Open for Business?

Eased restrictions won’t make up for Cuba’s lack of advertising and payments infrastructure fast, but pent-up demand may help expand commerce.


Open for Business?

Since President Obama’s announcement in 2014 of the restoration of U.S. diplomatic relations with Cuba and the start of a gradual lifting of a trade embargo in July 2016, there’s been a lot of chatter about what to expect. Add the facts that the country recently lost its longtime leader, Fidel Castro, and a new U.S. administration has yet to develop its official position, trade with Cuba continues to be—to borrow Winston Churchill’s line about Russia—a riddle wrapped in a mystery inside an enigma.

But noteworthy brands such as Netflix and Airbnb have begun operating in Cuba, and a host of marketing professionals have opened offices on the island, obtaining licenses or working with state-owned Cuban companies to establish trade. With around 3.5 million foreign tourists visiting in 2015, up 17.4 percent from 2014, Cuban consumers have become more brand-aware and are ready to shop. The opening of the island nation may offer an unprecedented opportunity for direct response marketers looking to expand sales in a virtually untapped market close to home.

Before anyone gets too excited, however, the reality is that Cuba is not yet an open market. It’s still very much a socialist country when it comes to media. “TV is controlled, so there really are no commercials except maybe propaganda,” says Denira Borrero, COO of Omni Direct. “There are no billboards, and there are no print ads. The internet is controlled, and I don’t think anybody would have it in their homes.”

Then there are issues with money. Much like the yuan before China slowly started to open its markets, the Cuban peso isn’t freely exchangeable on the international market. “There’s no capitalism there,” Borrero says. “These people do not have credit cards, and they get paid in currency they can use only to buy rationed food.”

She also points to the many hurdles of getting such an infrastructure established if DR marketers are suddenly allowed in. “Beyond that, you’d have to deal with three generations of people who have never thought that way before,” Borrero says. “They don’t buy with credit cards, [and] wouldn’t even know how to do that.”

Growing Consumer Demand

While it is likely still a long way off, if the U.S. embargo lifts completely and Cuba eases its own restrictions on what its citizens can view and purchase, commerce could develop relatively quickly. Banks would establish a presence, and it wouldn’t be long before Cubans could begin using credit or debit cards. Over time, private credit and small business development would further open Cuba as a place to do business.

“The Cuban market could represent a significant opportunity for direct response marketers in the years to come—perhaps comparable to Puerto Rico,” says Nicole Cordero, vice president of Hispanic strategy and planning for Mercury Media. “However, things still remain up in the air, as commercial advertising is not allowed.”

In a more open future, Mercury expects new Cuban consumers to gravitate toward products in the beauty and housewares categories, which have solid cultural foundations and have performed well historically with U.S. Hispanics. “This market should be on all marketers’ radar over the next few years,” Cordero says.

Products that solve everyday problems and make common tasks easier are likely to succeed in such an emerging market. Similarly, products that can help with Cuba’s technological problems might also be popular.

“DR offers a diverse range of products in the housewares, pet, consumer tech, fashion, fitness, beauty and nutrition spaces, all of which are highly attractive,” says Lindsey Carnett, president and CEO of Los Angeles-based Marketing Maven, an international public relations agency. “Big businesses trading in Cuba are creating anticipation and desire for Cubans, fueling demand for products that are both accessible and unusual.

“The Cuban population is looking to embrace consumerism, and the mix of direct response and new technological opportunities is an exciting mix,” she says. “Cuba has an economically active population of 5 million, with around 1.2 million working in the private sector. This brings a demographic [that’s] untapped, but very much ready to embrace consumerism and likely generate new innovation.”

Promotion Without Payoff

Cuba has a total population of 11.3 million, and these consumers will one day want to have a piece of the West’s spending power. But again, infrastructure will be the primary hurdle for DR marketers. “State control over the networks poses a problem, as does the expensive cost of accessing the internet for the average Cuban citizen,” Carnett says. “If the news of a move to establish a paid television cable network, partly funded by ad revenue, is true, it will totally open up the possibilities for marketers in the DR space.”

Call centers could then pop up in Cuba, as they have in the emerging markets of Mexico, El Salvador, the Philippines, India, and other offshore locations. Bringing DR-related jobs to Cuba could help the market evolve at a faster rate by fueling consumer spending.

Cuba doesn’t allow commercial advertising, though, and it is illegal for a U.S. company to open offices in the country without a local partner. As with travel in Cuba, promotion is limited to purposes of cultural exchange, and brands have to be creative to satisfy Cuban regulations. And while American companies can start building brand awareness now, the day when products arrive As Seen On (Cuban) TV is likely a long way off.

“American companies who want to do business there will have to get inventive about the way they promote their brand or product—sponsor travel, concerts, sporting events, etc.,” Cordero says, “which leaves little wiggle room for traditional direct response advertising, which is so traditionally media-centric.”

Keith Loria is a freelance writer based in Fairfax County, Va.