The Minority Market

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.

Homeownership Rates By Race

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).

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.

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.

Define the market. Small business expert Kim T. Gordon cautions against marketing to minorities simply because they exist in your community. “It is wonderful to have ethnic media, but as a remodeler, you have to reach people when they are thinking of doing something to their homes,” says the president of National Marketing Federation in South Florida.

Her advice is to market to minorities only if they fit the demographic profile that defines your best clients, including age, income, age of house, etc.

Define the media. Once you identify that a market exists, consider advertising in ethnic media. Ask an ethnic newspaper for a media kit to find out if they cover the demographic or ZIP code you want to target. “They are often inexpensive, so it might be a complement to your main campaign,” Gordon says. If you already advertise in a major daily newspaper, you can ask your rep for a Scarborough report to see which media minorities in your city use the most. “There is a good possibility this information will be cross-referenced by home-ownership,” Gordon says.

Scarborough Research in New York City is a leader in identifying local, regional, and national shopping patterns and media usage for American consumers. Its research products include 75 local market studies, a national database, and local market Hispanic studies.

For significant campaigns, consult an expert. Gordon stresses that if you choose to market in another language, you must work with an agency that is proficient in that language and better at identifying and using subtleties of cultures within a group. Former remodeler Paul Montelongo ran Spanish ads in Spanish media, and he recommends hiring a professional. “One word or mis-emphasis can turn the tables in a bad way,” Montelongo says.

Work with partners within the minority community. Clifford Tong, owner of ethnic marketing firm Diverse Strategies, advises remodelers to contact professionals who are on the front lines of the market you are targeting, including real estate agents, subcontractors, architects, interior designers, bankers, and mortgage brokers. For example, in Los Angeles there are several Hispanic Realtor associations. “You're better off forging relationships with people who provide complementary services to that market,” Tong says.

The Selig Center at the University of Georgia projects the nation's Hispanic buying power will rise from $222 billion in 1990 to $992 billion in 2009, by which time Hispanics will account for 9% of all buying power in the United States.

States With the Largest Hispanic Markets in 2004

When marketing to Hispanics, it helps to take into account a few general cultural differences. In general, Hispanics are family oriented and make decisions as a group. Kim T. Gordon says Hispanic first-time homeowners tend to have larger families with younger children, so they respond to family oriented products and marketing. Mortgage brokers and lenders who work with Hispanic clients taught Roy Larson of Larson Hispanic Research and Consulting that often the extended family will pool its resources to purchase a home. According to consultant Paul Montelongo, all vested parties give feedback on design and specifications. “If you include that in your process, you have a much better change of landing a deal — you have to act as a facilitator,” he says.

Larson says addressing the man of the house is generally part of the machismo culture of Mexico, but often it is the woman behind the scenes who has the final say.

States Ranked by Rate of Growth of Hispanic Buying Power, 1990 to 2004

Spanish-language media is the best way to reach Hispanics. Even second- and third-generation Hispanics use Spanish media for a cultural connection. “Miami is an extremely English-proficient target audience, yet they want to see you support their media and reach out to them in their own language,” Gordon says.

Larson suggests contacting Hispanic-owned businesses or attending a meeting of a local Hispanic chamber of commerce. “That is where you will find people interested in remodeling,” he says.

Hispanics Leading the Surge in Home Improvement Spending

Along with the rise in minority homeownership rates has come a surge in minority spending on home repairs and improvement. Home improvement spending among Hispanics was up nearly 80% in inflation-adjusted terms from 1995 to 2001 — more than three times the spending growth among white households.

The Selig Center predicts that African-American buying power will rise from $318 billion in 1990 to $965 billion in 2009, up by 203% in 19 years. This overall percentage gain outstrips the 140% increase in white buying power and the 159% increase in total buying power (all races combined). In 2009, the nation's share of total buying power that is African-American will be 8.7%, up from 7.4% in 1990.

States With the Largest African-American Markets in 2004

States Ranked by Rate of Growth of African-American Buying Power, 1990 to 2004

In 2009, 14.1 million Americans — 4.6% of the country's population — will claim Asian ancestry. The Selig Center predicts that the nation's Asian buying power will more than quadruple from 1990 to reach $529 billion in 2009. The 347% gain from 1990 to 2009 is greater than the increases in buying power projected for whites (140%), for the United States as a whole (159%), and blacks (203%), and matches the projected gain for Hispanics.

This group is harder to target because it is made up of so many languages and cultures. “As an Asian-American, I am sensitive to watching, reading, or listening to ads that … have Asian-Americans featured in them or that have Chinese-language characters,” says Clifford Tong, the owner of Diverse Strategies, a firm that specializes in ethnic marketing.

Remodeler Michael McCutcheon works with a large Asian population near San Francisco. On his Web site, he includes references to feng shui, the ancient Chinese practice of creating a balanced environment, and Vastu, a similar practice from India.

He says Asian clients are especially sensitive to over-aggressive sales tactics. They prefer a systematic and relationship-based presentation. “When you mention you have worked for a client with a Japanese or Chinese surname, they may not know them, but it is reassuring for them to hear,” McCutcheon says.

They are less likely to tell you when they are unhappy with something. McCutcheon had Asian clients who had an issue with the tub tile installation. “They would not tell me directly what was wrong. They would not make eye contact. I had to continue asking them, ‘How did we not meet your expectations,' before they reluctantly told us,” McCutcheon says.

States With the Largest Asian Markets In 2004

States Ranked by Rate of Growth of Asian Buying Power, 1990 to 2004