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Hispanic Market Growth Proves Dilemma at Research Company

Carlos Garcia is about to do something he never thought he would be doing offshore some of his company’s work to Mexico. With more work than the local firm can handle and pressure from clients to lower prices, the president of Garcia Research Associates, a Burbank-based marketing research firm, is negotiating to bring about two dozen part-time data collection jobs to Tijuana. The jobs will be incremental and will not result in any layoffs at the Burbank offices, but the move troubles Garcia just the same. “This whole offshoring is really hurting Americans,” Garcia said. “I don’t want to hurt the Latino community in the U.S. by shifting a workforce to do work that, ironically is about them, overseas.” Garcia Research Associates specializes in the Latino market, performing advertising testing and other marketing research for packaged goods and other clients seeking to tap into the community. Over the past 15 years, the company’s growth has come in spurts, shooting up one year and leveling off the next. But this year Garcia Research Associates has already logged as much business in the first eight months as it did in all of last year. Garcia Research, which about five years ago employed about 30 workers, now employs 90, and the company has been looking for new digs in L.A. and is working to open an office in New York to accommodate the growth. A growing realization that the size and the buying power of Latinos makes this group an increasingly lucrative segment of the market, has caught the attention of marketers who did not advertise to the group before, and increased the attention from those who have been active in the area. According to the Association of Hispanic Advertising Agencies, spending on television advertising to the Hispanic market last year increased to an average 7.4 percent of companies’ total TV ad allocations, compared to 4.7 percent in 2000. But the heightened focus is also creating far more competition for the kinds of services Garcia Research provides, and many of the new rivals do not offer the same kind of expertise the company provides, Garcia said. “Ethnic research costs more,” said Garcia. “It’s easier to find 70 percent of the population than it is to find 14 percent of the population. People seem to be perfectly willing to give their Hispanic research projects to Anglo companies, so we’re being beaten on price.” Focus on Latinos The problem, say those who work in the area of Hispanic marketing and advertising, stems from the growing importance of this market segment. As more advertisers seek to court Latinos, so too has the availability of advertising services grown. “With that growth has come a growth in the marketing services area and all of these related services,” said Tony Dieste, CEO at Dallas-based Dieste Harmel & Partners, the No. 3 ranking Hispanic advertising agency in the U.S. “And where there’s competition, there are competitive and price pressures. At the same time, I think we’ve seen clients in general put pressures on advertising agencies and media companies in terms of cutting costs.” Some clients have begun to grouse so loudly, Garcia worries that they will go elsewhere. “What had been genteel pressure about price from clients became ugly and overt,” said Garcia. Garcia expects that the decision to add an operation in Mexico will reduce the company’s costs to its advertisers by 20 percent. Employees in the U.S. earn $7.50 an hour to $9.50 an hour depending on their experience. In comparison, wages in Mexico will average $3.00 an hour to $3.50 an hour. The company, which hopes to launch in Tijuana in early January, expects to start out with about 24 workers and expand to as many as 72 within six months time. Meanwhile, some of Garcia Research’s local employees will be transitioned to new duties where additional staff is also needed. Risky move Even so, Garcia said, it is difficult to project the results of the move. For one thing, data collection workers, who conduct telephone interviews trying to ascertain consumer perceptions, require a fairly high degree of literacy. “It’s extremely risky,” said Garcia. “We don’t know this will work. We don’t know how much we’ll save. And we don’t know if it will be enough to satisfy clients.” While offshoring by technology and manufacturing companies has received the lion’s share of attention, experts say that outsourcing is occurring in all sectors of the economy. “You have medical record keeping, you have investment research, you have architecture and engineering doing the standard drafting on computers offshore,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. “Unless it’s a unique product or there are security concerns, there’s a lot of things that can go offshore economic analysis can go offshore too,” Kyser added, savoring the irony. The wages Garcia Research expects to pay in Mexico buy a middle class lifestyle, Kyser said, particularly since workers there receive national health care benefits. But despite all that, Garcia concedes he is still not entirely comfortable with the politics of offshoring. “What Henry Ford invented was not just the Model T, but a social class to buy the Model T,” he said, referring to the relationship between business and its workers. “I didn’t want to hurt the community.”

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