International -- Latin American Cover Story
MARKETING IN LATIN AMERICA (int'l edition)
Millions of young, hip consumers are on a shopping spree--and the race is on to grab their attention
At Brazilian supermarket Pao de Acucar, daily grocery specials aren't just advertised in the newspaper. The chain's Internet Web site offers same-day delivery of groceries to its growing numbers of cybershoppers. On Argentine beaches, cellular-phone salesmen hawk their wares at booths offering free soft drinks and complimentary salsa lessons. In Venezuela, airline AVENSA lures potential travelers with a raffle, awarding a three-day trip to Miami to the lucky winner and 50 friends. In Mexico, in a cultural role reversal, macho men are portrayed on billboards as sex objects modeling skimpy underwear.
It's all part of Latin America's new shopping spree. As governments have beaten down inflation and whipped up economic growth, purchasing power has surged, from working-poor neighborhoods to affluent enclaves. Sensing a trend with lots of room to run, homegrown and multinational companies are hitting the region with a marketing blitz. Their target is Latin America's nearly half-billion citizens and its attractive demographics: Almost half the population is younger than 20. Hooked on new technology, these new consumers are eager to tap into global trends, from fast food to fashion to PC banking. "Latin America is becoming a region of choice," says Nizan Guanaes, president of the DM9DDB ad agency in Sao Paulo. "It is a region that hungers for new products."
By contrast with Asia, reeling in crisis, Latin America is on a steady course. Its $1.9 trillion economy galloped along at 5.3% last year. While widespread poverty means that half the region's population still has trouble meeting basic needs, an estimated 10 million join the ranks of the consumer class each year. Meanwhile, close ties to the resilient U.S. economy also seem to be a stabilizing influence on Latin markets.
UNIFORMITY. "Nowhere in the world are prospects as bright," says Jens Olesen, president of McCann-Erickson Latin America, the region's largest ad agency. Advertisers spent an estimated $21 billion throughout the region last year, up 80% since 1994 (chart, page 52). Although the backwash from Asia's troubles could slow Latin America's growth to 3.8% this year, economists predict the setback will be short-lived. Latin consumers' pockets will keep jingling in the years ahead with increases in income from an expected 4% annual gross domestic product expansion through 2002.
There's more than just money behind the trend. Falling trade barriers and better communications are weaving the region's once disparate countries into a more uniform market. And nearly a decade of gradual economic improvement has raised expectations and awakened a new desire to consume (table, page 53). Women are moving into the workforce, creating a demand for new products. Along with the spread of democracy and calls for more accountability by politicians, Latins now want "choice, quality, and service" from companies, says John Holcombe, Latin American research director for Miami-based Strategy Research Inc. "There has been a change of mind-set that permeates everything from government rules to entrepreneurial approaches," adds Roberto Friedmann, director of international business programs at the University of Georgia's Terry College of Business.
Perhaps nowhere is the battle for Latin consumers raging more fiercely than in the market for high-tech goods and services. Upgraded telephone lines, the result of privatizations of state-run telecom services, have led to a remarkable rise in Internet use (page 54). Thousands of local companies and some multinationals such as Goodyear Tire & Rubber Co. are putting up Web pages in Spanish and Portuguese to introduce more sophisticated buyers to their products. In Sao Paulo, beset by traffic jams and security worries, consumers use their PCs to order home delivery of everything from groceries to pizzas.
The lowering of trade barriers, one of the biggest forces for change in Latin America, gave equipment marketers a big chance to tap the demand for cutting-edge technology. Long kept out by trade restrictions, the latest-generation computers, cell phones, and pagers are suddenly available everywhere. "There's a willingness to go from the mule to the airplane in just one jump," says Enrique Ospina, marketing vice-president in Latin America for Compaq Computer Corp., the region's No.1 computer provider, with over $1 billion in sales in 1997.
GEAR GAP. As soon as they can afford it, working-class Latins grab the latest gadgets. In Buenos Aires, professional dog walker Alejandro Rios holds a dozen leashes in one hand and a cellular phone in the other. A finicky client is calling to make sure her beagle, Tango, isn't too hot in the summer sun. Rios earns $800 a month and spends $110 on his cell-phone service, but he's not complaining. Competition has driven the price of cell phones to just a quarter of what it was three years ago.
As Latin Americans begin to take falling prices and the newest gear for granted, companies are hustling to find new ways to woo customers. Miniphone, an Argentine cell-phone operator, hawks its services on commuter trains, from minivans parked at highway gas stations, and at beach sites that provide a playground for the kids, free cold drinks, and complimentary salsa lessons for new recruits and established clients. With such tactics, Miniphone has snatched nearly half the Argentine market from rival Movicom since 1993.
The new technology is even changing deep-rooted business customs, such as the long lunch and leaving the phone off the hook as a device for delay. "The manana syndrome is going to disappear," says Paulino R. Barros Jr., a Brazilian who is general manager of Motorola Inc.'s Latin American cellular division. Motorola and competitors are benefiting from the race by Latin businesses to adopt time-saving technology to face global competition. Just 2% of Latins have cell phones. To capture a bigger slice of this huge potential market, Motorola plans to open megastores in Mexico City and Sao Paulo this year--its first anywhere.
In Latin America's biggest countries--Brazil, Mexico, and Argentina--the eradication of triple-digit inflation has prompted another big marketing play, this one in financial services. Steadier currencies are making it possible for banks to offer consumers home mortgages, life insurance, and private pension funds--often for the first time. Credit-card companies are also putting plastic in the wallets of hundreds of thousands of first-time cardholders.
Latin America has been Visa's No.1 growth region since 1996. The credit-card boom is making it a global testing ground for new products such as intelligent cash cards that can be loaded with extra funds at automatic teller machines. In Argentina, Visa is testing a card designed for small charges, such as fast food, that is co-branded with McDonald's Corp. restaurants. Visa's sales volume in Latin America has more than tripled since 1994, to $67.7 billion last year, and the number of credit and debit cards has nearly tripled, to 46.5 million, in the same time. Day Jimenez, senior vice-president for emerging technology at Visa International, projects 30% annual sales growth until at least 2000, when Visa expects to have 100 million cards in the region.
SENSITIVITY. Invading foreigners, from banks to megastores, are pioneering another trend: customer service. That has long been a grudging afterthought for many businesses in the region. Wal-Mart Stores Inc.'s move into Mexico, Brazil, and Argentina is forcing local competitors to match its money-back guarantees. Until Brazil's Banco Itau crossed the border into Argentina in 1995, local banks gave notoriously bad service. Itau shook them up with mocking TV ads that portrayed stodgy old Argentine bankers seated in their boardroom, laughing in disbelief at the notion that Itau had come "to serve people well." Although infuriated, local bankers immediately began offering customers cut-rate mortgages, prize raffles, coffee, and smiles.
That kind of sensitivity is showing up in other areas of the economy. Companies are fine-tuning strategies for consumers whose buying power is rising--as well as for millions of those simply ignored before. "If you turn on the TV in Brazil, you'd think you were in Denmark," says Helio Santos, referring to the absence of Afro-Brazilian and mixed-race actors and models. Santos is now producing a program aimed at Afro-Brazilians for TV Bandeirantes, Brazil's second-largest network. Even though most Afro-Brazilians are working poor, a recent study by Sao Paulo marketing firm Grottera Communications found that an educated black middle class of 7 million, with disposable income exceeding $500 million a month, is looking for products tailored to their tastes and needs.
Two years ago, beauty-products franchiser O Boticario moved aggressively to tap this market. The company launched a line of makeup, called Natural Colors, using three models in its ad campaign--a blond, an Asian, and a black. Its multi-ethnic makeup line now accounts for about 12% of the company's revenues. "We saw there was a huge potential," says Musa Dias, O Boticario's marketing manager. It's "as if Brazil is now discovering that black people exist here and that they are also engineers, lawyers, businessmen," says Aroldo Macedo, editor of a year-old magazine for Afro-Brazilians called Raca.
Marketers are also dropping patronizing stereotypes of an even larger consumer group: Latin American women. With an estimated 35% of women now working outside the home, Intercontinental Hotels & Resorts features women executives in magazine advertisements--a recent phenomenon in Latin America.
For Italian food giant Parmalat, a push to win the loyalty of kids has paid off big. A Brazilian campaign launched in 1996 and still going strong features babies and small children dressed in animal costumes with the tag line: "All mammals need milk." Since November, an offer of stuffed-animal toys for $8 plus 20 bar codes from Parmalat products has drawn long lines of mothers and children to stores. The campaign helped push Brazilian sales to $1.1 billion last year, more than double 1993's $470 billion.
GOODWILL. In Mexico, meanwhile, yogurt maker Danone, a subsidiary of France's BSN, is pioneering corporate philanthropy to build goodwill and sales. Every year, it puts six centavos of every peso spent on its products during a three-month period into a fund for education and treatment of children who are blind, abandoned, or sick with cancer. "We think consumers may give us their preference," says Marketing Director Monique D. Duran.
While sales to women, children, blacks, and the working poor are on the rise, there's no doubt that the region's liveliest consumer segment these days is the youth market. Millions of teenagers are avid viewers of Miami-based MTV Latin America. Launched in 1993, the Latin version of the music channel owned by Viacom Inc. reaches 8.3 million households with its Spanish-language service and 17 million with its Portuguese service in Brazil, where media giant Abril Group is a partner. Advertisers have grown from two--Coca-Cola Co. and Eveready Battery Co.--to 77. Motorola pitches its pagers, Philips Electronics its stereo equipment, and Levi Strauss its jeans on the air. These are companies, says Tom Hunter, president of MTV Networks Latin America, "who want to be associated with an audience that is young, active, cool."
MTV helped Unilever's Close-Up toothpaste to break into Brazil, where Colgate and local unit Kolynos have long controlled 70% of the toothpaste market. With ad agency J. Walter Thompson Co., Unilever made 35 three-minute spots chronicling the history of Brazilian rock from the 1950s on. The series' title: A Close-Up of Brazilian Rock. JWT and Unilever made it a multimedia splash, sponsoring a concert by the Sex Pistols and releasing a CD from the show. The campaign has enabled Close-Up to challenge its entrenched rivals in the under-30 market.
For the U.S.'s National Basketball Assn., Latin America is validating its belief that basketball is the game of the future for young people. "Increasingly, basketball is the global currency of youth," says Rob Levine, NBA Latin America's vice-president and managing director, "and we're definitely seeing that in Latin America." The NBA sells 3,300 hours of programming annually to Latin TV networks, including behind-the-scenes features on players presented in each country by local teen personalities. Its basketball clinics in Latin cities attract more than 2 million kids a year.
From cell phones to basketball, the barrage of messages is still a novelty to Latins, who are happy to be joining the global consumer community. So far, they tend to be receptive to pitches, whether they're extolling new services or breaking old social taboos. Latins receive less than 10% as much junk mail as Americans and Europeans do, and unlike Americans they don't yet hang up on telemarketers. The appetite for foreign brands will continue as long as the regions' economies prosper. But the competition among marketers for the hearts, minds, and wallets of these new Latin consumers is bound to grow ever fiercer.By Geri Smith and Elisabeth Malkin in Mexico City, Ian Katz in Sao Paulo, and Gail DeGeorge in Miami, with bureau reportsReturn to top