Section Q

Over the past several months, Section Q has featured articles on how prestigious companies are courting gay and lesbian recruits, how top-tier business schools are incorporating gay-related material into their core curriculum, and on what it's like to be openly gay in various industries. Last week, the HBS Gay & Lesbian Student Association and the HBS Marketing Club co-presented a panel, entitled "Niche Marketing: Advertising to the Gay Community," that explored yet another aspect of the evolving relationship between gays and lesbians and Corporate America - the targeting of gays and lesbians as a desirable consumer market segment.

The three panelists represented various parts of the advertising spectrum. Amy Simmons, formerly with Out magazine and now the Director of Advertising and Sales for gay.com, represented the sell side while Rick Cirillo, Global Sales & Marketing Manager, Gay & Lesbian Community, for American Airlines represented the buy side of the equation. The third panelist, Grant Lukenbill, has been studying gay marketing efforts for over a decade and is the author of Untold Millions: Secret Truths About Marketing to Gay and Lesbian Consumers (published by Harrington Park Press).

~ While the notion of marketing specifically to gays and lesbians is not entirely new (see today's companion piece "Big Bucks in Gay/Lesbian Marketing") what is relatively new is the extent to which this consumer segment is being pursued by mainstream businesses and the avenues by which this targeted marketing can be done. Around the time that most of the Class of 2000 was graduating from college, you could pretty much count on one hand the number of mainstream advertisers that had any focused effort on the GLBT market - Subaru, Absolut Vodka and American Airlines were among the early entrants. In fact, American Airlines was a pioneer in establishing a unit focused on the gay and lesbian market as early as 1994. According to Cirillo, the panelist from American Airlines, that early leadership is now paying big dividends. Although AA's gay and lesbian marketing group's budget is a mere $300K, the incremental revenues that the airline attributes directly to this marketing spend totaled $193.5 million in 1999. I'll let you do the math on that return on investment! And study after study has shown an incredibly high level of brand loyalty among gay and lesbian consumers. For example, all things being equal, a majority of gay and lesbian consumers indicated that they would fly American over other airlines because of American's demonstrated and on the ground!!

Like The Walt Disney Company, American Airlines faced a boycott by religious right groups for its courtship of the gay and lesbian market. To its credit, American did not waver or cave-in to demands from these extremist groups. And its steadfast commitment to the GLBT community again paid off when its competitor, United Airlines, tried to jump into the game. United approached all of the major gay and lesbian organizations, offering them cash support in exchange for becoming the preferred carrier for their various events. 100% of them stayed with American - another testament to the first mover advantage secured by those companies that were quick to realize the potential inherent in serving this often overlooked market.

~ Cirillo and the other panelists all emphasized that it is relationship building with the gay and lesbian community that is the key to tapping this market. Placing a pink triangle or a rainbow flag [both symbols of modern gay pride] on generic advertising just doesn't cut it. In fact, according to Amy Simmons of gay.com, "the pink triangle is the kiss of death." Gay and lesbian consumers are not easily fooled by such tactics. They want to see a more genuine commitment to the gay and lesbian community from these companies and this requires a dedicated plan for targeting this community. Gays and lesbians want to be reassured that the company is not just after their wallets. Ways in which companies can demonstrate this commitment is by including sexual orientation in their employment non-discrimination policies (done by almost 50% of the Fortune 500) and by offering health and other benefits to the domestic partners of their gay and lesbian employees (provided by about 85 of the Fortune 500). American Express, for example, has gone even further than most. It has built an entire program around the gay consumer, including the development of gay-specific creative for its ad campaigns.

Another interesting issue discussed by the panelists was the creation of what Michael Wilke, a reporter for Advertising Age, has termed "gay-vague" advertising. These are ads delivered to mass audiences through print and television in which the nature of the relationship between the people in the ad is ambiguous. A prominent example of this type of advertising was the VW ad that featured two young men roaming aimlessly in their new car. When one of the panelists polled the audience to see how many people thought the ad was deliberately featuring a gay male couple almost every hand in the room went up. In fact, Volkswagen and its advertising agency (Arnold Communications of Boston) are quite adamant that that ad was NOT meant to be a gay commercial nor one specifically targeting that demographic. Responding to inquiries about the gay nature of the ad when it first appeared, Liz Van Zura, advertising and marketing director for Volkswagen of America, stated, "it never crossed our minds [that viewers would infer the two men were anything but friends]." Ms. Van Zura added, "There was never any intention [other than to present them as] two college guys on a Sunday afternoon with nothing going on. It's interesting that people read more into it." Interesting indeed! Another reason why viewers may have associated a gay theme with the ad was that it was introduced during the episode of ABC's sitcom Ellen in which Ellen announces that she is a lesbian. Well. . .whatever.

~ Another boon to gay and lesbian marketing efforts has been the Internet and the audience aggregation that that particular medium allows. The two leading online gay portals, gay.com and PlanetOut, are each reaching several hundred thousand unique visitors each month. According to the latest Media Metrix figures, PlanetOut's unique monthly visitors has now topped the one million mark. This reach dwarfs the circulation of Out magazine, the publication with the largest gay and lesbian subscriber base in the US, which was 116,000 at the end of 1999. Advertisers are taking notice. Recently, Office Max, the Cleveland-based office supplies retailer, started advertising on gay.com. According to Steve Baisden, a spokesman for Office Max, "We're here to serve our customers. We don't care whether they're white, black, yellow, gay or lesbian." And for more and more of Corporate America that sentiment rings true. The gay and lesbian dollar is as green as the straight dollar and when it comes to making money, serving the gay and lesbian market is quite simply a good business decision.