The article discusses the proliferation practice of ethnic marketing that is manifested in the form of new product lines, tailored advertising, and customized promotion programs. It suggests three theoretical models for determining cost-effectiveness of marketing to specific ethnic groups: nested approach, cost-benefit optimization, and marketing mix differentiation. All the three models are represented graphically in a creative and accessible manner.
The nested approach is based on the model suggested by Bonoma and Shapiro (1984) that includes five levels of variables ranging from the broadest – outer nest – to the most precise – inner nest – namely demographic factors (race, language, nationality, education, income, family composition), psychographic factors (values, beliefs, motifs, attitudes), behavioral factors (media usage, lifestyle, consumption patterns), situational factors (product category, shopping occasion), and personal factors (personality and acculturation). As marketers move from the outer nest to the inner nest, cost of research increases, but so does responsiveness and effectiveness.
The cost-benefit optimization model suggests the trade-off between targeted marketing and economy of scale. Ethnic specialization involves increased direct cost but reduced opportunity cost, since each new segment to approach is smaller and means less profit potential, or less opportunity cost if overlooked. On the basis of this model, approach to ethnic markets can be under-differentiated, within optimum range, or over-differentiated.
The third model, marketing mix differentiation, offers a matrix that includes such a variable as marketplace diversity into ethnic marketing strategy formulation. Then it classifies strategies as Integrated Mass Marketing (when marketplace diversity is insignificant and a company targets the entire population), Ethnic Niche Marketing (when marketplace diversity is low but a company chooses to target a specific ethnic group with a highly differentiated approach), Cross-Cultural Marketing (when marketplace diversity is high but the company opts for a marketing approach that would resonate with all ethnic group), and Multi-Cultural Marketing (when marketplace diversity is high and the company targets a variety of ethnic groups separately).
The article is written in comprehensible language and has a very clear structure: opposite each paragraph, its main theme is identified. A succinct and effective executive summary for managers is provided at the end. The article also lists a sufficient number of examples from leading companies such as Coca Cola, Chrysler, Miller and Pepsi. The fact that the first two models can be applied for segmenting the market not only according to ethnic principles but also other demographic variables (e.g. age or income) can be perceived both as a strength and weakness. It can be seen as a strength for its universal applicability but as a weakness for loose link to the theme of the article, ethnic marketing. However, this weakness is compensated by abundance of examples relevant for ethnic marketers, for instance, of product categories where minority citizens consume more than Anglos, such as long-distance telephone calls, fashion apparel, and certain foodstuffs or of ethnic media such as BET, Univision and Telemundo. The article also suggests directions for further research and briefly discusses ethical implications of ethnic marketing.
- Cui, G. & P. Choudhury (2002). Marketplace diversity and cost-effective marketing strategies. Journal of Consumer Marketing 19(1), pp. 54-73.