When companies turn away lesbian, gay, bisexual, or transgender (LGBT) customers, they're snubbing their piece of a $743 billion pie. Investors might want to pay close attention to the savvy companies that do serve this audience well.

According to Witeck-Combs Communications and Packaged Facts, the total buying power of the U.S. LGBT adult population in 2010 is around $743 billion. Nearly 60% of LGBT adults are more likely to buy routine products and services from companies that market to the LGBT community, while 34% have switched providers or products after learning of a company that isn't doing right by the community.

Clearly, a company's actions count. As Witek-Combs CEO Bob Witeck noted, "When brands actually create campaigns specifically targeting the LGBT community, they get comparatively stronger [returns on investment]."

Maximizing effect
Companies can make more of an impact with the community by going beyond simple inclusion in advertising. Sure, it's effective to include a gay couple in an ad, but if the company can convey additional insight beyond that, all the better.

Macy's recently ran an ad featuring two wedding rings, with the tag line, "First comes love, then comes marriage," noting the "milestone" of gay weddings being permitted in California. That's an effective pitch, but the folks at Harrah's outdid it. An ad for the casino company's Paris Las Vegas location also features two rings, but reads, "Well, that took a lot of work. Now for the fun part." This conveys the company's understanding that before LGBT customers could celebrate those rights, they had to struggle for them.

High scores
Another effective ad comes from Wells Fargo, listing the specific evidence that the company treats its LGBT employees well:

  • Perfect 100% on Human Rights Campaign's Corporate Equality Index (2004-2009)
  • Full domestic partner benefits
  • A non-discrimination policy including both "sexual orientation" and "gender identity" 
  • LGBT team member networks throughout the nation -- forums for LGBT team members and allies to connect with each other, the company and the community
  • No. 2 of the Top 10 Companies for LGBT Employees -- DiversityInc (2009)

The Human Rights Campaign's (HRC) Corporate Equality Index mentioned above is another way that companies can earn a favorable outlook from the LGBT community. When LGBT consumers shop for cell phones, for example, a glance at the HRC's guide will show Sprint Nextel and AT&T with perfect scores of 100, and Verizon with room for improvement, at 70. If YRC Worldwide, a trucking concern, were more of a consumer-product company, its rating of 30 might cause it to suffer compared to its rivals. But the good news for investors and others is that companies with low scores have a lot to gain if they improve their standing.

Companies also score points by including LGBT consumers in their offerings. Just to name one example, MetLife offers "Planning Tips for LGBT Individuals and Couples" among its literature.

Waffling
When companies try to appeal to LGBT consumers, but also play it safe, they can earn an accordingly mixed reaction. McDonald's ran a commercial in France featuring one teenage boy with a crush on another. It was circulated widely online in the U.S. and generally applauded. But it didn't run in the U.S., and when an executive called it "a mistake" and confirmed that it wouldn't run here, the LGBT community was not pleased with Mickey D's.

Some ads can manage to both please and appease. A few years ago, for example, General Mills ran a commercial for Yoplait where two women in a spa are eyeing a male worker, which is the norm. But LGBT viewers might note that they're talking about women, since they refer to dating a "masseuse" (the female word for masseur). And one of the women in the ad was a leading actress on Showtime's lesbian-centered The L Word.

Waffling or fence-straddling may soon not be worth it. A recent Gallup poll showed that more than 50% of both men and women now find gays and lesbians "morally acceptable," with the strongest growth in men, especially young men.

Investors should note that companies doing right by the LGBT community can both make money and build customer loyalty. Many in America may still not like it, but support for LGBT equality is growing each year, and smart companies will learn to profit from it.

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