While most mutual fund companies use direct response marketing to promote themselves to brokerage houses and other third-party sellers, a few are using it to leapfrog traditional distribution channels and go straight to the investor – a potentially risky, but rewarding, marketing strategy.
At Toronto-based Scudder Canada Investor Services, the company relies on direct as a critical part of its marketing mix.
Because it is a ‘no-load’ (that is, no commissions) company, it sells most of its funds directly to the public without the help of a third-party salesforce. Cheryl Young, vice-president of marketing at Scudder, says that means the company needs direct, both as a prospecting tool and to deepen the relationship it has with its existing customers.
‘We have always personalized our mailings,’ says Young. ‘Ironically, our u.s. parent had not. When they started doing so, they had a 1% increase in response,’ she says.
Newsletters, statement inserts, a 1-800 line and customer surveys help support the company’s general image advertising because all have a consistent look and feel, says Young.
‘We are not a bank and don’t have branches – we don’t have a face out there – so we use direct to create that face, that voice,’ says Young.
On the ‘load side’, GT Global – which does sell its funds through brokers and financial planners – maintains a delicate balance when providing information directly to investors so as not to step on the toes of those who represent its products, says Kate Taylor, marketing manager for the Toronto-based company.
‘It is still a fairly immature industry,’ says Taylor. ‘It is taking people a while to realize that they can advertise to the consumer in a way that does not affect the relationship with the brokers and planners.’
GT Global uses a 1-800 line, business reply cards placed in The Globe and Mail and The Financial Post as well as direct response magazine inserts and its Web site to stimulate consumer interest in the company’s products.
Whenever GT Global launches a fund, says Taylor, there is some sort of direct response campaign attached to it. Recently, the company launched its Canada Value fund, for which promotional postcards and letters were sent to both brokers and investors.
Further, the company produced business reply mailers for distribution to investors by brokers and financial planners. The mailers were designed to be returned directly to GT Global for processing, says Taylor.
At Toronto-based Fidelity Investments, however, direct is used primarily as a way to reach the brokers and investment advisors who comprise the company’s distribution channel.
‘It’s still that whole concept of `Whose client is it – the financial advisor’s or the fund company’s?” says Brian Henderson, Fidelity’s director of marketing.
Last fall, the company launched its True North Fund. According to Henderson, Fidelity supplied more than 200,000 promotional packages to its network of third-party sellers for distribution to investors.
The fund has now topped $1 billion and Henderson says while much of its success has to do with advisor recommendation, it can also be attributed to attractiveness and utility of the promotional packages supplied.
GT Global’s Taylor says she expects the mutual fund industry will eventually have to engage in a lot more efforts targeted directly to the end investor because, ultimately, the industry has a responsibility to educate consumers about what it is they’re purchasing.
‘I think as more people become aware of the fact that there may not be a government pension for them, they have to be responsible for their own future – and we have to give them the tools to be able to make those decisions.’
Also in this report:
– They’ve only just begun: Big banks intensifying database marketing efforts to retain customers p.DR12
– Virtual banks latest stop on electronic continuum: ING Direct, mbanx and Citizens Bank of Canada the logical successors to ATMs and telephone banking p.DR14
– Canada Post uses direct mail to sell mutual fund marketers on the benefits of direct mail p.DR18
