First of its Kind Study Reveals Corporate Leaders in Hispanic Marketing Also Lead in Creating Shareholder Value – SSG

San Francisco, CA. February 2, 2006. First-ever study on the impact of investing in the Hispanic Market and the Return on Shareholder Equity.

The breakthrough results of the first phase of a study that indicates that companies seriously investing in Latino markets have a significant edge in accelerating shareholder value creation, according to the Santiago Solutions Group (SSG) study “Does a Well-Resourced Hispanic Corporate Strategy Translate into Shareholder Value Creation?”  The study found that the companies that allocate the highest percentage of advertising resources to Hispanic marketing produce an average return on equity that is four times higher than the followers.

“Until now, chief marketing officers, chief financial officers, as well as brand and segment managers, lacked reliable proof to substantiate moving dollars from the ‘General’ Market to the booming Latino segment” said Carlos Santiago, President and CEO of Santiago Solutions Group.   “This study,” continued Mr. Santiago “begins to validate that committing to a well resourced corporate Hispanic initiative not only can generate accelerated top line growth, but also contribute to shareholder value creation.”

The study found that between 2000 and 2004 the 10% of the companies allocating the highest resources to Hispanic advertising as a percentage of their total advertising spending created a mean cumulative return on shareholder equity of 9.0, while the remaining 90% of the companies had a return of only 2.2.  This means that every $100 invested in a “top decile” company, leading in allocation to Hispanic marketing, in 2000 will return $900 in 2004, as compared to a $220 return from an investment in the remaining 90% of companies.

Preliminary findings also indicate that the relative impact of a commitment to Hispanic marketing differs by industry.  Further analysis on the Consumer Packaged Goods (CPG) industry, which led the other industries in the study for investment in marketing to Hispanics, revealed that the leaders within the CPG industry had a mean cumulative return on shareholder equity 12 times higher then the followers.  The 10% of the companies, or top decile, allocating the highest resources to Hispanic advertising as a percentage of their total advertising spending in the CPG industry created a mean cumulative return on shareholder equity of 33.8, while the remaining 90% of the companies had a return of only 2.8.  This means that every $100 invested in a “top decile” company in 2000 will return $3,380 in 2004, as compared to a $280 return from an investment in the remaining 90% of companies.

Therefore, an investment in a company that is a leader in seriously investing in the Latino markets is much more likely to reap a higher reward than an investment in a company that is not committed to investing in this crucial segment of the marketplace.

For this phase of the study, the preliminary sample of companies was generated from companies that were the top 500 U.S. advertisers ranked by TV and print expenditures for the years 2000, 2001, 2002, and 2003, based on data from TNS Media Intelligence.   2004 marketing data was collected from the AHAA 2004 Media Trend report.   The final sample was selected based on multiple factors, including status as a public company and financial performance data available from Value Line.  The return on shareholder equity, according to Value Line, was used to calculate the cumulative return between 2000 and 2004.  Various statistical analyses were applied to ensure significance and integrity of the results.

SSG continues to investigate these findings and pursue new areas of research related to this study, such as understanding the first-mover advantage in an industry as it applies to Hispanic marketing and understanding how internal corporate culture and infrastructure impact the external marketing campaigns to Hispanic markets.

 

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