Among the top 60 advertisers in the Hispanic market (see "Media Markets Report, December 2002), four are telecommunications carriers. A batch of statistics has these marketers singing "La Vida Movil" – industry jargon for the Hispanic community’s love for wireless communication.
According to California-based Cheskin Research, nearly half of U.S. Hispanics have mobile phones, which translates into a market of roughly 16 million people. Insight Research reports that Hispanics spent nearly $4 billion on wireless last year – a figure that is expected to reach $4.4 billion by the end of 2003.
So it’s no wonder the six leading carriers – AT&T Wireless, Cingular Wireless, Nextel, Sprint PCS, T-Mobile, and Verizon Wireless – have cast a wide look for Hispanic customers. Cingular Wireless lays claim to the Internet portal "Mi Ventana Movil" (www.miventanamovil.com), a Spanish-language version of the company’s "My Wireless Window" site. AT&T Wireless offers subscribers access to the carrier’s Spanish-language Web site. And Sprint PCS and its Mexico-based partner Pegaso PCS recently teamed up to offer Wau.com, a Spanish-language wireless portal.
ON TARGET, IN COMMUNITY
Establishing an online presence is just the tip of the iceberg.
The carriers have planned a barrage of marketing campaigns, product launches, and wireless services aimed at affluent and tech-savvy Hispanics. Strategies differ, but the goal is ultimately the same – to win a beachhead in the U.S. Hispanic market.
Verizon Wireless targets the market by focusing on each community’s cultural nuances and sensibilities. "A lot of companies take [wireless programs] and translate them literally into Spanish, and then cross their fingers and hope and pray that [Hispanics] like them," says Nick Montes, manager of multicultural marketing at Verizon Wireless. "What Verizon is trying to do is market to Spanish-speaking people on their terms with programs that are targeted to them specifically."
To that end, Verizon Wireless has retained RLR Jarrin, a California-based Hispanic advertising agency, to create and execute a Spanish-language print, radio, and television campaign. Verizon Wireless also is gearing up to roll out cell phone service plans featuring special discount rates for calls to Latin America, and the company’s Irvine, California–based call center employs nearly 150 Spanish-speaking customer-service representatives.
Marketers would be hard pressed to find a demographic group as ethnically diverse as the U.S. Hispanic community. That means ad campaigns designed to win the hearts of one Hispanic segment could offend or miss another part of the market.
Besides the obvious national-origin and geographic fragmentation lines, the Hispanic wireless market also is characterized by a cultural rift between the country’s third-generation residents and new immigrants, many of whom lack the financial history and credentials required to activate a wireless account. For this audience, adoption of the English language is a major issue both in marketing and in telecommunication services (see "Language and Markets in the U.S.," December 2002). Also, the wireless landscape is marked by a widening gap between today’s young, tech-savvy Hispanics and their elders.
Weaving all these threads into a comprehensive ad campaign is an exercise in cultural diplomacy and understanding that many wireless carriers are failing, says Roger Entner, program manager for the Yankee Group, a Massachusetts-based market researcher. "Many wireless carriers view Cinco de Mayo simply as a Latin American festival," laments Mr. Entner. "They don’t know that people from [countries other than Mexico] are as excited about Cinco de Mayo as the Russians are about the German Day of National Unity."
AT&T Wireless believes it has developed a strategy that communicates a consistent corporate message while addressing the divisions within the U.S. Hispanic market. The Washington-based company relies on "macro-campaigns" – marketing initiatives created and executed within local markets – to promote its products and services. In keeping with the company’s international marketing strategy, the focus remains on easy-to-use mobile devices and ready-to-go packages. Retail services, local promotions, and customer support services are tailored to suit individual markets.
"Your national strategy has to be aligned with a very comprehensive local market strategy. You have to have a grassroots effort in the local markets," says Rosa Alonso, director of multicultural marketing at AT&T Wireless. "And you have to have campaigns that appeal to specific groups."
THE BATTLE FOR LATIN AMERICA
The when-in-Rome approach also works as wireless companies penetrate the Latin American markets. According to Mario Carotti, Nextel’s vice-president of Latin American corporate communications, Nextel gained a foothold by fashioning itself into a homegrown institution. Local residents, not expatriate U.S. executives, make up each country’s workforce. Marketing campaigns and product promotions are customized in accordance with the buying preferences and usage patterns of local residents.
"Latin American people perceive Nextel as a domestic company in the same way they perceive Ford and Coca-Cola as domestic companies," says Mr. Carotti. "These are everyday names that are a part of everyone’s life and are as much local as they are international."
Industry privatization of formerly state-owned telephone companies has opened up gigantic opportunities as well as fierce competition, attracting the likes of Verizon Wireless, Bell South, and large Latin American players. With a population of 500 million and one of the highest online growth rates in the world, Latin America appears a ripe market for wireless services.
At the same time, economic and political turmoil mean a bumpy ride for utility-related industries such as wireless. After the destabilization of Argentina’s banks in early 2002, for example, Mr. Carotti traveled door-to-door, meeting with subscribers in order to negotiate reasonable payment plans. "From the president to junior sales reps – each of us was assigned a group of clients with whom we had to speak face-to-face, to analyze what payment problems there were, what limitations there were to draw cash from the bank, and how to work it out," he says.
Other bumps come from the telecom industry’s competitive pressures. In the mad rush for market share, many wireless companies focused on enlisting new subscribers rather than drafting a disciplined business strategy and conservative cost structure. Today, these companies are fast realizing that many of their subscribers are low-revenue generators, incapable of offsetting operational costs, especially in the midst of an economic slump. "If you already have a low-revenue subscriber and then your currency devalues 75 percent in one year, all of a sudden you just have a junk subscriber," warns Erica Eppinger, research director for Latin America at the Yankee Group.
SOUND OF THE TIMES
In its report "The Wireless Future: A Look at Youth Unplugged," Cheskin Research cited several future trends for the industry, especially the development of wireless data transmission that will permit complex games, entertainment, and business graphics to travel on the airwaves. U.S. Hispanic youth – a demographic group projected to grow 62 percent by 2020, compared with 10 percent for all U.S. teens – will be a major consumer for these services. "Understanding consumer behavior – in particular the youth market , which can be a bellwether for the mass market – is crucial to predicting what will drive users to upgrade their phones to take advantage of these high-capacity networks," explains Amy Francetic, author of the report.
In the foreign markets, experts say, an emphasis on establishing a local presence has resulted in a lack of synergy between wireless carriers’ headquarters and their foreign offices or partners. At a moment when the future of U.S.-owned wireless companies in Latin America looks cloudy, the U.S. Hispanic markets look even brighter by comparison.
HELPING PALM GET A GRIP // By Nicole Lewis
In his bid to boost the handheld device maker’s fortunes, Angel Mendez is turning to Latin America.
Latin America figures prominently in Angel Mendez’s continuing recovery plan for Palm Inc. According to Mr. Mendez, vice-president of global operations at Palm, the Latin American market for handheld computer devices is ripe for expansion.
"The handheld computer space is very young in Latin America, in part because pricing has been high and the device is expensive," he says.
With that in mind, Palm has embarked on a new strategy to manufacture handheld units in Brazil for sale in that country. Until now, the company has imported finished Palm products into Brazil, where they are subject to import duties that undermine the company’s designs on increasing market share.
"What we currently do is to ship products from our distribution center, consolidate them in Miami, and then ship the products into Brazil," Mr. Mendez says. "Our price has become quite high for the lower-income consumer in Brazil, so our strategy is to move toward localization of production in Brazil to avoid import tariffs. That way our prices can be dramatically lowered, expanding our market."
According to IDC Latin America, Palm has an overall regional market share of 72 percent. In Mexico, Palm’s market share is 79 percent; in Venezuela, it’s a near-monopolistic 87 percent.
Handheld-unit shipments to Latin America increased a healthy 12 percent during the second quarter of last year – a period that saw the overall personal computer market decline 13 percent, according to IDC. The research firm notes that the market value of handheld-unit shipments to the region is some $68 million.
In an effort to build market share in Mexico, Palm has teamed with Gigante, one of the country’s top grocery store chains, to promote its new Zire, a low-end device targeted to first-time users of handheld pocket computers. To drive sales of the Zire over Christmas, Gigante offered a discount to customers at its 400 stores who spent more than 1,500 pesos.
"Gigante placed one of the largest single-customer orders for the Zire," Mr. Mendez says. "Mexico has been one of those early channels that we hope to create for the product."
Mr. Mendez joined Palm, the world’s top handheld computer device maker, in the summer of 2001, immediately after the company had announced a write-off of some $260 million worth of goods and was in the middle of a downturn that saw several quarters of losses.
"We were suffering through a dramatic inventory glut caused by a number of things: failures in the way in which we went about planning demand, failures in some product introductions, which were delayed, and slower demand following 9/11," says Mr. Mendez, who oversees a division of 100 employees and about 70 percent of Palm’s overall budget.
He has since pushed Palm to pursue several cost-cutting measures. The company has reduced its contract manufacturers from two to one, cut the number of partners and suppliers by 30 percent, and reorganized the company by region. He says the latter approach has enabled the company to impose greater accountability for regional performance.
Looking ahead, Mr. Mendez hopes to continue perfecting an efficient supply chain that has led to year-over-year operating cost reductions from $113 million to $84 million, an inventory decline from $78.6 million to $38 million, and a cash-to-cash cycle of three versus 14 days.