Fund houses set to halve marketing budget

With bad market conditions continuing, mutual funds are tweaking their marketing strategy to tackle the downturn. It is this time of the year when mutual funds start planning for their marketing budgets for the next financial year. According to sources, most of them are bracing for a 30-50 per cent reduction in their marketing outlays for 2009-10.

Waning investor response and a Securities and Exchange Board of India (Sebi) regulation scrapping initial issue expenses and amortisation for close-ended funds have hit the financials of fund houses hard. Earlier, mutual funds used to charge 6 per cent of the total investment over the fund’s period for meeting distributor needs and sales and marketing expenses.

However, tough times call for extraordinary measures and mutual funds have not lagged behind in coming up with innovations in their marketing strategy. In terms of product, some of the mutual funds are planning to launch intelligent systematic investment plans (SIPs). In an intelligent SIP, there are triggers that decide the entry and exit points for investors. For example, if an investor wants to get in at 8,000 Sensex level and get out at 10,000, intelligent SIPs will come into picture.

While kickbacks and perks for distributors have certainly gone, there are a few fund houses that are diverting the money from their reduced ad spend to incentivise the distributors. Distributor education too is something where almost all fund houses are willing to spend. For example, Fidelity mutual fund has Fidelity Advisors Institute, which imparts training to mutual fund advisors.

Apart from that, mutual funds are now willing to indulge in more below-the-line rather than over-the-head marketing, which includes hoardings and banners. In below-the-line marketing, asset management companies (AMCs) tap a specific set of customers through direct mailers or separate meetings. UTI Mutual Fund recently marketed its product Wealth Builder-II through dabbawallahs.

“Digital space is something we are actively considering. We are doing a lot of search-engine marketing and will continue to expand in this space,” said Jaideep Bhattacharya, Chief Marketing Officer, UTI Mutual Fund.

UTI is not the only one. SBI Mutual Fund Chief Marketing Officer R.S Srinivas Jain said, “Our spends on the internet have certainly gone up. While there is no figure available, it has almost doubled since last year.”

Experts say that there will be some slowdown in marketing in the coming quarter, but serious players will continue to advertise and penetrate different markets.