A Trillion Dollar Opportunity

Underserved markets offer vast potential for businesses and communities.

The challenge was formidable, even for Manpower Inc., the huge Milwaukee-based, employment-services company. The forecast was that jobs requiring information technology skills would nearly double in the decade ending 2010. And growth in the U.S. labor market during that period was going to come overwhelmingly from nontraditional sources — ethnic minorities and low- to moderate-income individuals.

To bridge the skills gap, Manpower developed a program called TechReach, initially partnering with 45 community-based organizations to provide training, certification, placement and support for potential job applicants. In May 2003, the effort was expanded dramatically through a National Business Partnership with the Department of Labor, creating formal links between Manpower’s network of 1,100 offices and nearly all 1,900 of the Department of Labor’s One Stop Career Centers.

The result: Manpower was able to reach and place thousands of individuals into well-paying jobs — and increase profits as well. “Programs like TechReach enable us to meet our business objectives and pro-vide the opportunity to develop communities and the Manpower brand by investing in individuals’ work readiness,” says Bojan Cubela, the company’s manager, Workforce Development for North America.

Manpower’s experience shows how individuals living in underserved markets — markets of ethnic minorities and low- and moderate-income individuals — represent a multi-trillion dollar opportunity that has been largely ignored by most companies. With tremendous production and distribution potential, and growing workforce and supplier bases, these markets are host to some of the fastest growing business opportunities. For example:

• The total purchasing power of all ethnic minorities in the U.S. will top $1.5 trillion in 2009.
• The 100 fastest-growing companies located in inner-city, underserved markets in the U.S. recorded a compound annual growth rate of 55% between 2001 and 2005.
• Over the next decade, the growth in the workforce in the U.S. will come predominantly from minorities and immigrants, many of them living in underserved communities.

But identifying those market opportunities is not always easy. Recent research sup-ported by the Ford Foundation shows that a company’s ability to create both business benefit and community benefit in an underserved community depends on “market alignment” — the degree to which market goals and community goals coincide. And assessing those goals can be tricky.

One key strategy is to develop sources of data on underserved markets, and new methods of analyzing the data that’s gathered. Social Compact, a Washington, D.C.-based, nonprofit dedicated to providing better market information on inner-city communities, has pioneered The Neighborhood Market Drill Down, a market analysis model built on innovative sources of dependable, business-oriented data.

The Drill Down analysis often shows hid-den opportunities that standard information sources do not. For example, when SocialCompact analyzed the Columbia Heights community in Washington, D.C., it found both a larger population and higher average annual household consumption than the U.S. Census did. The two together led to an estimate of a much larger total market: $1.4 billion as measured by Social Compact versus $0.85 billion as measured by the Census. Business decisions based on the Census data would miss the opportunity that the Social Compact analysis highlights.

Underserved markets can also be addressed by businesses through industry associations and coalitions. One example is Corporate Voices for Working Families, a Washington, D.C.-based, nonpartisan, nonprofit corporate membership organization whose 52 partner companies employ more than 4 million individuals throughout all 50 states, with annual net revenues of $1 trillion.

“Although more than half of the employees in the U.S. earn less than $25,000 per year, they are all too often undervalued and overlooked,” says Donna Klein, president of Corporate Voices. A 2004 study by Corporate Voices showed how the provision of benefits to low-wage earners improves both the corporate bottom line and the lives of low-wage earners. The benefits studied included de-pendent care, employee development, financial assistance, and flexible scheduling.

One example cited in the report: Providian Financial, a division of Seattle-based Washington Mutual. Providian provides a Dependent Care Flexible Spending Account to all benefits-eligible employees, which enables them to use pre-tax dollars to fund child care benefits, with employee contributions matched dollar-for-dollar by Providian.

Programs like that are important to low-wage workers and an essential tool in helping businesses unlock some of the hidden value in underserved markets, says Klein. “These programs help build satisfaction in the work-place, contributing enormously to retention, productivity and profitability.”

John Weiser (JohnW@BrodyWeiser.com) is a partner in the firm of Brody Weiser Burns, and co-author of “Untapped: Creating Value in Underserved Markets,” (Berrett Koehler, $28.95).