Financial service firms that ignore the Asian-American market can be missing a major profit opportunity, experts say. As a group, Asian Americans show an impressive population increase, higher-than-average income and an educational level that represents an exceptional potential for continued strong earnings growth.
Although Asian Americans represent 4% of the total U.S. population, companies like Wells Fargo Bank, Bank of America and New York Life find that this group represents significant sales opportunities. All have developed extensive marketing programs specifically targeted to various Asian audiences.
One reason is that the Asian-American population is growing faster than any other ethnic group in the country. Since 1990, it grew by more than 48%, from 6.9 million to about 10.2 million in 2000. That is five times the general population growth rate.
Moreover, the group is prospering. Among 3.5 million Asian-American/Pacific Islander households, median household income reached $55,121 in 2000, compared to an average of $42,148 for the nation as a whole, U.S. Census Bureau data shows.
More than half of these households earn more than $50,000 annually, while a third earn more than $75,000 and a fifth more than $100,000, according to census data.
Yet it is a young population, with an estimated median age of 31.1 years, more than six years younger than non-Hispanic whites.
Educational levels are high. In 1997, the Census Bureau found, 42% had a bachelors degree, compared to 25% of whites. Nearly one-seventh of doctorates in the U.S. in 1995 were conferred on non-Hispanic Asians and Pacific Islanders (not including foreign students). The group received a third of all engineering doctorates and one fourth of those in the physical sciences and math.
High education levels are reflected in the Asian-American workforce. Census data in 1996 showed 35% of adult males and 31% of adult females among Asian-Americans worked as managers and professionals.
The term Asian-American covers a number of subgroups: 23% Chinese, 18% Filipino, 16% Asian Indian, 11% Vietnamese, 11% Korean, 8% Japanese and 11% other.
Of these, Chinese-Americans and Asian Indians are the wealthiest. The two groups together make up just over 40% of the Asian-American population but earn 46.7% of the income, reports Packaged Facts, a division of Marketresearch.com, New York.
Those of Chinese heritage represent a total annual income of $62.1 billion, estimates Packaged Facts, while Asian Indians earn $51.2 billion.
Asian-American families tend to be larger than the U.S. average. Just over half have four people or more, compared to 34.5% for non-Hispanic white families, the Census Bureau finds.
Datamonitor Inc., a research firm in New York, found in a survey early this year that education is the primary reason for savings among 21% of Asian households, compared to 10% of non-Hispanic whites.
Retirement is the primary financial goal for 20% of Asians, well below the 29% for whites. Part of the reason: The customary extended family among Asians helps support their seniors, notes Brendan Ford, a senior analyst for Datamonitor.
Datamonitor found that Asian-Americans account for only about 2% of all funds invested by U.S. consumers in accumulation-type life insurance products.
In contrast, they account for about 4% of total money held in savings by Americans.
“They are a risk-averse community,” Ford says.
Still, Datamonitor found, 22% invest in stocks and 19% in mutual funds.
Asian-Americans are an easy market to find, thanks to their preference for living in and near major urban areas, particularly Los Angeles, San Francisco, the New York/New Jersey metro area, Seattle, Washington and Chicago.
Business owners are a key segment of this market. Ford notes more than one million U.S. businesses are Asian owned, of which 5% produce more than $1 million in annual sales.
Thirty-five percent of those sales are by Chinese-owned business and 22% by Asian Indian businesses, Datamonitor estimates.
What should insurers do to target this lucrative market? Ford offers a number of suggestions.
One is to remember that the Asian market is in fact a variety of segments, such as Korean and Chinese.
“These groups respond best to different messages,” he says. “You cant just take an existing commercial and dump it into Asian media.”
In-language marketing communications is important to most Asian groups, Ford adds. Even though the vast majority speaks English well, in-language marketing helps build trust. (Asian Indians, however, are generally proficient in English.)
For most Asian groups, the most effective ad messages are often family-centered.
“You would show someone investing for a house or education or a family vacation,” Ford explains.
He notes that Bank of America, San Francisco, aimed some of its commercials to the Chinese market at the mother of the husband of the family. In many Chinese households, it is traditional for the husbands matriarch to handle family finances.
Customer education in the language of a given community is also a good way to make inroads into the market, Ford adds.
On the distribution side, Ford advises insurers to recruit agents in each targeted community.
“It creates trust and gives you a sales force that understands the culture and makes it easy for them to do in-language customer education,” he observes.
Agents of other ethnic backgrounds that want to sell to Asian markets should take the time to learn the culture, he adds. For instance, it is customary to begin a phone call or face-to-face meeting with an Asian customer with small talk. Getting right down to business is often considered rude, Ford notes.
The non-Asian agent might also offer in-language educational materials to the customer where available or try to hire an assistant who can speak the language of the targeted market, he adds.
Carriers can help by letting agents who have worked within these communities share their experiences with other agents during training.
Finally, marketing campaigns should be sustained, “and not just something you do during the lunar New Year,” says Ford.
“Asian-Americans are looking for firms that are committed to them, and they are sensitive to the level of advertising aimed at them. It can be important to advertise constantly, to reassure them that your company is healthy and committed to them.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 9, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.