As the population and purchasing power of ethnic minority consumers in the USA continue to grow, more marketers are using subcultural segmentation and targeted marketing to reach these consumers. Meanwhile, some marketers have grown increasingly concerned with the cost-effectiveness of ethnic segmentation and differentiated marketing. This research reviews various methods for segmenting the ethnic markets and suggests the nested approach and cost-benefit optimization for analyzing the cost-effectiveness of ethnic segmentation and marketing. Furthermore, this research proposes four alternative strategies for marketing in a multicultural environment. Directions for future research and managerial implications are explored.