Concentrated Affluence: How to Harness the Buying Power of Asian American Consumers

05/19/2015 05:22 pm ET | Updated May 19, 2016

If Asian Americans were a country, their spending would represent the eighteenth largest economy in the world. The numbers are staggering, yet many brands continue approaching their multicultural marketing efforts solely considering Hispanic and African-American audiences. Asian Americans are often considered an afterthought pending the availability of leftover budget.

I had the opportunity to catch up with Tim Wang, Founder and Principal of TDW+Co, a cross-cultural advertising agency that works with brands such as Verizon Communications, Pacific Gas and Electric Company, Principal Financial Group and Waste Management by helping them appeal to the new mainstream of America. Tim took some time to explain the business opportunity presented by the Asian American consumer and why it is critical that this segment of the population be at the forefront of a multicultural marketing strategy.

A little goes a long way

Tim explained that Asian American buying power is mighty. He noted that while this consumer segment comprises a smaller portion of the American population, its purchasing power per household is higher than any other racial group - Asian American household spending is currently 20 percent more than that of the general market and is expected to reach a total of $1 trillion by the year 2017.

Members of the Asian American community often lead affluent lifestyles and value luxury goods; in fact, according to my company's research, Asians over-index in spending on financial services, cars and education.

Despite the purchasing power of Asian Americans, skeptics continue to believe that targeting Asians isn't a high priority. To that, Tim argued that Asians are in the midst of outpacing even Hispanics in population growth with a 2.9 percent growth rate, (compared to the Hispanic population's 2.1 percent growth rate) which is higher than that of any other population group. Although Hispanics are more than three-times more numerous, Asians have far greater per household income than any other race group, including white non-Hispanics (Anglos).

The diversity of "Asian"

While the proof is in the pudding, marketers remain hesitant to double down their efforts on the Asian American population. This is likely due to the diversity of the community, which is made up of varied nationalities, which fall under the Asian umbrella, each with their own respective languages, heritage and traditions.

Though there are similar cultural traits between the various Asian segments, the unique diversity and language differences present a difficult challenge for brands to create a simple strategy that reaches the broader Asian community. Instead, smart marketers create multiple versions of creative and messaging components to build an effective, inclusive marketing campaign. This is admittedly an investment, but if done correctly can earn them exponential rewards.

Pilot and evaluation

Finally, I asked Tim how he recommends that a novice should approach the market, and he suggested that a company take their first steps with a pilot or trial period. He explained that by focusing on two or possibly three key language groups, an organization is able to execute a smaller, more manageable campaign that can be expanded and scaled effectively.

Tim and I also agreed that grounding a campaign in data and concrete insights is critical to success. If you gain a holistic understanding of your target market, your campaign is bound to appear dramatically different and be far more effective than one based off of guesswork and stereotypes.

Today's technology offers a level of sophistication that enables users to define and code individuals by country of origin, acculturation and language, information that is necessary to build a successful campaign. Marketers will be well on their way to success if they recognize the diversity within the Asian American population segment.

I often hear that the entire concept of multicultural marketing is incredibly daunting, yet it doesn't have to be - and my discussion with Tim was no exception. Ask any brand that has successfully executed a campaign and they will echo that the effort was worthwhile. The numbers do not lie - and Asian Americans are one of the fastest growing demographics within the new mainstream of consumers. It's important that we as marketers overcome our hesitations and begin taking advantage of this immense business opportunity.

How does your company address the Asian market? Is it a high-priority? If there is hesitation, what is the reason for that? Do they understand the level of growth and buying power?