Dive Brief:

• Brands that show a broad variety of cultural and demographic groups in their advertising see improved perception among consumers and stock market gains, per a study that Deloitte-owned agency Heat shared with Marketing Dive.
• Brands with the most representative ads saw an average stock gain of 44% in a seven-quarter period ended last year, Heat found. Brands with the highest diversity scores showed an 83% higher consumer preference.
• Heat's analysis found that 94% of ads showed women in a primary role, but they tended to be stereotyped as an empathetic mom, devoted wife or boy-crazy girl. Ninety-two percent of ads showed people of color, but only 15% were culturally represented by more than their skin color. LGBTQ+ characters appeared in less than 1% of ads. Heat studied 30-second ads from the 50 top spenders on media.

Dive Insight:

Heat's analysis of a correlation between diversity in advertising and other company metrics supports other research that suggests marketing strategies would be well-served by evolving to meet the needs of an increasingly diverse population. Specifically, brands should consider showing greater diversity in their ads to connect with younger generations that are more culturally diverse than older Americans.

Based on its analysis of 30-second ads, Heat recommends that advertisers portray multicultural characters in a way that doesn't feel like they're filling a quota or pandering. That means showing people who have several diverse characteristics, including physical disabilities. While one out of four people live with a disability, only 1% of ads represent them.

The context of how people are portrayed is significant, such as whether they appear in a primary role or a background role. Brands also must consider whether a character is in a position of power — such as making a purchase or working in a servile role — and whether those portrayals reinforce stereotypes.

Interestingly, Heat found that the stocks of financial services companies performed particularly well during the study period, but it's important to consider that the industry benefited from tax cuts that stimulated growth and higher interest rates that lifted incomes for banks.

Studies from business intelligence platform PSFK and marketing consultancy Barkley, among others, show that younger consumers favor products, ads and brands that value inclusion. Multicultural consumers make up almost 40% of the U.S. population, but multicultural media spending is only 5.2% of total ad and marketing spend, per a study by media researcher PQ Media.

Among the more notable recent examples of brands that are emphasizing diversity is toy-maker Mattel, which last month introduced a gender-inclusive doll line called Creatable World. Boxing brand Everlast also launched a new iteration of its "Be First" campaign by spotlighting unique athletes, including the world's first professional male boxer who is transgender. Procter & Gamble's Gillette brand earlier this year garnered significant social media attention with its "We Believe" ad that referred to toxic masculine stereotypes.