cross-culturally, but it's still difficult with anyone.” Listening skills are a tremendous asset in this area. “The same skills good remodelers across the country have in helping people improve their living spaces, that will help them cross the cultural divide,” McCutcheon says.