The reason is a simple one: demographics. Lafayette Jones, executive vice president of Segmented Marketing Services Inc. (SMSI), a Winston-Salem, N.C.-based consulting firm that specializes in ethnic marketing, calls the data from the most recent U.S. Census report a "wake-up call for marketers."

Already, people of African, Asian, Hispanic and Native American ancestry account for 25% of the total U.S. population. By the end of this century, they will comprise a third of all consumers in this country. By the year 2010, non-whites are projected to make up the majority of the populations of California and Texas.

Ethnic markets are growing at a rate twice as fast as the overall population. While the buying power of most minority groups still trails that of whites, discretionary income among non-whites is growing at a faster pace than that of the overall population.

In some of the nation's biggest markets--New York, Washington, Atlanta--more than half the residents are non-whites, and in some cases up to 70% of those populations are minorities, points out Jones.

The most recent U.S. Census report is a "wake-up call for marketers."'

That trend has been accelerated by the arrival of almost 10 million immigrants during the 1980s, mostly from Asia and Latin America. Minorities now make up the majority of the residents in about half of the 90 California cities with populations of 50,000 or more. "Minority majorities" are the norm in one of every six such cities across the U.S.

It should come as no surprise, then, that at least half of all Fortune 500 companies have launched some ethnic marketing initiatives, says Gary Berman, president of Market Segment Research, a Coral Gables, Fla.-based firm specializing in ethnic market research.

In fact, while Berman projects ethnic marketing expenditures will double to more than $1 billion by the end of this decade, what is more surprising is that mainline marketers have been so slow in tapping this market, given its huge growth potential. That means the potential for small entrepreneurs, who can react quickly to market changes, is even greater.

Part of the problem has been that non-ethnic marketers simply did not know how to go about it. "Ethnic consumers are not simply white consumers with different colored skin," says Geri Duncan Jones, executive director of the American Health and Beauty Aids Institute, a Chicago-based trade association of ethnic beauty care products companies.

TARGETED MESSAGES NEEDED

In the same vein, Jones faults many mainstream marketers for confusing message exposure with message receptivity, "Black consumers, like other segments of the population, respond best to tailored, personalized invitations to purchase," he says. "But those invitations simply don't get delivered to most black consumers via the general market media."

Certainly, there are positive signs that mainstream marketers are beginning to hear get the message. Within the last few years, leading retailers including J.C. Penney, Montgomery Ward and Sears, Roebuck and Co. have announced plans to sell merchandize specifically targeted to black and Hispanic consumers. Arcadia, California based supermarketer Vons Cos. has created an entire new store format targeted to the Hispanic market. Its Tianguis prototype has been hailed as the standard bearer for marketing to the Latino population of southern California.

Still, tremendous opportunities remain, and minority entrepreneurs--often frustrated by lack-luster products positioned as ethnic offerings--have sprung up to fill the gap created by lack of appropriate offerings from mainstream companies.

Mattel Inc., for example, has long offered black Barbie dolls that, with the exception of their skin color, are identical to white Barbie dolls. Consumer dissatisfaction with that half-hearted measure prompted Olmec Corp., a New York-based black-owned company, to introduce Imani, a Barbie- type doll with authentic African-American features. The product was an immediate hit with black consumers.

Great opportunities exist in businesses targeted to minority populations.

Such ethnic marketing gaffes are likely to become a rarity as mainstream companies begin to hone their ethnic marketing skills. Realizing the complexity of targeting minority consumers, marketers are running more ethnic focus groups, hiring minority-owned firms as consultants and strategic partners and experimenting with specialized marketing programs as a prelude to full-blown launches.

One such effort was recently conducted by Hillshire Farms & Kahn's, A Cincinnati-based smoked sausage and lunch meat subsidiary of Sara Lee Corp.

"Disfrute el sabor de lo mejor," which translates to , "Enjoy the taste of the best," was the tag line of a Spanish language campaign for Hillshire Farms that included 15 different radio spots, recipe tear pads, a recipe booklet and two freestanding insert coupon drops. The radio spots featured Chef Pepin, a popular figure on Univision, a Spanish-language television network.

"This effort made sense for us for a number of reasons," says Marianne O'Dwyer, smoked sausage product manager at Hillshire Farms & Kahn's. "Hispanics are much bigger consumers of smoked sausage than the general population. As a group, they are also less concerned about fat and cholesterol."

Big-name companies such as McDonald's, Sears, Procter & Gamble, Nike and MasterCard International are the force behind big increases in ad spending in Hispanic media lately, but now the growth is coming from smaller companies in areas such as financial services and regional retailing.

GROWING TARGET MARKET

"The ethnic market is becoming a target for all sorts of companies," says Berman. "Banks, credit card companies, insurance companies--they-re all finding they have strong market opportunities here, as long as they approach the market in the right way."

And therein lies the key to successful ethnic marketing, say the experts. Marketers who would hitch their stars to the ethnic juggernaut must be wary of a number of pitfalls. Above all else, say Jones, Berman and other ethnic marketing specialists, they must realize that ethnic markets are not homogeneous.

"An inner-city black youth is not going to respond to the same marketing messages as a middle-aged black professional living in the suburbs," says Neil Harris, director of International marketing at Johnson Products Co., a black-owned health and beauty aids firm. "They may not even be interested in the same products."

Diversity can be even more pronounced among other ethnic groups. The U.S. Census Bureau tracks 16 different nationalities under the umbrella heading of "Asian" in its surveys. The Hispanic market in this country consists of people from at least 25 nations.

Entrepreneurs must realize that ethnic markets are not homogeneous.

Another key for marketers is to avoid condescending or patronizing campaigns, says Jones.

G. Heilman Brewing Co. earned the wrath of the black community with a controversial marketing campaign for its PowerMaster malt liquor, a potent brew that relied on stereotypical imagery to target inner-city black youths. The backlash forced Heilman to pull the brand, although it was later quietly reintroduced under another name.

"Marketers must recognize the differences among ethnic groups, and they must create marketing programs that appeal to the individual wants and needs of those disparate groups," says Jones. "But all the while they must maintain respect and understanding of those differences. That, in a nutshell, is what effective ethnic marketing is all about."

Clearly, the ethnic market holds many business opportunities, but it takes patience and the right approach to capitalize on them.