Courting the gay consumer

NEW YORK (Fortune) -- "Whether you're planning to spend Gay Ski Week in Whistler with your friends, or take your partner to Boston so you can hop over to Provincetown to enjoy Lesbian Week, we have terrific options for you..."

So goes the pitch at www.aa.com/rainbow, American Airlines' Web site for gay and lesbian travelers. The site features a list of gay-friendly destinations and a calendar of events for gay people. American also points out that it gets a perfect score on the Corporate Equality Index published by the Human Rights Campaign, the nation's largest advocacy group for gay, lesbian, bisexual and transgender (GLBT) people.

This is quite a turnabout for a company that was once labeled "The Ugly American" by The Advocate, a magazine for gays. Back in 1993, the airline angered gay travelers when a flight crew taking people home to Dallas after a gay-rights march in Washington asked that all of the aircraft's pillows and blankets be thrown away or burned, out of a misguided fear that they could carry the AIDS virus.

Now, as it courts GLBT consumers, American has plenty of company. About 175 Fortune 500 brands advertise specifically to gay and lesbian audiences, according to the 2005 Gay Press Report from Prime Access and Rivendell Media Co., two firms that specialize in gay media. Other trend-setters when it comes to gay marketing include American Express (Charts), Merrill Lynch (Charts), Orbitz, Subaru and Volvo.

They have good reason to target the GLBT audience. Gay buying power is estimated to be $641 billion in 2006 by Robert Witeck and Wes Combs, the authors of "Business Inside Out: Capturing Millions of Brand Loyal Gay Consumers" (Kaplan, 2006) and owners of Witeck-Combs, a Washington D.C. marketing and communications firm. Research indicates that GLBT people do not earn more, on average, than other Americans, but that they have more disposable income because fewer are raising children.

Gay-themed advertisements typically appear in niche magazines like The Advocate or on Web sites such as gay.com, whose sponsors include Cadillac and Sears. But some show up in mainstream media as well. Many rely on humor to deal with a subject that was once taboo.

A magazine ad for MGM Mirage's New York New York hotel in Las Vegas shows two men in bed under the headline: "Luck Isn't Always A Lady." Another, for Intel, pictures one woman sitting on another's lap, with the caption: "For incredible movie experiences in your lap, get Intel Centrino in your laptop."

A TV commercial for Subaru says that, "Some people think there should only be one road in life...but in reality every driver is different...and the redesigned 2006 Subaru Forester...is built for all of them...whichever way you go." A TV commercial for Ikea shows a smiling gay male couple and their daughter, leaning on a couch, and asks, "Why shouldn't sofas come in flavors, just like families?"

(For a variety of gay-themed ads, Commercial Closet, a nonprofit group, keeps an archive, with commentary, on its Web site, www.commercialcloset.org)

Witeck and Combs say companies need more than clever ads to win over gay consumers. They should also have gay-friendly workplace policies, including health benefits for same-sex partners, and philanthropic programs that support local and national gay organizations. "People want to spend their money with companies that support the community," says Witeck.

The Human Rights Campaign last week published a buying guide for gay consumers, suggesting, as an example, that they buy gas from BP (Charts) or Chevron (Charts), but not Exxon (Charts), or choose clothes from Gap (Charts), Liz Claiborne (Charts), Levi Strauss, Nordstrom (Charts) or Nike (Charts) rather than J.C. Penney (Charts) or Abercrombie & Fitch (Charts).

"Between 70 and 80 percent of gay consumers will give preference to a company that is gay-friendly," says Howard Buford, CEO of Prime Access. "They will love an American Express, but don't even show them a logo for Cracker Barrel."

Amex's ads feature lesbian talk-show host Ellen DeGeneres, while Cracker Barrel has yet to overcome its decision to fire people who do not have "normal heterosexual values" back in 1991.

American Airlines (Charts), with its dedicated Web site and its partnership programs with gay organizations, can track its sales to gay travelers. It won't disclose revenues, but Betty Young, one of two full-time sales managers for the GLBT community, says: "Our GLBT customer base is up 10 percent, year over year."

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