Understanding Hispanic Culture and Credit

What is missing from this logic is an understanding of the dynamics of social class across cultures.  Imagine a gathering of physicians from India, Mexico, Denmark, the United States, and Japan.  Will they be able to communicate among themselves?  Most likely they will be able to communicate very well.  That is because most have Western education, and most likely they all have lived or spent time in the United States.  Further, they are affluent and cosmopolite.  They value similar aspects of life.  They likely aspire to be examples of Western success.  

The lower middle classes and working classes of the countries mentioned above are more likely to be much more different among themselves in their own country than the physicians.  Further, the physicians are most likely to have more difficulties communicating with the lower middle and working classes of their own countries than with physicians from other countries.  The social distance of the upper and lower classes of most countries is larger, in many cases, than the social distance of the upper classes of diverse countries among themselves.

Further, migration patterns are not independent from socio-economic class.  Migrants from Mexico and Central America to the United States tend to be generally from the working class.  These are people that come to the United States to get a major break in their financial situations and lifestyle.  Many of these migrants to the US were subsistence farmers and factory workers in their countries of origin.  They did not have the economic capacity in their own countries to access packaged consumer goods to any large extent.  Fundamentally these are people that become consumers when they come to the United States.

Their more affluent counterparts in their countries of origin are not as likely to migrate to the US because they can enjoy a relatively comfortable life at home.  The migration pressure is so much stronger on the poor.  These less affluent individuals have not had as much access to manufactured goods before coming to the US.  The commercial messages designed in Mexico City target those who have the resources to purchase manufactured products.  They do not target the poor and the disadvantaged.  

Messages in Mexico can be high on image and low on information because they are communicating with a commercially experienced audience.  Here in the United States, however, the masses of consumers need communications that are high on information and low on image.  This is because they are inexperienced as consumers and eager to learn the basics about products.  This is why ads from Mexico City are not likely to be as effective here as they were there.

Consider that less than 30% of Mexico’s households make US$10,000 or more per year.  The 70% below this income level, in the bottom of the distribution, are the ones more likely to migrate to the US.  They have very different perspectives on life and that is what marketers need to work with.  The marketer is not just dealing with a national culture but with a set of experience heavily characterized by poverty.  These are people who are willing to risk everything to improve their standard of life for themselves and their children.  They generally do not come to the US with middle class perspectives and experiences.  The majority of migrants to the US from Mexico and different parts of Central America tend to have little formal education and many times their first language is not Spanish but a language native to the continent such as Maya, Quiche, Zapoteca, Nahuatl, etc.

When coming to the United States these consumers go through a transformation in their ability to deal with the world economically.  This transition is many times very difficult and frustrating.  A large number of these migrants are young men who have left behind their parents, siblings, spouses, children, and everything that is dear to them.  When they arrive in the US their main need is to learn the ways of the new culture.  Ads from the big cities advocating the use of products with ethereal images emanating from cosmopolite advertising agencies in Mexico City or Buenos Aires have little to do with the lives of these people.

Credit and Collections

As we discussed earlier, strong traditions from Arabia and Spain have influenced how credit is perceived among Hispanics.  There are interesting examples of the power of language in influencing credit related behaviors.  The term “hipoteca” literally translated into English means mortgage, but the meaning of this terms is very different for Hispanics.  In Latin America one mortgages one’s home only when one is down and out, when all resources have been exhausted.  There are multiple statements Hispanics make about the negative meaning of “hipoteca” for example “hipotecar el futuro de los hijos” (To mortgage the future of one’s children) and “hipotecar el futuro.”  The negative connotation of these expressions influences Hispanic consumer perceptions, that is why ads about mortgages should state “prestamo para comprar casa” (Home loan ) instead of “hipoteca.”

Traditionally, credit has a negative reputation in Latin America, particularly among less affluent consumers.  Partly because of the cultural and historical connotation, and also because it is a matter of pride “not to owe anything to anyone.”  Also credit is associated with being obligated to a boss, an organization, or someone else.  This is something is generally seen as taking away freedom.  Unfortunately, many of the experiences of Hispanics with credit are actually negative.  Many times because by lacking the experience on how to use credit many consumers tend to run into trouble.

To change perceptions among US Hispanic consumers marketers need to be cognizant of the traditional meaning of credit, and the meaning that credit has acquired among Hispanic consumers in the United States.  Credit education and guidance are crucial tools to create loyalty among Hispanics.  When credit is seen as a way to achieve as opposed to a way to get in trouble, then the consumer is empowered and the lending institution cultivates loyal customers.

No one enjoys being asked to pay what one owes.  Collections are touchy and psychologically a challenging craft.  Hispanics tend to be very proud and in my research experience they strive to pay what they owe.  Many companies know this.  For example, there are multiple furniture stores that sell on credit to Hispanics with no credit history in the U.S.  They generally report a very small default rate of between 2% and 5%.  That is because of pride and the desire to meet obligations.  Once a Hispanic gets in trouble and defaults, his/her ego needs assistance instead of threats.  Helping the consumer save face and elevating their stature by virtue of respectful and helpful treatment can be more helpful than threats and intimidation.  As we say in Spanish “se agarran mas moscas con miel que con hiel” (You catch more flies with honey than with bile).

The moral of the story is:  Understand the Hispanic consumer in-depth, provide education, treat them with respect, and harvest loyalty, and profits.

Dr. Korzenny will be presenting the keynote address, “Hispanics: One Culture Uniting Many People,” at the Credit & Collection Symposium of the Americas, October 28-30 in Miami, FL.  For more information, visit: www.CCSAmiami.com.