After a year of record growth, when the assets under management (AUM) of mutual funds grew 85 per cent between April 2003 and February 2004, the industry is changing gears. | |
| It is shifting focus from merely fighting for a share of the existing pie to growing it further. Reason: mutual fund penetration is still below one per cent. |
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| Put another way, for every 100 people who want to park their savings somewhere, only one of them looks at mutual funds as an option. To get over the hump, mutual funds are pouring big money into advertising and brand-building. |
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| According to an ACNielsen survey of ad spends, the industry spent Rs 135 crore between April 2002 and September 2003. Marketing spends have grown more than 30 per cent in the last one year for almost every big fund house. |
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| According to sources, the industry is currently spending over Rs 175 crore annually on advertising and marketing. |
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| The recent burst of advertising to launch various monthly income plan (MIP) schemes is a pointer to this. |
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| Says one fund manager: "Mutual funds are focusing on brand-building as never before to prepare for the time when most products (fund schemes) and their performances may become more or less similar." |
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| Ajay Kakar, executive director and head of financial practice at ad agency Ogilvy & Mather, says the only way to "target the Indian who has an investible surplus but lacks the time or knowledge to make his money work" is to build strong retail brands. |
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| Isaac Jacob, chief marketing officer, Tata Mutual Fund, which recently launched an MIP, says building a strong brand is about creating a functional differentiator and an emotional connection with investors. |
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| Sukumar R, director and CIO-Equity, Franklin Templeton Investments, does not believe that advertising and branding had ever gone out of focus. |
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| But, he points out, "Branding of investment products such as mutual funds is unique because these are typically high-involvement products and largely intangible. The challenge is to make a credible, meaningful and attractive customer proposition." |
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| The big bucks are not being spent only on advertising. Pankaj Razdan, managing director, Prudential ICICI AMC, says his fund has a dedicated knowledge management group for the purpose of educating its distribution channel - the first point of contact with the investor. |
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| "Proper identification of the customer and educating him is very important," he says. At another level, some players are modifying strategies. One is a shift from the earlier product-focused marketing to providing solutions. |
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| Says one mutual fund representative: "Most mutual fund advertising today is still "manufacturer-speak, where they talk about products and features. Till we get into consumer-speak, we will not strike a chord with our investors." |
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| An example of the shift from product-centric thinking to providing solutions to investors is the launch of several asset allocation plans that allow investors to move between different types of investment schemes based on changing risk-profile and assessments. |
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| Prudential ICICI, Franklin Templeton and Principal Mutual Fund allow investors to allocate assets between various schemes. The bottomline, though, is performance. |
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| Says S K Mitra, managing director, Birla Sunlife AMC: "(The) brand is very important but equally important is the fund's track record. A consistent performance is very important." |
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