However, the opposite seems to be true among an increasing number of advertisers focusing on multicultural marketing. The business decision to target multicultural consumers usually is based on a segmentation analysis that highlights these consumers' value, profitability and growth. In most cases, advertisers will only address multicultural consumers when they over-index on category usage and therefore contribute higher profit margins than general market consumers. For many advertisers, multicultural consumers often prove to be the most valuable consumer segments.
So why should it be that when it comes to calculating the compensation of professionals who provide the expertise in reaching these valuable consumers, a discount, rather than a premium, is usually applied to the formula? This fact, which is the current status quo within the communications industry, cheapens the value that multicultural experts bring to the marketing mix and obscures their real role as "specialist" marketing partners.
The logic for providing unfair compensation to multicultural advertising agencies seems to be based on the historical evaluation of compensation as a percentage of total budget. Using this formula, multicultural agencies look very expensive due to the target market size and the low cost of multicultural media. Today, a multicultural agency manpower fee percentage of 30% to total budget is not uncommon at a time when the general market agency fee is going south of the traditional 15%. The reason for a higher agency fee in terms of percentage is based on simple math: 10% of $10 million is a lot less than a 10% of $100 million. A typical budget allocation for a multicultural agency falls below 10% of total budget.
If we apply the historical budget/fee percentage formula to compensation, the professionals at multicultural agencies will be earning below the federal minimum wage. For example, if an Asian media buyer spends an hour buying 10 in-language newspapers worth $10,000 and a general market media buyer bought 10 English newspapers worth $100,000 during the same one hour, what should be the fair compensation for each of the professionals?
According to the traditional percentage theory, the Asian media buyer will receive 10% of the wage given to general market media buyer. Based on a recent salary survey showing an average salary of $35,000 a year for a media buyer, a Chinese media buyer should be earning $3,500 a year with an approximate hourly rate of $1.75 an hour.
Similarly, when two art directors of equal education and work experience create a print ad to place on the media bought by their respective media buyers, what should they be paid? Should the Asian art director receive the same $1.75 an hour?
As one of the pioneers in the multicultural markets, I'm painfully aware of the need to bring cost-efficiency to this marketplace. Our TV production costs usually are one-third those of the general market-but consumers would never realize this based on final spot quality. Although we have been successful in lowering production costs by utilizing new technologies and through strong negotiation with our production partners, I have failed to attract an Asian-American advertising professional who can take on these challenges while getting paid one-tenth the salary of a general market professional in a similar role.
Advertisers do not ask their direct marketing or PR or event marketing agencies to keep their fees below 15% of the budget. And this also surely is not the case for specialists who focus on the affluent, college students, alternate-lifestyle or any other high-worth customer segments for which solid business cases exist.
I know it has been easier to stick with one set of formulas. However, for a true evaluation of what is fair compensation, we must look at several sets of formulas which account for the efficiency and value of the effort. Such formulas would include the cost per creative unit produced (both manpower and production cost), and the relationship of the total budget to the return on investment. And upon examination, if the investment in the growing multicultural market does not reflect a solid business case, I agree that the total market investment should be re-evaluated rather than simply reducing the fees of the partner agency.
There is no question that in keeping with the demographic trends of the country, the importance of multicultural communications to major advertisers will dramatically increase in the next 10 to 20 years. Now is the time to make sure that multicultural agencies are both properly and fairly recognized for the value that they bring to the table.
Eliot Kang is president-CEO, Kang & Lee Advertising, New York, a Young & Rubicam agency and a leading multicultural
communications agency specialist. Mr. Kane can be reached at email@example.com.