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Posted June 12, 2004 by publisher in Cuban American Business

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BY YUKI NOGUCHI | The Washington Post

WASHINGTON—Elmer Arias whizzes through 5,000 minutes a month on his cell phone, racking up at least $200 in charges, which include daily phone calls to his native El Salvador.

“As a business owner and as president of the Salvadoran Chamber of Commerce, I call (El Salvador) maybe two times a day for 15 or 20 minutes each,” says Arias, a suburban restaurant owner. That doesn’t include regular calls to friends and relatives, or to in-laws in Mexico.

And it’s almost a sure bet Charlie Rizzo’s Nextel phone is either ringing or beeping.

Rizzo is vice president of international food-distribution company Rio Grande Foods Inc., which imports jalapenos, pupusas and other Latin American goodies for U.S. grocers. Phone costs for 45 employees are a large chunk of business costs for Rio: about $2,000 for cell phone charges, $500 for domestic long distance and another $2,000 for international calling per month on average.

At home, where he calls family and friends in Ecuador at least three times a week, Rizzo rings up a monthly international bill of $300 to $400. “In Central America, mostly countries are still just getting up with e-mails and stuff,” he says, so the best way to reach out is still the old way—by dialing.

Even after 18 years in the United States, Rizzo feels the pull of his roots, he says, echoing a sentiment often repeated by Latino expatriates and business people marketing to them: “We have the need to call.” Experts say that as a demographic group, Hispanics spend more of their monthly budgets on telecommunications, mostly to stay in touch with their far-flung families. They spend 10 percent more than average on cell phones and $6 more on monthly long-distance phone service, according to Scarborough Research. It’s no surprise, then, that telecommunications companies have joined the array of firms training their sights on the pockets of Hispanic families.

Latinos represent the nation’s fastest-growing minority population, with spending power expected to reach more than $1 trillion within four years. Roughly $4 billion is spent every year marketing specifically to the group, which makes up about 14 percent of the U.S. population, according to the Association of Hispanic Advertising Agencies.

“You see it everywhere—some new entity deciding this is a market and going after it,” says Alisa Joseph, Scarborough’s vice president of advertising marketing services. As a group, Hispanics “have large spending power, large families and a larger sense of loyalty” than the population as a whole, which makes them ideal consumers, she says.

Telecommunications ranks sixth on the list of spenders on Hispanic advertising, as it does in spending to the general market—behind consumer products, the automotive industry, consumer electronics retailers, entertainment and manufacturing, according to the AHAA. Overall, 7.7 percent of the industry’s 2003 advertising dollars went to television and print promotions targeting that market.

That percentage was lower than the 12.1 percent of telecom ad dollars the Latino market attracted in 2000, but the dollar amount was up, from $210 million to $241.3 million, according to market researcher Santiago Solutions Group. Consumer electronics sellers, by comparison, are trying harder: Those companies spent 19.6 percent of their overall advertising budgets last year on marketing to Hispanics.

GTE Corp., one of the predecessor companies to Verizon Communications Inc., was one of the first telecommunications companies to make its move.

Back in 1998 the company had “already hit the English-speaking market and was looking into the Spanish-speaking market,” says Ed Miller, executive director of Verizon’s multicultural marketing program. The early investment paid off because more than 60 percent of Verizon’s Hispanic customers are recent immigrants, and heavy users of international calling customers who spend, on average, 18 percent more for Internet and telecommunications services, he says.

Cellphone service provider Nextel Communications Inc. is now trying to catch up to rivals such as Verizon Wireless and Cingular Wireless.

“Looks like there’s an opportunity that others are capitalizing on that we’re missing,” Nextel executives told themselves about two years ago, says Miguel Avila, Nextel’s senior director of emerging markets.

In April, the mobile-phone company launched marketing efforts in Miami, Los Angeles, Chicago and San Diego, hiring Spanish-speaking staff in its stores, and translating brochures and contracts into Spanish. Nextel skewed advertising more to Spanish radio stations in areas where Spanish-language newspapers aren’t as heavily circulated. It sponsored a gigantic promotional booth at a recent festival in Miami and advertises in Spanish to a large Latino audience that watches NASCAR racing.

Last month Nextel, which has been building out its network in Latin American countries, launched an international version of its walkie-talkie service, allowing users here to communicate with friends and family living in Brazil, Argentina, Peru and eventually Mexico with a push of a button—something business users like Rizzo say he’d use daily to reach vendors.

Avila says it’s worth the investment because of the large number of Hispanic small-business owners and the high Hispanic telecom consumption.

Nextel won’t say how much it’s spending or how many Latino customers it has gained so far, but Avila says it hopes eventually to increase its Hispanic base by 50 percent.

Hispanics this year are at the top of Cingular’s priorities, says David Garver, director of national marketing for the Atlanta-based Cingular, a dominant cellular provider in several big Latino hubs in southern and western regions.

“They have different lifestyles, different passion points,” he says. “Their passion point tends to be more family-related,” one reason every cellular-phone company touts family plans that allow customers to add phone lines.

Restaurateur Arias says some small companies are getting it right. When a Spanish-speaking representative of DigiLinea Inc., a Florida-based international phone-service provider, called to offer him 10 cents a minute anywhere in Latin America, he ditched his $1.10-a-minute MCI Inc. long-distance account and his complicated calling cards and snapped it up.

“It’s the marketing: They call and explain in Spanish how much money we will save,” he says. Both language and technology were easier for him to understand.

Telecom as an industry didn’t just wake up one morning and think, let’s go talk to Latinos. Like the banking and consumer-goods sectors, telecommunications suddenly found itself a maturing business that had pretty much tapped the mainstream market. Digging deeper into specific market groups for customers is a common way to keep growing.

“The wireless industry is saturated,” says Scarborough’s Joseph, so now it’s developing a more nuanced marketing message that appeals on a personal level. With more than half the population owning a mobile phone, the niches to plunder are the youth market, business users and minority ethnic groups, she says.

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