Annual Edition 'Buying Power of
Black America' report breaks down billions in expenditures Black
consumers are responding to tighter economic condition by focusing more of
their spending on items and services that improve their homes and
lifestyle. That's one of the trends revealed in the 15th annual report,
"The Buying Power of Black America," published by Target Market News. The
report analyzes spending for black households in 2008 and finds that
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McDonald's ties black, Hispanic culture to its marketing efforts
Bloomberg Businessweek (July 8, 2010) The music industry has long sold black culture to
white Americans. Now McDonald's (MCD) is doing much the same. It's
taking cues from African Americans, Hispanics, and Asians to develop
menus and advertising in the hopes of encouraging middle-class
Caucasians to buy smoothies and snack wraps as avidly as they consume
hip-hop and rock 'n' roll.
"The ethnic consumer tends to set trends," says Neil Golden, McDonald's
U.S. chief marketing officer. "So they help set the tone for how we
enter the marketplace." Golden says preferences gleaned from minority
consumers shape McDonald's menu and ad choices, which are then marketed
to all customers.
The fast-food giant's strategy is a departure from the way companies
typically market to American households. Usually, a company works with
an agency to develop advertising aimed at the general market, then turns
to boutique multicultural agencies to create versions tailored to
blacks, Hispanics, or Asians. McDonald's still creates ads specially
tailored to minority groups, as it has for over 30 years, but minorities
exert an increasingly influential role in its mainstream advertising as
well. The company thinks they provide early exposure to new trends.
"Most companies think they can box in Latinos, box in African-Americans,
and then run the general market ad," says Steve Stoute, chief executive
of Translation, which advises brands, including McDonald's, on how to
reach young adults. "McDonald's will take an ad that could be primarily
geared toward African-Americans and put a general market advertising
dollar behind it."
The move reflects a demographic shift under way in the U.S. as a whole.
As whites head toward minority status by mid-century, according to
Census Bureau projections, Hispanics, Asians, and black populations are
growing faster. California and Texas, the two largest states, are
already "majority minority," meaning white non-Hispanics make up less
than 50 percent of the population.
Its low prices have helped fuel McDonald's recent strong performance,
even as the rest of the restaurant industry struggles to recover from
the recession. But Golden says his minority-shapes-majority marketing
strategy is paying off, too. U.S. sales rose 1.5 percent in the first
three months of the year, thanks to the success of new menu items and,
he says, an improved perception of the brand among all ethnic groups.
Golden says he first discovered how dramatically minority tastes can
influence mainstream preferences when he oversaw McDonald's marketing in
the U.S. West in the 1990s. His team had developed products aimed at
Hispanics called the "Fiesta Menu," which included guacamole and spicy
beef tortas. After the launch, the items sold well enough in Hispanic
neighborhoods—but sales rose more than expected in Orange County and
specifically Laguna Beach, an area that was more than 90 percent white.
"The intended consumer said, 'We sure appreciate what you're trying to
do, nice try.'" Golden recalls. "But [the Fiesta menu] overperformed in
the general market."
Golden went on to create a strategy for the U.S. business that he calls
"Leading with Ethnic Insights." Working with Jonah Kaufman, a McDonald's
franchisee who has 13 restaurants on Long Island, N.Y., Golden doubled
the spots designated for minority franchisees on the national
advertising committee, which advises on and approves ads. McDonald's
also uses a disproportionate number of blacks, Hispanics, and Asians in
focus groups. Later, marketers are asked to imagine how they would sell
a product if the U.S. population were only African American, Hispanic,
or Asian. They look for differences to McDonald's general market plan.
That sensitivity has already influenced new products. The fruit
combinations in McDonald's latest smoothies, for instance, reflect taste
preferences in minority communities. And when the company started
heavily advertising coffee drinks last year, the ads emphasized the
indulgent aspects of sweeter drinks like mochas, a message that
resonated with blacks, says Golden.
In fact, many of McDonald's ads now feature only African Americans. Of
the 10 most-aired TV ads from the past 12 months, compiled by ad tracker
Nielsen IAG, five had all-black casts. While the ads usually push
specific products or deals, many use situations aimed directly at ethnic
consumers. In a recent commercial called "Big Day," a young boy at a
wedding looks bored while watching the bride and groom kiss and jump
over a broom—an African American matrimonial tradition. His eyes light
up, however, when he gets to his seat and finds a Happy Meal.
The bottom line: McDonald's is increasingly taking its marketing cues
from minority groups, which it considers to be trendsetters for white