8.2 Diversity and Inclusion Marketing

What It Means to Businesses

Leading the marketing strategy with a diversity-driven intention can increase customer satisfaction and build stronger brand loyalty. Top Design Firms surveyed hundreds of consumers in late 2020 and found that 67 percent would consider making repeat purchases from companies committed to diversity in marketing campaigns.⁸

Another report confirmed that these observations are not restricted to specific populations. Market analysis by Heat agency found that high diversity scores for brands translated into a whopping 83 percent higher preference by consumers.⁹ Besides improving brand sentiment overall, studies show that companies that build emotional ties through diversity marketing programs generate more revenue, increase stock price performance, and enhance brand perceptions.¹⁰

What It Means to Consumers

Diversity marketing is important on a personal level because of what it implies. Companies that prioritize this strategy clearly demonstrate a higher level of understanding, value, and respect for all individuals in society. The conscientious inclusion of racially, ethnically, culturally, and socially distinct groups in marketing efforts suggests a genuine desire to communicate and engage with everyone.

Acknowledging consumers’ differences and adopting tactics to meet each group’s needs and preferences also validates individuals’ importance in the market. From a consumer standpoint, the application of diversity and inclusion measures in a company’s marketing practices shows a universal recognition and appreciation for people.

Market Research

Market research is essential for developing successful marketing strategies because it leads to consumer insights. It also identifies potential communication gaps. This means that diversity must be treated as a market research factor to learn about multidimensional audiences. Leveraging consumer diversity in the research process has several benefits. For instance, it provides the information needed to better understand people’s cultural or social differences. This is useful for companies to avoid wrong assumptions and avert public mishaps.

To do good research, marketers do not have to belong to or identify with a specific consumer group. However, understanding how ethnic and sociocultural differences impact buyers’ decisions and actions requires diversity marketing intelligence (DMiQ). Diversity marketing intelligence refers to the capability of identifying, accepting, and valuing the diversity of consumers within a market and using this knowledge to tailor the marketing mix accordingly.

In early 2018, Tarte Cosmetics introduced to the market its highly anticipated Shape Tape Foundation. The launch featured 15 shades of makeup, almost all light tones. However, the product was not well received. Loyal customers were furious because of the lack of shades for people with darker skin. Tarte Cosmetics was accused of being a whitewashed brand and even making deeper skin-toned people feel inadequate.¹¹ The company quickly apologized for alienating customers and changed its product and marketing communication.

When diversity marketing efforts fall short, as the Tarte Cosmetics case shows, it is often the result of racially or socially charged insensitivities and missteps. The outcome can have costly repercussions for companies. In 2017, PepsiCo (see Figure 8.5) received heavy backlash for its “Live for Now Moments Anthem” campaign featuring Kendall Jenner. The commercial was criticized for trivializing the Black Lives Matter (BLM) movement and undermining protesters’ real-life hardships in pursuit of peace and justice.¹² It was described as insensitive and offensive.

PepsiCo defended its position as not intending to be socially disrespectful. However, PepsiCo withdrew the commercial, estimated to have cost $5 million to produce, and widely apologized to the market and to Jenner.¹³ A final lesson here is that when diversity marketing efforts are done correctly—as Fenty Beauty did—it can boost brand awareness, consumer engagement, and sales.

Figure 8.5 The PepsiCo commercial “Live for Now Moments Anthem” was an expensive lesson for the company—a failed campaign that was criticized for making light of a culture’s real-life hardships. (credit: “Pepsi” by Mike Mozart, JeepersMedia/flickr, CC BY 2.0)

Race and Ethnicity

Two out of every five individuals in the United States—over 40 percent of the population—identify racially or ethnically as other than non-Hispanic White.¹⁴ Researchers expect this trend to keep growing in the coming decades, and as consumer diversity increases, cultural identification becomes even more important. Race, ethnicity, and culture give meaning to one another. This makes it critical for marketers to pay attention to how multiracial or multiethnic consumers identify culturally. Having a multicultural identity means that a person has been exposed to various cultures and self-identifies as being part of more than one racial or ethnic community or various social groups.¹⁵ We will focus on four key multicultural identity segments of the American population: Hispanic, Black, Asian, and Native American/Alaska Native.

Being multicultural can take many forms. Multicultural individuals may speak multiple languages or have different sets of friends in each culture. From a marketing perspective, multicultural consumers may have different responses to brands or products depending on their multicultural affiliation.¹⁶ Why is this significant? Because marketers must consider the effects of multiculturalism on the marketplace when developing the marketing mix. Race and ethnicity are clearly linked to diversity marketing.

Modelo Especial is a good example. Modelo Especial is a Mexican beer that has successfully capitalized on its heritage to target the Hispanic population while also appealing to the general market. Marketed by Constellation Brands, the beer has had strong sales in the United States since the 1990s.¹⁷ In 2019, Hispanic consumers captured close to 70 percent of the brand’s national sales, but Hispanic people are only about half of the customer base.¹⁸ Over the course of several decades, various aspects of Hispanic culture have been widely embraced in the United States. Have you heard of artists like Jennifer Lopez, Pitbull, Bad Bunny, and J Balvin? The marketing team at Constellations Brands attributes the brand’s mainstream appeal not only to connecting well with Hispanic consumers but also to the openness of millennial and Gen Z consumers to different cultures and lifestyles.

Sociodemographics

In marketing, sociodemographics describes the combination of social and demographic factors that characterize specific consumer groups in the market. These factors are mostly quantifiable, meaning they can be measured or verified to a certain extent. Though race and ethnicity are cultural factors, sometimes they are included in market research as sociodemographic parameters. This is done to increase the generalization of consumer findings and to uncover potential areas of concern linked to social issues.¹⁹

Sociodemographic variables typically consist of gender and sexual orientation, age or generation, family structure, religion, education level, and income. The latter two are also frequently associated with socioeconomic status. Disability is another variable that can be treated as a demographic factor. Figure 8.4 offers a more comprehensive list of diversity marketing’s sociodemographic factors.

Just like with multicultural consumers, segmenting buyers based on shared sociodemographic factors allows companies to tailor goods or services to match the needs and preferences of this diverse group. This enables marketers to develop the right marketing mix—as well as create effective advertising content—to influence distinct consumers. Here is how Disney uses family structure as a sociodemographic factor to segment and target social media users. Disney on Ice is a music and skating show that brings the magic of Disney to ice rinks around the country. People with small children are more likely to consider family entertainment activities, so Disney on Ice targets these consumers on Facebook with tailored family-oriented ads.

Multicultural Populations

Racial and ethnic diversity continue to grow every day around the world. In the United States, in particular, demographers predict a majority–minority population shift by the mid-2040s, as Figure 8.6 shows. In other words, the bulk of American consumers will identify as multicultural, meaning racially and ethnically diverse people of color.

This projection has enormous marketing implications for companies and nonprofit organizations. As the marketplace becomes even more racially and ethnically diverse, marketing efforts must be aligned to the needs and expectations of multicultural groups to be effective.

Let’s take a closer look at these key multicultural segments of the American population:

• The Hispanic population is the largest multicultural group in the nation and makes up about 19 percent of the total population. According to data-driven marketing company Claritas, the Hispanic population is one of the fastest-growing groups, with over 63 million individuals, and is also responsible for 59 percent of the country’s population growth between 2010 and 2021.²⁰ Plus, by 2026, business strategists believe that nearly two out of every three consumers in the United States will belong to this ethnic group.²¹ With a median age of 29, this group also has the youngest population in the country.
• The Black population is also a growing segment with 46.9 million individuals—or 14.2 percent of the total population—according to the 2020 US Census. This group is made up of three different subethnicities: individuals who identify as Black alone (single race), or as Black Hispanic, or as Black with another race such as White or Native American (multiracial). The Black population in general has the second youngest median age. In fact, almost 60 percent of this group were millennials or younger (under the age of 38) in 2019 based on findings from the American Community Survey.²²
• The Asian population accounts for 7.2 percent of the American population with 24 million individuals from combined subethnicities as reported by the 2020 Census. Like Black people, Asian people also self-classify as either single race, Asian Hispanic, or multiracial individuals. Communities often included as part of the Asian multiracial composition are Native Hawaiians and Pacific Islanders. Asians’ three classifications combined experienced the fastest population growth of all multicultural segments in the nation between 2000 and 2019.²³ The Asian population has a median age of 34 and is expected to reach around 35 million individuals by 2040.²⁴
• The Native American/Alaska Native population represents 1.1 percent of the population in the United States with 3.7 million individuals identifying as single race Native people. During the 2020 Census, these Native groups were combined with other races and ethnicities, boosting the number to 9.7 million people, or about 2.9 percent of the total population.²⁵

Figure 8.6 US Population Projections from 2016 to 2060 by Race and Ethnicity (data source: US Census Bureau; attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Sociodemographic Populations

While all sociodemographic consumer groups are important, the following are essential segments of sociodemographic marketing:

• LGBTQIA+ population. LGBTQIA+ stands for lesbian, gay, bisexual, transsexual, queer/questioning, intersex, asexual, and other sexual identities. About 5.6 percent of American adults—roughly 14.4 million individuals—identify as LGBTQIA+ according to a 2020 survey.²⁷ In general, LGBTQIA+ consumers spend more at retail stores than other groups and have a higher percentage of online purchases compared to non-LGBTQIA+ households. Not only is this segment part of diversity marketing, but the LGBTQIA+ community is very diverse too.
• Generational population. Consumers are grouped into age clusters based on birth year. These populations include 21.7 million Traditionalist or Silent Generation (born between 1928 and 1945), 70.6 million baby boomers (born between 1946 and 1964), 65 million Generation X (born between 1965 and 1980), 72.2 million Generation Y or millennials (born between 1981 and1996), 67 million Generation Z or Zoomers (born between 1997 and 2009), and 27.6 million Generation Alpha (born between 2010 and 2025) according to 2020 US Census data.²⁸ Every generation is unique and has different historical references, challenges, interests, and technological experiences that impact these consumers’ preferences and appeals.
• Socioeconomically disadvantaged population. These individuals tend to come from low-income households, experience financial insecurity, and have less access to education. In the United States, the estimated number of people living in poverty was over 34 million individuals in 2019.²⁹ The majority of disadvantaged consumers are located either in poor rural areas or inner-city communities that lack social resources and infrastructure to reduce poverty.³⁰ Marketers must be careful targeting these consumers to avoid negative repercussions from the market.
• Consumers with disabilities. This group represents an estimated 61 million Americans. About one in four adults lives with some type of disability.³¹ Disability is a classification derived from an impairment related to mobility, learning, intellectual, or other types of functions. This group is also considered very diverse because disabilities span cultural, social, and demographic factors. Consumers with disabilities have been traditionally underrepresented in marketing efforts, though studies show they are one of the largest sociodemographic market opportunities after baby boomers and other segments.³²