Hispanics - The Untapped Market

Written by Bert Gonzalez Wednesday, 10 March 2010 16:49

Articles - Sales and Marketing

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You’ve probably heard it before, but it just might be time that you hear it again; The Hispanic Market is huge, it’s underserved and it’s growing like crazy.  If you have a viable Hispanic Community within your reach, it’s a niche you simply cannot afford to ignore.  In this article I give you a case study and proof of the power of tapping this market, and also show you how you can tap into it. The numbers are impressive.

The great thing about the Hispanic Market is that the big guys don’t know how to capture it, sell to it, or service it properly.  This leaves the door wide open for small to medium sized firms to dominate this demographic.  Is it profitable?  You bet it is!  


THE PROOF
: Consider this factual case study.  A small Florida company, having never closed a HECM before January of 2008, launched their initial marketing campaign focusing mainly on Hispanics in perhaps the most fiercely competitive market in the country.  The strategy propelled them to number one in their home city, topping Wells Fargo and Bank of America in only their twelfth month, and as high as 16th in the nation after only twenty months.  In their second year of HECM originations (Fiscal 2009), their Hispanic market strategy would make them number three in the entire state of Florida, behind only the two previously mentioned behemoths who have branches on almost every corner.  

Their results took the State by storm, and prove that a market, which almost every lender perceives as an inconvenience because of the language barrier, can pay off handsomely.

One more telling detail demonstrated in the table below is that they hit those numbers generating business from primarily one city and one demographic.  What better proof is there?  That’s the power of the untapped Hispanic customer.

Here are some numbers at the end of fiscal 2009 complied for HUD’s HECM Endorsement Report for September 2009 and HUD’s Neighborhood Watch Website for comparison.
 

In the table above, Genworth & Generation, who may not be focusing on Florida retail business, are shown mainly to highlight the ratio of the number of retail markets they’re in (FHA Field Offices) as compared to their total nationwide retail loan volume.  When compared to the subject company, the dominance of the marketing strategy in the geographic area the subject does business is staggering.  Just imagine what the nationwide numbers would be if they had launched in five or six heavily Hispanic areas of the country simultaneously.  If they only produced 60% of their Florida numbers in five other markets, they would have added 1,284 loans and ranked eighth in the entire nation for fiscal 2009.  Concentrating on Hispanics is a powerful market strategy!

A GROWTH STRATEGY
Market and census research abounds with proof that the Hispanic Market is large and growing at an astounding rate.  Here is some data.
•    Hispanics are now the largest Ethnic Group in the United States
•    40.4 Million Hispanics in the U.S.
•    13.83% of the total U.S. Market
•    1 out of every 8 U.S. residents is Hispanic
•    10.7 Million Hispanic Households
•    By 2050, Hispanics will comprise 25% of the population in the U.S
(Source: Current Population: U.S. Census October 2000)

Hispanics Show the Highest Growth in Homeownership in the U.S. 
 

(Source: Simmons Hispanic Univision Study)

I know what you may be thinking.  Those 11 million Hispanics households are still a whole lot less than the rest of the population.  Although statistically correct, catering to this market, as our case study has proven, is like finding that small fishing hole that no one knows about; it’s not the Atlantic Ocean, but it’s full of fish, and you just may be the only one with your line in the water.

The market is tremendous now, but it will become even better over time.  Here is some more eye opening information that projects future homeownership by the Hispanic population.

In a 2003 comment from the Congressional Hispanic Caucus Institute, quoting US Census Bureau figures:

"The homeownership rate for Hispanics in the U.S. (46.1%) continues to lag significantly behind the nation's overall rate (68.1%), as well as that of non-Hispanic Whites (74.6%). Over the past 10 years, however, Hispanic rates have improved, and in some cases Hispanic homeownership has grown at a rate three times higher than that of other non-Hispanic groups."

A brand new report out of the University of Southern California (USC) called, The Homeownership Potential of Mexican-Heritage Families states, ”84 percent of Latino renters ‘strongl’ desire to buy a home and 55 percent plan on buying in the next five years. As a result, the Tomas Rivera Policy Institute (at USC) estimates at least 1.5 million Latino households will buy homes by 2010." Based on this information it is reasonable to surmise that since 50% of American Hispanics are in Texas and California, half those buying homes will also be in those two states- so 750,000 Hispanic households could buy homes in those two states by 2010.

All this looks great for the forward market, but don’t forget that forward borrowers become reverse borrowers, and a good portion of these buyers are surely close to becoming HECM Eligible.  From my perspective, the Hispanic community looks like a pretty good basket to put some of your eggs in.

SE HABLA ESPAÑOL?
Our case study proves that traditional message of “Se Habla Español”, indicating your company can do business in Spanish just doesn’t cut it.  First & foremost, to implement a successful plan, you have to let go of your preconceived notions on how to handle the Hispanic client.  Particularly when dealing with the older generation, strategies that apply to the younger and hipper Latino, or simply translating marketing campaigns and materials just don’t work.

Lately, some of the big companies have been trying to capture their share of this lucrative market.  Just walk into any BofA branch in a predominantly Hispanic neighborhood, and you’ll see that the Spanish posters and translated materials are there, however, they are still light years away from understanding the culture and nuances that are the key to success in truly capturing this market.  For example, Bank of America has Spanish signs and personnel in their branches, yet in an interview with a branch loan officer I discovered that they don’t follow through to processing and customer service.  As ridiculous as it may seem, when a non-English speaking Hispanic applies for a mortgage or reverse at most large lenders, all the correspondence and processing is in English, necessitating translation to the borrower through branch personnel or family members.

To do it right and dominate the Hispanic Market, you have to abandon the traditional approach of hiring a token Hispanic to handle the random call, to a full service Hispanic division.  Hispanic ads, materials, originators, back office, correspondence, and even phone menus and messages on hold.  The great part is that any Hispanic personnel you hire to do this can also cater to your traditional English-speaking clientele, so you don’t need a complete duplicate workforce, just enough bilingual people to handle your projected business.

Next, you have to understand what marketing and sales processes Hispanics respond to.  No, it’s not all the same across cultures, and assuming Hispanics watch, listen to and respond like Anglos is pure folly.  Heck there are even differences among Hispanic sub-groups!  Do Hispanics like doing business on the web?  Will they apply for a mortgage over the phone?  Do they toss their junk mail as quickly?  Do they respond to celebrity endorsements?  These questions and more must be asked and answered to avoid costly mistakes.    I’ve structured these types of processes and campaigns personally, and it’s not as difficult as it sounds. 

The reason most companies can’t turn their Hispanic marketing campaign into millions of dollars of revenue like our small Florida lender has, is that they don’t commit to doing it right.  The old “let’em learn English” or “if they want what I have, they’ll come”, is not only a failed policy, but also, any smidgen of truth those statements could have had, just got blown out of the water as we saw in this case study.

If you’re interested in the kind of numbers that can be produced in this niche market, but don’t know how to get started or you’re just too busy to do it, get someone to do it for you.  If not, you may wake up one day to find that a company, not unlike the one we highlighted here, is in your backyard feasting on the business you chose to ignore.  Trust me; it happened in Florida, and I’m sure that the lessons learned from this “little company who could” will not be overlooked for much longer.
 
Folks, this is the number one niche within our niche, and right now, it’s still up for grabs.


1) January 2009 HUD HECM Endorsement report ranked CityOne as first in Miami above both BofA and Wells Fargo.
2) HUD HECM Endorsement report for August 2009