Rent-to-Own

Tapping Into the Fast-Growing Hispanic Market by Mary McVickers

APROfile: The Tissots — The Son Also Rises by Margaret Harrist

 

 

 

 

 

 

Tapping into the Fast-Growing Hispanic Market
By Mary McVickers

There’s no doubt about it: venturing into a new market can invigorate and enrich your business – well beyond the income statement and balance sheet. It can also be very tricky and involves some careful evaluation and planning. If done right, however, your rental business can join other successful businesses that are tapping growing markets that previously have been relatively ignored. One of the fastest growing markets in the United States, of course, is the Hispanic market, with $223 billion in combined buying power. More and more rental dealers are coming to realize that they can increase their BOR by marketing directly to this burgeoning group.They see opportunity – and they’re right. The statistics speak for themselves.

According to Ricardo A. Lopez in his article, "Hispanic Buying," while the income level of U.S. Hispanics has declined a bit over the past few years, the combined purchasing power has gone up. The Hispanic population is projected to account for 44 percent of the U.S. population growth between 1995 and 2025. That is 32 million Hispanics out of a total of 72 million people added to the nation’s population.

"Businesses that cater to them [Hispanics] directly and pay attention to the Hispanic culture and heritage will benefit from tapping into this large source of purchasing power. It is indeed the Latinos’ desire to maintain their roots which makes this market so receptive to target marketing," says Lopez. Rental-purchase businesses are part of the trend of expanding into the Hispanic market and there are elements of the trend that seem almost made-to-order for the industry. How have these businesses done it?

Identify Your Market

"Hispanic" is an umbrella term that includes many diverse cultures, including Mexican, Puerto Rican, Venezuelan, Costa Rican and so on. Differences go well beyond identification with certain countries. Traditions, holidays, customs, even the basic culture and language can differ widely. Puerto Ricans don’t respond to Cinco de Mayo, the Mexican holiday, any more than someone arriving in the United States from Norway would respond to Bastille Day or Chinese New Year.

Find out about the cultural importance of different holidays – beyond just the "excuse" to drink beer on Cinco de Mayo, says Mark Peterson of H&H Furniture in Yakima, WA. Peterson’s stores have successfully ventured into the agricultural Hispanic market. Most Hispanics in the United States – about two-thirds – in 1999 were of Mexican origin, while people of Puerto Rican origin accounted for 10 percent of the total Hispanic population. A smaller percentage of Hispanics are from South and Central America – but don’t overlook the fact that a small percentage of a large number can still mean large pockets of people and potential customers. Overall, Hispanics account for 12.5 percent of the U.S. population, according to the 2000 Census, which translates to 35.3 million people. This is not a market to blink at.

If one or more of your stores has a local Hispanic population and you are considering marketing to that population, your first step is to identify the predominant culture of origin. Immigrants obviously tend to settle where there are others from their country or even from their state or region, so a local population tends to be pretty homogeneous rather than a mixture of originating countries. In spite of the vast differences between various groups, there are several basic components evident in all "segments" of the Hispanic population. One of the most predominant – and one that rental-purchase dealers need to pay careful attention to – is the high priority placed on family and home life.

"There is an emphasis [in the Hispanic population] on making homes comfortable and inviting," says Mamie Salazar Harper, owner of Fiesta Rent To Own in El Paso, TX. "This influences how we set up the showroom. For example, home-like groupings, with a strong appeal toward comfort and attractiveness, is more appealing to Hispanic customers than a straight line-up of furniture."

Identify Your Opportunity

The second step is to identify your area of opportunity. This is more complex than identifying the nature of the Hispanic market in your area. It involves making the decision whether your business is ready to venture into a different market and if there’s a match between your business and that market, which isn’t always as obvious as it may sound. "We have a large Hispanic population here in Eastern Washington State," says Peterson. "In fact, half of our county is Hispanic. We decided that if we were going to truly tap the market potential, we could not ignore this demographic group – it’s huge! Segmenting our business has been vital to our growth."

If there already is a strong representation of rental-purchase dealers working the Hispanic market in your area, there still may be opportunity for you. However, as you would when undertaking any new marketing situation, when trying out a new niche, you want to be sure that there is room for you in your current market. Usually there is, especially since the Hispanic market is growing every day. But, assessing your competition is critical to see just where you can compete without it turning into a head-to-head contest that chews up a lot of resources without a lot of gain. You also need to consider the type of investment it will take to cater to this market. Much of this is obvious, such as physical space, a store, inventory, delivery and so on, but what about the less obvious investments?

"We’re in an area where television advertising is very affordable," says Peterson. "There are five Hispanic stations and several newspapers. Our customer base is predominately Mexican – many of them agricultural workers. [Yakima is in the eastern area of Washington state, which is heavily agricultural.] Not all of the stations are Mexican, however, and radio stations can vary in audience of course, so you have to choose your media carefully. We keep the message the same for English and Spanish ads, basically just translated." And you can’t ignore the investment in staff fluent in Spanish. "There absolutely must be a Spanish speaker in the store," says Peterson.

Mamie Salazar Harper in El Paso agrees. "Many people who are bilingual have a higher comfort level with Spanish than with English," she says. She uses flyers printed in both English and Spanish. Delivery people and customer service people must be Spanish speaking as well. These folks are, after all, essential customer contacts. Much of the success of the customer retention will depend on these areas. "It will hurt you if you aren’t willing to work hard on customer service with the Hispanic market," says Harper.

High-quality customer service has a slightly different import in the Hispanic market than with other groups. While we all know that customer service matters significantly, Hispanics are closer to the market tradition of knowing who is selling to you and then developing a relationship, thereby customer loyalty, with a store manager or account rep. We all should remember practicing that tradition at some place and time in our past, but many of us are now far removed from it, but not so with Hispanics. Similarly, when you are researching a new market, making plans to participate and getting ready to launch, your time and attention (or someone else’s) is going to be spoken for. What effect will this have on your continued participation in the rest of the business? Again, a "cost" to consider. All of these costs-time, money, effort-can be dealt with and usually fairly readily. Paying attention to these considerations early on will do a lot toward ensuring your new venture is successful.

The Product Mix

Is the product mix for the Hispanic market different from the product mix of another market? "Definitely," says Peterson. Color and design preferences have cultural roots and products you’re trying to market to an Hispanic market should reflect this. Just as an English market would favor chintzes and the traditional English country look and the Chinese market favors lacquer reds and gold, the Hispanic market is drawn to certain colors as well. The color preferences are brighter, with more reds, yellows, some oranges, blues and greens. These are the "true" colors, more in the primary family, with no heather or muted shadings. The "muddy color" or neutral look (beige, natural, brown tweeds) does not work in this market. If you have any doubt about what this look is, go visit a store that sells fabrics in a Hispanic neighborhood. Look at pictures of traditional clothing. Think bold flower colors; this is a culture that lives with flowers year round.

In the past it was difficult to find upholstered furniture that would work well in the Hispanic market. "Furniture manufacturers are finally figuring out the range of tastes that are out there," says Peterson. However, he says, you still have to search for the right products. "Hunter green checked fabrics don’t do well in this market," says Peterson. For more ideas, buy a Spanish home furnishing magazine and look at what is featured. This can give you ideas for how home settings are presented for this market as well. If you do locate that fabric store, buy some and have some throw pillows or hangings made for your display area.

Word-Of-Mouth Marketing

Here’s where your business can benefit from the strong Hispanic tradition of close family ties and emphasis on family. We all know word-of-mouth advertising is the best marketing tool around, but this truism takes it to a whole new level in the Hispanic market. "Much of our business comes through word of mouth. Because of the close-knit nature of the community, we get excellent referrals," says Harper. "And we build on that."

Fiesta Rent To Own offers two kinds of referral bonuses to customers. One is a $25 credit, which is applied to the current cust omer’s account. The other, which has had a particularly strong response, offers a $25 grocery gift certificate. For this, Fiesta partners with a local grocery chain. Either bonus takes effect once the new customer has had a rental product for one month and has made payment. Referrals are marketing at its best and at its most basic. There are no gimmicks, no clever ads to beguile potential customers. The success of it is entirely up to you. The importance of a strong customer-service base cannot be overemphasized.

Investing in Resources

As part of your planning, you’ll want to allow sufficient time to investigate and develop resources. Who, for example, will you get to do the translating on your advertising and promotion? Or, is it better to utilize different promotions entirely? In some target neighborhoods, a more specialized promotion may be more effective. The "look" of promotional material in the Mexican community is different than the "Anglo" look. If you feature color photographs of room settings, you obviously need different photos. The need for Spanish-speaking employees to serve customers in the store, work in customer service and make deliveries is obvious. Less apparent is the investment needed to hire and train these employees. All employees who have contact with your public are important and are critical to the success of the venture. If you are uncertain about locating the resources you’ll need, particularly for promotion and translating, talk to another business that has a large Hispanic customer base. If there is a local or regional Hispanic Chamber of Commerce, contact the office. Work with the Spanish media. "We spend about one-third of our radio advertising budget on Spanish-speaking stations," says Peterson. "Our print materials are printed in both Spanish and English, too. We also sponsor local Mexican soccer teams to get our name out there and support the community."

Venturing into a new market is a commitment, and when that new market has a strong cultural component, the venture involves a different type of commitment than just putting together a plan, rounding up the capital and launching. If you don’t have a genuine interest in and respect for doing business with the Hispanic culture, your efforts will not go far. If you do, you, your employees and your business can benefit well beyond the bottom line.

Mary McVickers is a free-lance writer.

 

The Son Also Rises: Mike and Darrell Tissot’s Legacy of Success and Service
APROfile series: Second generation businesses by Margaret Harrist

The answer took them both by surprise. It happened during their annual father-son golfing vacation. Darrell Tissot, owner of the Countryside Rentals chain of stores in southern Ohio, once again asked his son, Mike, if he’d like to join his company. Mike had graduated from Denison University with degrees in economics and math five years earlier and had been working for a large advertising firm in Chicago ever since.

"I had some frustrations with my job and realized that it was not something I was going to do for the rest of my life," Mike remembers. As an account executive with the agency, he helped develop marketing strategies for a variety of companies, including Phillip Morris and Maytag. "I knew that I wanted to move closer to my parents because we’ve always had a very close relationship. In talking with my dad, I realized he needed my help – and I thought it would be fun to work with him in the business. So I told him yes."

The Tissots agreed that they would get out of the arrangement at any time if things weren’t working or if they weren’t getting along. "We weren’t going to let it hurt our relationship," Mike says. "The scary part for me was that it’s one thing to quit an ad agency, but it’s another thing to work at a business your dad has spent 15 years building. It’s not something you can walk out on. I didn’t want to let him down."

Mike joined the company in September 1997. Since then, Countryside has added three new stores and has seen a 20 percent increase in same-store revenue each year. The chain’s profitability doubled from 1997 to 1999. "What my father started and built was phenomenal," Mike says. "He has done some fabulous things with this business and has built a company where people love to work for him. He has always operated with the utmost integrity. To be able to add to what he’s created has been a wonderful opportunity for me." A Fitting Business

Before launching his rent-to-own business in 1985, Darrell had been a schoolteacher and had owned a construction business and a home improvement center. "I wanted to find something that had a value beyond the goodwill of the owner; a business I could build and sell. I didn’t want to have to be the front person of the business, because that limits expansion possibilities – particularly in small towns. After doing some research, I decided that rent-to-own was a good business to be in," he says.

Darrell started his first rent-to-own location in Hillsboro, OH. Within 18 months, he opened a second location and continued to add stores gradually through the years. Today, Countryside Rentals includes 12 stores in Ohio and one in Kentucky. "I decided from the beginning not to add stores too quickly because I didn’t want to get highly leveraged. I don’t want bankers running my business," he says.

In those early years, he made the most of educational programs available through APRO and of the opportunities to learn from other APRO members. He served on the APRO board of directors and executive committee for several years and was president of the Association in 1997. He also served as president of The Rental Industry Buying Group (TRIB). And in August 2000, Darrell received the President’s Award of Excellence from APRO for his outstanding contributions to the rent-to-own industry and the Association.

"Serving on the boards of both groups over the years probably made me a better business person than I would have otherwise been," Darrell says. "I’ve seen a lot of positive changes in the industry. I think rent-to-own is a more accepted business than it used to be. The entire industry has improved its business practices immensely and has in turn created a stronger customer base."

Building on Solid Ground

When Mike signed on with Countryside Rentals, it was a 10-store chain. "The company had expanded to the point where it required certain talents I really didn’t have – or didn’t want to take the time to develop," Darrell says with a laugh. "Mike came in at the right time and brought the talents we needed. He has taken this company to new levels."

Although Mike’s initial focus was marketing and business strategy, he started to identify inefficiencies and opportunities to improve in other areas. "I think my inexperience made me pretty good at the business because I wasn’t caught up in the way things have always been done," Mike says. "By the end of my first year here, I knew this was going to work when I saw that I was making a difference to the company’s bottom line." With his background in marketing, Mike focused on building stronger brand awareness and carefully targeting the company’s promotional efforts. His penchant for numbers enabled him to dig deeper into the nuts and bolts of the business to find ways to increase profitability. He continued the monthly managers’ meetings his father had established, but began adding more detail to the information provided and discussed.

"We have total open book management, which can be scary if employees aren’t armed with the knowledge to understand it. We go over the profit-and-loss statements for the company and for each store and work to help our managers thoroughly understand the business of this business. There are so many angles to consider – from how long the product is going to stay out to whether a lower rate will help it stay out longer and much more. We go over what the details mean, what we could do better and how the details affect each store’s profitability. Our managers understand how each aspect of their day-to-day operations affects their store’s bottom line," Mike says. This greater depth of knowledge has paid off for both managers and staff, who receive a percentage of Countryside’s profits through the company’s bonus plan.

Focus on Employees

"The people who manage the storefronts are the most important people in this industry," Mike says. "The store managers create the working environment at their store. That goes far beyond what I can do as the owner. It’s the day-to-day reality." What he has done to foster a positive atmosphere in the stores is build upon or initiate a number of programs designed to reward high performers and improve employee retention company-wide. Countryside uses a streamlined evaluation process to identify top performers. The company focuses on nurturing those employees and paying them well, Mike says.

In addition to a bonus plan that is tied to store and company profits, Countryside provides employees with a number of programs to help them personally and professionally, including:

• employee discounts on products
• college tuition reimbursement
• low-cost medical insurance
• a 401K plan that includes profit sharing contributions and an aggressive matching program
• emergency loans
• training classes

"On-the-job training is not training. The sink-or-swim theory just doesn’t work," Mike says. "In the past year or so, we’ve offered employees training classes focusing on sales techniques and product knowledge as well as account manager training and a rent-to-own orientation class that new employees take within their first month. We want to teach people how to succeed in this business." Although the tight labor market made employee recruitment challenging everywhere last year, Countryside took a proactive approach to hiring that helped minimize empty slots. The company allocates a percentage of its advertising budget to recruitment ads even if no positions are available.

"Our goal is always to have a pool of applicants to choose from. We don’t wait until there’s a slot available to interview candidates because we’re always looking for people to help grow our company. When we lose an employee, our lead time is cut in half because we already have applicants," Mike says. But there’s far more to Countryside than number-crunching and watching the bottom line. The company takes time out to celebrate employees’ accomplishments at a company-wide annual meeting, where awards for store-, managerand employee-of-the-year are presented. The event has proven to be so popular with employees that Mike is considering making it a full-day affair in 2002.

"I’m not one to consider my worth by the number of stores. I think it’s more important for the stores to do well," Mike says. "If this company stays at 13 stores for the rest of the time I’m here, that’s O.K. with me as long as the stores and employees continue to get better and better. "What I didn’t really understand when I took over the business is that 100 families are counting on me. That’s a different perspective. In marketing, I did my job and went home. But the decisions I make here affect me and my new wife, my father and all of the people who have committed to this company. I feel very strongly that my role is to enable the employees to succeed and deliver results."

Strengthening the Industry

Like his father, Mike is finding the educational opportunities and the contacts available through professional associations to be very valuable. He currently serves as the vice president of the Ohio Rent-to-Own Association and is a board member of The Rental Industry Buying Group, where he is the chairman of the furniture committee. "I’ve found the associations to be a great networking tool. It’s nice to be able to call another 13-store dealer in another region and talk about business ideas and strategies. Those colleagues have become my informal advisory committee," he says. "I also appreciate how the associations keep us abreast of any legal or political issues. That’s increasingly important." Mike acknowledges that the slowing economy may affect the industry in the near-term, but he thinks there are opportunities to be found. "We just need to tweak our marketing a bit to bring in customers who haven’t considered us before," he says. "One of the things I love is hearing a new visitor to our store remark about how they didn’t expect to see such high quality products. I feel good that we help people gain ownership of those items." For now, his goal for Countryside Rentals is to keep improving that bottom line – and to arm his emp loyees with the education they need to make that goal a reality.

"I realize that I work for my employees. And in the past few years, our staff at headquarters has made the transition to realize that they work for the stores and not the other way around. That’s been an interesting dynamic and has really changed the tone of our day-today interactions," he says. Darrell, who is now semi-retired, is more than pleased with the growth and success of the business he started. "Mike is now running the company and doing a wonderful job. I couldn’t be luckier," he says.

"I think the key to this business has always been getting good people, trusting them to do their job and treating them right," Darrell continues. "Everything we do is about relationships – whether it’s with my son, family, community, employees, customers or friends. A relationship won’t last unless both individuals or organizations receive rewards from it. It’s that simple." With Mike now leading the way, Countryside continues to put people first.

"I want to build a company where my employees are happy to come to work. I want to make some employees rich because they’ve done a great job," Mike says. "Every year and every month, I look at the profit-and-loss statement as my scorecard; it’s my evaluation of whether I’m doing a good job or not. As we continue to grow from a revenue and profitability standpoint, we can continue to do the neat things I love to do such as pay people more, throw big parties and events and add better benefits. All that comes after the success."

Margaret Harrist a free-lance writer.