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Section 1
Section 1
INTRODUCTION
2 2
Background
Since 1998, AHAA has been helping its members serve its clients through breakthrough independent studies that
increase understanding of what it takes to win the market, share new concepts, and identify best practices of marketing to Latinos.
In March 2012, Part 2 demonstrated that Hispanic Allocation positively affects revenue growth rates for Consumer Packaged Goods companies, explaining about 35% of changes in revenue growth.
This third part of AHHAs Revenue Growth study focuses on Technology, Telecom and Entertainment companies including:
manufacturers of consumer hardware (computers, TVs, cell phones) content (media, movies, games) connectivity providers (cable, satellite, wireless)
Population CAGR
7x
3.6%
3.0% 2.5%
2.0% 1.5% 1.0% 0.5%
GROWTH
Hispanic Population 2000-2010 CAGR8 v Non-Hispanic 3.6% v. 0.5%3 56%4 74%7 Hispanic Share of Total US Population Growth 2000-2010 Hispanic Share of Labor Force Growth 2010-2020
0.5%
0.0%
Hispanic
Non-Hisp
Share of Population
ECONOMIC
2012 Estimated Buying Power
Hispanic Buying Power 2000-2010 CAGR v. Non-Hisp
1, 3, 4 2010 2 SSG
Hispanic 17.0%
$1.2 Trillion5
7.8% v. 3.4%6
Buying Power CAGR
8% 7% 6% 5% 4% 3% 2% 1% 0% 2x
7.8%
Census ACS Analysis of Census 5,6 Selig Center at the University of Georgia 7 Bureau of Labor Statistics 8 CAGR = Compound Annual Growth Rate - the year-over-year growth rate of an investment over a specified period of time; the rate at which an investment would have grown if it grew at a steady rate.
3.4%
Hispanic
Non-Hisp
Hispanics have generated about a third of the Tech consumer base growth; expanding 3x faster than NH
While Hispanics accounted for 17% of the population in the US, they also contributed to 34.8% of the growth in the Tech-TelecomEntertainment consumer base. During 2006-2010, the Hispanic consumer base in the Tech-Telecom-Entertainment category grew 3 times faster than the NonHispanic consumer base.
Study Objectives
To understand if there a significant difference in the revenue growth rate attained by Tech-Telecom-Entertainment advertisers which designate higher allocation of ad resources to the Hispanic market and those that focus less.
Study Variables
Methodology
Hispanic Allocation and organic revenue growth rates of 40 Tech-TelecomEntertainment companies, a subset of the Top 500 US advertisers which are publicly-held, were tested for 2006 to 2010.
First, we tested the linear association of the two variables through correlation analysis. Next, the causal nature of Hispanic allocation upon revenue growth rate was tested through linear regression analysis. Details of statistical analysis n Section 5.
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Public (418)
Private (-82)
Tech-TelecomEntertainment (40)
11
For GE, only its Media & Entertainment revenues while owners of NBCU were included in the analysis; excluded all other LOBs revenue streams.
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Section 1
Section 2
13 13
Finding 1: Tech-Telecom-Entertainment Growth Rates Are Directly and Positively Impacted by Hispanic Allocation
The study shows a direct & positive relationship between Tech-Telecom-Entertainments Hispanic ad allocation and overall topline revenue growth. The study shows that in general the higher the Hispanic allocation displayed on the horizontal axis, the higher propensity of organic revenue CAGR, indicated on the vertical axis, attained by companies in the sector, and vice versa.
Please see Appendix D (Graph 1) for Detailed Graph and Graphical Analysis.
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Finding 1: Tech-Telecom-Entertainment Growth Rates Are Directly and Positively Impacted by Hispanic Allocation
The top 30 percentile of Allocation and top 30 CAGR percentile includes DirecTV, Echostar/Dish Network, Metro PCS, Leap Wireless, Time Warner Cable and Verizon.
Top 30 Percentile
The mid 40 percentile in Allocation & Growth include: T-Mobile, Cablevision, AT&T, Lions Gate Entertainment, Comcast, Vonage, Best Buy and News Corp.
Please see Appendix D (Graph 1) for Detailed Graph and Graphical Analysis.
Mid 40 Percentile
Bottom 30 Percentile
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In just five years, they forced a flurry of changes like tablets, apps, and mobile marketing as well as upheaval among tech manufacturers, retailers and data services revenues for connectivity providers.
See more details on Apple & Samsung in Appendix F 16
Finding 3: As Hispanic Allocation increases, the revenue rate of growth of Tech competitors soars sharply
Frequencies* Companies in the Top Tier allocate twice as much as the Mid Tier
but the Top Tier growth is 3 times larger than the Mid Tier
Average Allocation & Growth By Tier*
16.0%
14.0% 12.0% 10.0% 8.0%
13.3%
12.9%
6.2%
3.4%
0.4%
-1.4%
Top Tier 71-100 Mid Tier 31-70 Bottom Tier 0Percentile Percentile 30
Finding 4: Every 1 point increase in Hispanic Allocation yields a boost of about two-thirds of a point in annual growth rate
The regression demonstrates that for every additional percentage point increase in Hispanic Allocation, we would expect an average annual organic revenue growth boost of 0.68%.
That is, on average, for allocating an additional 10% of the companys ad resources to Hispanic media over 5 years, an average increase of 6.8% in organic revenue annual growth rate would be expected.
Organic revenue growth rates decline sharply as Hispanic share of budgets decrease and vice versa.
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Finding 5: Hispanic Allocation explains 30% of increase in Tech Sector Revenue Growth Rates*
Hispanic Allocation explains a substantial portion (30%) of Tech-Telecom-Entertainment increase in topline revenue growth
The other 70% may include other critical factors such as product innovation, user experience, brand equity/reputation, brand experience, strategic focus, price, operational alignment, distribution, sales force, past performance, talent, incentives, overall segmentation expertise, etc. Further analysis is needed to determine what other drivers could be measured in standard ways and what statistical contribution these may have in revenue growth. * Excluding Anomalies: Apple & Samsung
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Finding 6: Including leading global innovators, Hispanic Allocation explains 17% of Revenue CAGR
Including Apple & Samsung, Hispanic Allocation alone explains about 17% of Tech-Telecom-Entertainment increase in topline revenue growth.
The other 83% may include other critical factors such as product innovation, user experience, brand reputation, brand experience, strategic focus, price, measurement tools, distribution, sales force, segmentation expertise, etc. Further analysis is needed .
The study shows that an average revenue growth rate of 0.56% over the 5 years is expected for every additional percentage point increase in Hispanic allocation.
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Summary Findings
1. There is positive relationship between Hispanic allocation and Revenue CAGR, meaning, the more a company allocates Hispanic budget, the higher the corporate growth.
As Hispanic Allocation increases, the revenue rate of growth of Tech competitors soars sharply
2.
Tech-Telecom-Entertainment companies show that Hispanic Allocation accounts for 30% of increase in revenue growth.
Including Apple & Samsung, Hispanic Allocation explains about 17% of the fluctuations in revenue growth rates, accentuating the need for Hispanic allocation among tech convergence companies that dont have revolutionary innovations and brand experiences.
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Section 1
Section 3
22 22
23
To
Hispanic Index v NH
169
I want others to say "wow" when they see my electronics. My cell phone is an extension of my personality.
163
I am among the first of my friends and colleagues to try new technology products.
Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics)
133
24
I give others advice when they are looking to buy technology or electronics products. I enjoy learning about technology or electronic products from others. I enjoy reading about new technology products.
Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics)
131
131
25
Hispanic Index v NH
130
129 125
Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics)
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Hispanic Index to NH
90 128 115 129
144 113
Source: Nielsen Video Census 2012; Mobile Insight Survey: Netview 2012, Mobile Bill Panel, Nielsen TV Panel 27
Tech Gadget iPad Video Game system MP3 player Blu-ray disc player HDTV
Purchase Intent
Next 12 Months Hisp Index (vs WNH)
141 103 98 93 91
Source: Scarborough USA+ 2011 Release 2 Total; Base: Adults 18+; Respondents: 151,099 White Non-Hispanics & 27,301 Hispanics
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137
117
Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics)
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Section 1
Section 4
IMPLICATIONS
31 31
Hispanic allocation is a significant driver to healthy organic growth in this discretionary category
Hispanic Allocation is substantial enough in the winning equation to transform company results --propelling players, obstructing competitors, building sustainable advantages This is especially so for companies that dont have revolutionary product innovations in their pipeline like the first iPhones, iPads or Google/Android smartphones. Compromising Hispanic Allocation can have negative short and long-term growth effects.
Huge growth opportunity lies ahead as Hispanics continue to lead adoption and usage
Brand loyalties will be increasingly at stake as Hispanics dominate segment growth.
32
Many companies may be falling short of their optimal revenue generation or handing off growth points to competitors with higher allocation and cohesive Hispanic-centric strategies.
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Section 1
Tech-TelecomEntertainment
Auto Private
Government
Retail
B2B Insurance/Finance
Non-Profit
35
Test Validations
Main Regression
All validation tests corroborated the same findings. Hispanic Allocation has a direct & significant impact on companies overall revenue growth.
36
37
38
In other words, the expected range for allocating 10% of the companys ad resources to Hispanic media over 5 years is an increase of 3.26% to 10.29% in overall corporate revenue growth rate.
N=38
39
40
In other words, the expected range for allocating 10% of the companys ad resources to Hispanic media over 5 years is an increase of 1.48% to 9.7% in overall corporate revenue growth rate.
N=40
41
Test 1: Is Aggregate Hispanic Allocation Important? YES! Hispanic Allocation directly impacts topline revenue growth for Top 500 Advertisers
Aggregate Hispanic Allocation 06-10
On average, for every additional percentage point increase in Hispanic allocation, we would expect revenue growth of .47% over the 5 years. In other words, allocating 10% of the companys ad spend to Hispanic media over 5 years would generate revenue growth of 4.7% over the 5 year period
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TEST 2: Individual Years Growth and Aggregate Hispanic Allocation Revalidated! Both directly impact topline revenue growth
Of course, each years CAGR most significantly affects the companys revenue growth over 5 years
R-square 0.305 In other words, 30.5% of the variation in growth over the 5 years (CAGR 06-10) is explained by the ad spend in Hispanic media over the 5 years and each years annual growth.
On average, for every additional percentage point increase in Hispanic allocation, we would expect revenue growth of .468% over the 5 years. In other words, allocating 10% of the companys ad spend to Hispanic media over 5 years would generate revenue growth of 4.68% over the 5 year period.
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Test 3: Hispanic Allocation, Super Categories and Revenue CAGR Revalidated Again! Hispanic Allocation Is Relevant to Revenue Growth!
CAGR: 06-07, 07-08, 0809, 09-10 Categories: Auto, Tech & Entertainme nt, Retail, CPG, Finance/Insu rance Hispanic Allocation: 06-10
R-square .376, in other words, 37.6% of the variation in growth over the 5 years (CAGR 06-10) is explained by the ad spend in Hispanic media over the 5 years and each annual years growth. On average, for every additional percentage point increase in Hispanic allocation, we would expect revenue growth of 0.464% over the 5 years. In other words, allocating 10% of the companys ad spend to Hispanic media over 5 years would generate revenue growth of 4.64% over the 5 year period.
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Section 1
Section 6
APPENDIX
45 45
Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Percentile
100.0% 97.4% 94.8% 92.3% 89.7% 87.1% 84.6% 82.0% 79.4% 76.9% 74.3% 71.7% 69.2% 66.6% 64.1% 61.5% 58.9% 56.4% 53.8% 51.2%
ECHOSTAR /DISH NETWORK DIRECTV GROUP INC TIME WARNER CABLE LEAP WIRELESS INTL INC METROPCS INC DEUTSCHE TELEKOM/T-MOBILE CABLEVISION SYSTEMS CORP RADIOSHACK CORP AT&T INC VERIZON COMMUNICATIONS INC SPRINT NEXTEL CORP WALT DISNEY CO LIONS GATE ENTERTAINMENT MOTOROLA INC BEST BUY CO INC COMCAST CORP GENERAL ELECTRIC CO TELEPHONE & DATA SYSTEMS INC NEWS CORP VONAGE HOLDINGS CORP
46
Rank
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Percentile
48.7% 46.1% 43.5% 41.0% 38.4% 35.8% 33.3% 30.7% 28.2% 25.6% 23.0% 20.5% 17.9% 15.3% 12.8% 10.2% 7.6% 5.1% 2.5% 0.0%
SONY CORP COX ENTERPRISES INC LIBERTY MEDIA CORP EASTMAN KODAK CO ELECTRONIC ARTS INC MICROSOFT CORP HEWLETT-PACKARD CO APPLE INC ROYAL PHILIPS ELECTRONICS NV LG GROUP MATSUSHITA ELECTRIC INDUSTRL CO LTD/PANASONIC SEIKO CORP/EPSON SEGA SAMMY HOLDINGS INC DELL INC GARMIN LTD SAMSUNG ELECTRONICS CO LTD SHARP CORP TOSHIBA CORP TEXAS INSTRUMENTS INC
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Rank
1 2
Percentile
100.00% 97.40%
3
4 5 6 7 8 9 10 11 12 13 14
94.80%
92.30% 89.70% 87.10% 84.60% 82.00% 79.40% 76.90% 74.30% 71.70% 69.20% 66.60%
16.8%
0.0% 7.6% 16.9% 26.0% 3.7% 0.1% 2.8% 24.8% 4.1% 12.6% 0.0%
15
16 17 18 19 20
64.10%
61.50% 58.90% 56.40% 53.80% 51.20%
3.9%
0.9% 7.9% 1.1% 1.8% 2.9%
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Rank
21 22 23 24
Percentile
48.70% 46.10% 43.50% 41.00%
25
26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
38.40%
35.80% 33.30% 30.70% 28.20% 25.60% 23.00% 20.50% 17.90% 15.30% 12.80% 10.20% 7.60% 5.10% 2.50% 0.00%
0.1%
11.0% 0.1% 0.1% 0.0% 0.1% 0.1% 0.4% 3.3% 2.1% 5.9% 2.2% 0.0% 0.1% 1.3% 3.9%
DELL INC
TEXAS INSTRUMENTS INC LG GROUP
-0.3%
-0.5% -1.4% -2.5% -2.7% -4.0% -5.0% -5.6% -6.0% -6.6% -9.8% -9.9%
ROYAL PHILIPS ELECTRONICS NV HEWLETT-PACKARD CO GENERAL ELECTRIC CO SONY CORP SPRINT NEXTEL CORP TIME WARNER INC SHARP CORP MATSUSHITA ELECTRIC INDUSTRL CO LTD/PANASONIC EASTMAN KODAK CO
MOTOROLA INC
-11.4%
49
CAGR 06-07
CAGR 07-08
NA
CAGR 08-09
NA
.021 .121 (.029) .026 .202 (.000) .003 .033 (.567) .328 .465 (.000) .468 .202 (.000) NA
NA
NA
NA
NA
CAGR 09-10
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Retail
NA
NA
NA
NA
CPG
NA
NA
NA
NA
.020 235
.166 40
.298 38
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Appendix C2: w/o Apple & Samsung anomalies Regression Analysis Results
Test 1 Variable in Model Unstandarized Beta Standardized Beta (Significance) NA Test 2 Unstandarized Beta Standardized Beta (Significance) .021 .121 (.029) .026 .202 (.000) .003 .033 (.567) .328 .465 (.000) .468 .202 (.000) NA Test 3 Unstandarized Beta Standardized Beta (Significance) .025 .146 (.007) .024 .190 (.001) .002 .027 (.636) .335 .476 (.000) .464 .200 (.000) -8.385 -.224 (.000) -.027 -.001 (.991) 2.344 .082 (.190) -1.659 -.057 (.362) 2.065 .068 (.269) .376 235 Technology Model Unstandarized Beta Standardized Beta (Significance) NA
CAGR 06-07
CAGR 07-08
NA
NA
CAGR 08-09
NA
NA
CAGR 09-10
NA
NA
Insurance/Finance
NA
NA
NA
Technology
NA
NA
NA
Retail
NA
NA
NA
CPG
NA
NA
NA
.305 235
.166 40
51
Graph 1
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Chart 2
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Appendix E
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Apples a leading global innovator has become Americas most valuable company and most influential stock on the psychology of the investor market. Apples iPhone noted as the phone that changed phones forever, was designated as the Top Invention in 2007 by Time magazine. Apples Macbook Pro has consistently been one of the best selling laptops since its inception in 2006. The iPad was named as the Top Gadget in 2010.
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Samsung is a global leading tech innovator breaking repeated records of slimmer products such as LCD TVs & Blu Ray Disc Players, highest resolution cameras, and smartest cell phones such as the Galaxy, the first Droid in 2008. Recognized in industry for best gadgets only behind Apple.
A global market leader Samsung took No. 1 spot in U.S. cellphone market in 2008. Enjoys #1 market share position for TVs worldwide. 56