Winning Strategies for Latin Markets
The last decade of the twentieth century was a time of profound economic transformation in Latin America. We began this book with an identification of key drivers of such transformation: global financial systems, regulatory reforms, regional integration, market transformation, and technology (see Figure 1.1). With different levels of intensity and at different times, these drivers have had a profound impact on all Latin American countries, without exception. The impact has transformed industry and business strategy. In Chapters 3 to 7, we analyzed the impact of these drivers on the infrastructure, consumer markets, banking, and health sectors. In this chapter we revisit our initial framework, assess the strategy of adapters and shapers introduced in Chapter 1, and provide recommendations on how firms may continue to operate in Latin markets.
Any strategy for Latin markets must recognize the importance of the U.S. Latin market. The 34 million people of Latin American descent in the United States represent the fourth largest Latin American nation and the third largest in buying power. The future of any large multinational firm in Latin America will be decided by its ability to lead in the Brazilian, Mexican, and U.S. Latin markets. This golden triangle represents about 67% of the $1.6 trillion market power (see Table 2.1) and total number of households. A strategy that focuses on market dominance in only one or two of these three large Latin markets will not be enough to achieve regional market predominance.
The make up of the markets in the golden triangle could not be more different. Because of geographic distance and the fact that about 60% of the Latin population in the United States is of Mexican origin, the U.S. Latin and Mexican markets are relatively closer than they are to Brazil. The challenge for any firm is to formulate strategies that are effective for all three market cultures. The key to starting such a formulation is to gain a grasp of the Latin market identity.
The New Latin Market: Latin American or American Latin?
In his comprehensive analysis of the people and culture of the Americas, Peter Wynn once referred to Latin America as an invention devised in the nineteenth century by a French geographer to describe the nations colonized by Latin Europe. The resulting outcome of migration has shaped a region of diverse races, ethnicities, cultures, and languages sharing a common historical experience. Based on racial mixing alone, a variety of Latin identities emerge: European-Latin, Afro-Latin, Asian-Latin, and Indo-Latin. The diversity of the Latin market has challenged the popular vision shared by many firms of a single Pan-American market. Advertising agencies in particular have attempted to develop regionwide campaigns only to find substantial cultural, demographic, literacy, and language dialect differences even in countries that speak the same language. According to the advertising industry's most representative information source, Ad Age, "the so-called Latin market is a lazy description for a complex region of consumers."
Is there a single Latin market? In a strict sense, there are as many Latin markets as nations created out of the Latin European colonization. Argentines are different from Brazilians, and Chileans are different from Mexicans. Furthermore, within large markets like Brazil and Mexico, there are several ethnic markets. Thus, what characterizes the Latin market? At the risk of generalization, Latin markets may be grouped either by their demographic transformation (see Figure 2.1) or by the subregional corridors mentioned in Chapter 5 (Andean, Southern Cone, Mexican-Central American, Caribbean, and Brazilian). Additionally, about 34 million Latin consumers are part of the large U.S. market.
The key to understanding Latin markets is to define the core of the Latin identity. The Latin identity is only an issue from the perspective of another culture. When the Latin consumer is in his or her cultural milieu, identity is unambiguously national in character. When the Latin consumer is outside his or her cultural context, in the United States, for instance, the Latin identity is ambiguous. Thus, the answer to identifying the Latin core can be found by examining Latin consumers in the United States.
When Latin Americans travel or emigrate to the United States, they are grouped under the single label of Latin. Individually, the Latin person perceives himself or herself as a member of one of the Latin American nations with little in common with other Latin Americans. The immersion in the large American culture results in two adaptation processes. The first is the assimilation to the large dominant American culture. The second one, which is less understood, is the exposure to many other Latin American national cultures, a process that may be referred to as the Latinization or cross-fertilization of the Latin American cultures. This second process holds the key to the Latin core, as it is only in the United States that a true melting pot of diverse Latin American cultures takes place. As these Latin American emigrants socialize, work, or intermarry with others from the same group, the fusion of their cultures produces a new synthetic Latino identity and syncretic popular culture. In this process of discovery of a new Latin identity, it is not clear what aspect of the new Latin identity replaces the national culture and how much of the new American way is assimilated. The level of fusion of these three cultural identities (national, Latin, and American) depends on the level of education, socioeconomic level in the native country, and other traits.
A related process that also influences the Latin core identity is the reverse process of Latinization of the larger American culture. As Americans look for more diversity and new experiences, especially in food and music, they may embrace Latin expressions or gestures and explore Latin products. This process of Latinization of the large U.S. market is of great interest to U.S. firms targeting this ethnic market segment. The potential ethnic crossover of Latin products and culture to the general market is five to ten times more attractive than just targeting the Latin market alone. For instance, the crossover of the traditional Latin flavor dulce de leche in food products such as ice creams and candies has a much greater impact than positioning this flavor only as an ethnic concept. The dulce de leche flavor is now part of Häagen-Daz's global ice cream product line. Mars has tested the dulce de leche flavor in its popular M&Ms. The firm tested the flavor first in the U.S. Latin market, but the expectation is to introduce it into the large U.S. consumer market. Mars could eventually introduce the new flavor to the rest of Latin America and perhaps the world. The change in flavors or colors in the M&M product offering is not a trivial decision for this company.
As a result of assimilation and cross-fertilization of Latin Americans in the United States, three groups emerge. The first group consists of the unassimilated immigrant that retains a strong national culture. This group exhibits little of Latinization or assimilation to the American way. A second group consists of foreign-born assimilated and Latinized persons. This group is fully bilingual and bicultural. The degree of Latinization and assimilation may range from bicultural (American-national culture dominant with little Latinization) to tricultural (all three levels of culture are equally dominant). The third group consists of fully assimilated foreign-born Latin Americans and first- or second-generation U.S.-born Latins. In terms of consumer culture, this group is indistinguishable from the mainstream U.S. culture.
The third group of fully assimilated or U.S.-born Latins operates well in all three cultures. For the U.S.-born, the Latin culture is important because this is what makes them different from the general population. Encouraged by the recent process of Latinization of the U.S. market, Latin youth have rediscovered their heritage as a source of pride.
In reaching the Latin market, firms need to understand that Latin-ness is a continuum that ranges from the purely national to the fusion of two or three similar or different cultures (national, Latin, and non-Latin). The degree and relevance of the three cultural components depend on the geographic location of the consumer. For Latin Americans in their own country, the relevant culture, and perhaps the only aspect to appeal to, is the national culture. In itself, the national culture may be a blend of many local cultures resulting from the complex processes of colonization of native populations and waves of immigration. For Latin Americans outside their own cultural milieu, the approach depends on degrees of assimilation and cross-fertilization mentioned before.
In reaching the complex Latin market, the following market-based strategies may be considered:
Local national strategy. Ideally, the best strategy is to develop a differentiated approach for each Latin American nation. This strategy is too costly to implement. The compromise is to develop national strategies for large markets where the national culture is distinctive (Mexico, Brazil, and Argentina) and to group the other Latin American markets by regional corridors (Andean, Caribbean, and Central American). In the U.S. Latin market, firms may segment the market by the country of origin of the Latin population.
Latin localization strategy. This strategy is based on finding the common ground or essential commonalities that are shared by all Latinos in a given consumer category. Clues for such common ground may be found in the new Latin identity created by the process of cross-fertilization of Latin American cultures in the United States. The grasp of these commonalities is still at the early stages of development. Crude generalizations and abstractions can be observed in the approach used in marketing strategies for U.S. Latin markets that describe this group as warm, affectionate, family oriented, traditional, conservative, and religious. To grasp the concept of Latin-ness, more research is needed on Latin consumer inner traits such as aspirations, beliefs, and motivations that may cross national cultures in Latin America as well as Latin consumers in the United States. In the future, U.S. companies may integrate marketing approaches to Latin markets by merging their U.S. Latin operations with those of their subsidiaries in Latin America. P&G, for instance, has established an office in Puerto Rico to coordinate the firm's Latino market effort. Even if such common cultural icons can be found, national localization is important to connect with the different national groups. An example of this approach is the MTV network. In competing for the attention of Latin youth, the MTV network mixes the genres of global, regional (Latin), and local music. Since the preference for regional and local music varies by country, MTV has established separate Latin business units. MTV-Brazil tailors the mix for this country only. MTV-Latin does the same for Spanish-speaking Latin America and customizes the programming for local content. In the United States, MTV targets Latin viewers in the English language but makes itself relevant to this group by sponsoring such events as Latin festivals in cities with large concentrations of Latinos, such as Miami and New York.
American Latinization strategy. This strategy should be used primarily for the Latin markets in the United States. This approach is to blend the three levels of cultural reference: American, Latin, national. The appropriate blend varies with each one of the groups based on partial to complete assimilation. For instance, if the consumer is fully assimilated but bicultural Latin, the approach should either provide options or channels of communication in either culture. Banks have certainly implemented this strategy by multiple language access to their ATMs and customer service call centers. Furthermore, given the diversity of consumer cultures in Latin America, the American Latinization strategy could just be the answer to reaching the regional market with an approach that is markedly Latin but cannot be ascribed to a particular country. We are not aware of any firm that has instituted this reverse ethnic crossover marketing that in principle seems valid.
Global localization strategy. The strategies above apply to consumption categories where culture plays a significant partfor example, food, personal care, and entertainment. However, for marketing computers, financial services, or cars, for example, the approach to Latin markets is essentially global with localization of the customer relations and delivery aspects. One example is the strategy used by online portal Terra-Lycos. Terra-Lycos uses a two-prong strategy to reach Latino online users in the United States and Latin America. In the United States, Terra joined forces with Microsoft and Mexican Telmex to acquire the leading Latin portal Yupi and renamed it YupiMSN, which is promoted through Microsoft's own portal MSN.com. For English-speaking audiences in the United States, Terra-Lycos offers the Lycos portal. In Latin America, the firm uses the Terra site, which is offered in every country where the parent company Telefónica operates, whether in Spanish or Portuguese.