Reach the African-American consumer

2/25/2013

U.S. African-American consumers represent a buying power of nearly $1 trillion, a figure larger than the gross domestic product of most countries in the world. Marketers need to better understand this valuable segment to capitalize on this opportunity. According to Rick Kash, founder of New York-based Nielsens The Cambridge Group, to succeed in a competitive marketplace, retailers and manufacturers must be able to answer the question, \"What do I know about the demand of my most profitable customer that my competitor doesnt know?\"

Nielsen insights show that fewer African-American households (31 percent) versus white non-Hispanic households (35 percent) feel strongly that private brands are just as good as \"manufacturer\" branded items. Insights also show that African-American households – compared to white non-Hispanic households – devote slightly less overall buying to private brands (18 percent versus 18.7 percent shares, respectively).

The lower private brand share might be a result of the lower availability of private brands in smaller retail channels – such as drugstores – where African-Americans make relatively more trips. Alternatively, it could be an indicator of stronger national brand loyalty among African-American households. This tendency to be more brand-loyal is reinforced by Nielsen surveys showing African-American consumers to have a lower attitudinal connection to store brand purchasing, in general, and a much stronger likelihood to \"always buy the brands they trust\" (46 percent – compared to 36 percent of white non-Hispanic consumers – say they agree/strongly agree).

These findings should not be construed to mean that retailers dont have opportunities to grow store brand share among African-American consumers, who indicate a higher staying power once they find a store brand they like. Retailers looking to increase market share with African-American consumers should focus on women and the family/communal behaviors centered around eating and food preparation, and look for crossover product placement opportunities.

Shopping habits
The purchasing behavior of African-Americans has some distinct characteristics that retailers and marketers should identify and use to establish an effective market position. African-Americans shop more often than all other groups, but spend less money per trip and overall. This behavior reflects a propensity to make quicker/smaller purchases based on short-term needs and less on deal availability or the desire to \"stock up.\"

Despite making more shopping trips overall, African-Americans make fewer trips to grocery stores, supercenters, mass merchandisers and warehouse stores than those in other groups. African-Americans are more likely to frequent drugstores, dollar stores and convenience/gas outlets. Major retail channels seem to have a prime opportunity to motivate this highly active group to come to their stores.

What they buy
Among the major buying categories, African-American households spend more on basic food ingredients and beverages and tend to value the food preparation process and – on average – spend more time preparing meals. Other popular buying categories include fragrance and health and beauty care products.

Given shopping patterns in retail channels where coupon redemptions have been historically low, purchasing on deal and response to coupons are lower for African-American consumers. However, this should not be interpreted to mean African-Americans do not find consumer promotions and good prices to be important, as almost half (47 percent) strongly agree that \"it is always important to get the best price\" when shopping for groceries (versus 40 percent of white non-Hispanics).

Strategies to grow store brands
When looking to reach African-American shoppers with your own brands, consider the following strategies:

Branch out into untapped geographic areas – African-American communities tend to shop often but underutilize some popular retail chains because they may not be easily accessible. Retailers investing in stores and locations that are more convenient likely will see higher-volume usage.
Market to women – African-American women tend to be the primary decision-makers for most household buying decisions. Retailers looking to increase market share with African-American consumers should use advertising messages and images that appeal to women.
Dont underestimate African-Americans buying power – the number of African-American households earning $75,000 or more has grown by 63.9 percent in the last decade, a rate greater than that of the overall population. This growth in affluence, social influence and household income will continue to impact the communitys economic power in the years to come.
Focus on communal behaviors around food preparation – highlight your products by using images and messages that reflect this preference in your store brand marketing materials.
Look for cross-merchandising opportunities – African-American consumers are very committed to national brands, so look for opportunities to co-promote the right combination of branded and store brand items.
Keep prices affordable – African-American households display a commitment to lower prices. The majority of consumers are not willing to pay more for store brands. The same is true for brands, but an assessment of price level and price gaps between your store brands and brands can yield stronger sales and profits.
Expand the variety – do your homework to assess opportunities among your core shoppers. Dont introduce new lines or items at the expense of high-penetration and/or high-frequency brands, which can drive your shoppers to competitive retailers.
Invest in quality – value is important, but it goes hand-in-hand with quality. Consumers dissatisfied with a products quality will buy less. Store brands dont need to be just about low prices; a tiered store brand approach can allow you to build sales among diverse shoppers.
Use social media to connect with your consumers – trends in technology adoption and social networking provide this group with an influence over popular culture beyond the limits of ethnic categorization. These shoppers also are more engaged in online information-seeking, so look for opportunities to connect with them via digital communication vehicles.

Todd Hale is the senior vice president, consumer & shopper insights for Nielsen, New York. He can be reached at [email protected].