Site Evaluation

By Jeff Pappas

The Hispanic market is one of the fastest-growing population segments within the U.S. Hispanic disposable income is up 29% since 2001 — more than two times the growth among the general U.S. consumer. The younger generations of Hispanic consumers are driving this growth and are leaving behind a distinct cultural mark.

Sixty percent of the Hispanic market is below the age of 30 and almost twice as likely to live in households of four or more people. Many of our customer support centers realize that they should take note and pay particular attention to the Hispanic consumer.

At the end of 2004, 40.4 million Hispanics lived in the U.S., accounting for 14 percent of the total population. They are now not only the nation's fastest-growing minority group, but also its largest. The U.S. is now the fourth largest “Hispanic country” in the world, after Mexico, Colombia and Spain. With an adjusted gross purchasing power of more than $686 billion (2004 figs.), U.S. Hispanic buying power now exceeds the Gross Domestic Product of every Latin American country. Latin American marketers and U.S.-based companies are trying to leverage this by aiming to:

• Acquire a solid understanding of the U.S. Hispanic consumer goods market.
• Learn how to market and sell to this fast-growing ethnic segment.
• Leverage strong consumer goods brands from Latin American countries and build a following among U.S. Hispanics familiar with them.

As differences among Hispanic consumers are uncovered, the following marketing questions should emerge:

• Should the message to the Hispanic community differ from the message to the general market?
• How much of the marketing campaign should be in the Spanish language?
• To what extent do general market initiatives sufficiently address the Hispanic population — what's working and what's not?
• How should my distribution and assortment differ among major Hispanic markets?

The need for a bilingual and “bi-cultural" customer support agent is vital. The cost to run a bilingual center in the U.S. is high. The need to look at nearshore and offshore markets is vital. Direct marketing (inbound and outbound calls) responses are based on the following components:

• The process of acculturation influences the Hispanic consumer's perception of direct marketing. While most consumers in the general market dismiss direct marketing materials as junk mail, Latinos — particularly recent immigrants — welcome it as a means of becoming a more informed consumer.
• Overall, Hispanic households are 3.5 times more likely to respond to a direct mail solicitation than a non-Hispanic household.
• 52% of the respondents speak only Spanish in their homes.

This being all said, our clients need to know the following in order to make a concise decision on locating a new customer support center in Latin America. Our clients have located successful customer support centers in Venezuela, El Salvador, Panama, Costa Rica, Dominican Republic and Mexico, among others, by researching individual locations based initially on the following criteria:

1. Labor availability: What is the long term ability of hiring 600-1,000 “bi-lingual” agents on a consistent basis? (Be aware of the turnover of agents.)
2. Labor wage: What is the total monthly wage that a U.S.-based outsourcer would be expected to pay to hire a “qualified” inbound agent (including mandatory benefits)?
3. Labor relations: Due to the high turnover typically associated with a customer support center, what is the recourse of the employee if an employer has fired the agent?
4. Telecom cost: The most expensive cost is T1 lines. A typical T1 in the U.S. runs about $1,000 per month per line (a typical 200-seat center averages 20 T1s per). In order to make an offshore center profitable, the T1 cost will need to be determined. Also, the cost of the long distance call will need to be determined. If a switch is on site in São Paolo, what is the average per-minute call cost to the U.S.? If the switch is based in the U.S., then the cost is typically $.04 per minute. We would need a cost comparison.
5. Real estate: Our clients are typically under a very tight timeframe to open a new facility. We will typically need to look at existing properties. The key issues in an existing facility are:
   1. Size — We typically look at a minimum of 22,000 rentable square feet, with expansion capabilities of double/triple in size.
   2. Location — Since we typically hire young/university/high school graduates, we would need to be in area that can easily attract that demographic.
   3. Mass transit — About 60-70% of our workforce will not drive a car, so adjacent to mass transit is required.
   4. Parking — Since management will drive, we will need access to 30% of our employees having a parking space.
   5. Fibre — The site will need to have dual redundant fibre (sonet ring). The local provider would be able to determine this.
   6. Ownership — The property must be owned by a financially sound owner. The cost to build out a call center is $50-$75psf and would need to be funded by the owner.
6. Crime: Many of these workers will be making a wage that would be considered “middle class”. Thus, crime in the area becomes an issue. Client will need to be made aware of any and all crime statistics for the area in question.

Jeff Pappas is a partner with Arledge Partners Real Estate Group

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