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Marketers should eye Cuba opportunity with patience, caution

Consumer-focused brands that would sell to an expected surge in the number of American visitors to Cuba are best positioned to benefit from the United States? re-establishing of relations with the Latin American country but only after its infrastructure and regulatory issues are resolved.

The biggest opportunity for brands could come from providing creature comforts to new American visitors to Cuba, following the breakthrough U.S.-Cuba agreement that included the announcement this week of Cuba?s release of prisoners. Scarce and slow mobile data and Wi-Fi networks in Cuba, however, will keep marketers from realizing the benefits of the opening of relations, at least initially. 

?After years of tourists from Europe and Latin America, there is brand familiarity with the Cuban population,? said Tom Edwards, senior vice president of digital strategy with The Marketing Arm, Dallas.

?As American visitors begin to increase travel, there will be an opportunity for American comfort brands to quickly gain market share. But due to some of the mobile and Internet infrastructure issues in the region, it will happen initially through more traditional means, versus [being] innovation-led in the short term,? he said.

People to people
Washington?s pact with Havana means Americans may join tours to Cuba that encourage ?people to people? contact. Previously, only religious, educational and cultural groups could legally travel to Cuba, and then only with U.S. State Department permission.

However, Americans still will need to travel with a Cuba travel organization that has an official State Department license. Furthermore, the U.S.-Cuba accord bans purely recreational activities such as scuba diving or beach visits from being included in tour itineraries.

Nevertheless, the first major thawing of US-Cuba relations in 54 years is a game-changing marketing development.

Havana in Google Maps.

?Cuba is essentially an untapped market,? Mr. Edwards said. ?Traditional marketing as we have known it have been restricted for decades and consumers are craving capitalist products. Anytime a new market opens with a hungry consumer base it is a significant marketing event.? 

Cuba has a very low mobile phone and Internet penetration rate, making infrastructure an obstacle, he said. Also, the longstanding bureaucracy associated with Cuba and marketing standards will not change as quickly as brands and agencies may want, he said.  

But U.S. tourism could spur infrastructure construction that would facilitate better mobile communications and marketing programs, some experts say. 

The tourism and travel sectors will be the first to benefit from the change in U.S.-Cuba relations, most notably the markets for mobile applications, maps and visiting points of interest, followed by shopping, logistics and remittances.
 
?In the last three years, Cuba had been receiving more than 2 million tourists every year,? said Tina Lu, senior analyst for Latam region with Counterpoint, a technical market research firm.

?This number should increase by at least 50 percent when the U.S. starts allowing direct flights into the island. On the other hand, Cuba locally has more than 3 million mobile phone users,? she said.

Underscoring the need for infrastructure improvements in Cuba, the country?s network is only 2G. ?The broadband network is connected to Venezuela, so it also has a speed issue,? Ms. Lu said. 

?Outside of Havana, broadband is only available in the hotels, beaches and parks. However, the government will slowly open broadband and Wi-Fi access ports for locals.?

Advertisers will need to be upfront about the Internet speed issue when reaching out to mobile visitors. And when building mobile advertising for locals, they must take into account that the vast majority of mobile phones used in Cuba use are feature phones. 

Although smartphone penetration is rapidly increasing in Cuba, those in use tend to be either low-end devices or old high-end models. Another issue is that no US operators have a roaming partnership with Etecsa, the government-owned sole mobile operator in Cuba.

The Cuban broadband network is built mainly for foreigners? use, because it is outrageously expensive for Cuban users.

Private advertising has been allowed in Cuba since 2012. Bans on advertising, however, still extend to restaurants, coffee shops and night clubs, among other service-industry players.
 
When and if the government finally decides to allow these services to be marketed, communication will still be government-regulated and -monitored.

?Since most Cubans have been isolated for over 50 years, modern mobile marketing techniques [there] may not be as effective as they are in the rest of the world,? said Tom Sather, senior director of research with Return Path.

?However, the opportunity for mobile marketers could be the introduction of consumer brands. But we'll likely see mobile marketing focus on SMS before moving to more advanced techniques like geolocation,? he said. 
 
Despite the marginal benefits marketers stand to reap from creating an additional point of branding for American tourists in Cuba, being first into the market will pay off once restrictions are fully lifted.

?The greatest benefit will be [in] the 11 million Cuban consumers being introduced to American brands who will be the ultimate consumers of those brands," said Greg Ricciardi, president and CEO of 20nine.

Tourism demand
For travel marketers, the U.S.-Cuba accord raises more questions than answers.

U.S. State Department Cuba travel-document application.

?It?s tough to say what the precise U.S. demand for tourism to Cuba is at this moment,? said Ken Wisnefski, founder and CEO of Webimax. ?Will U.S. tourists view Cuba as a tropical getaway like St. Martin, or do they view it more curiously due to its historical significance and strained relationship with the U.S.?  

?Is it even safe?? he asked. ?There is a big marketing opportunity to portray it as one of those two things or both.? 

Final Take
Michael Barris is staff reporter on Mobile Marketer, New York.