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Should mutual fund marketing go the FMCG way?

Monday, June 06, 2016

Over the years, mutual funds, the financial media as well as the Regulator, are using various means to ensure that mutual funds emerge as the investment vehicle of choice, for small investors.

Recently, I overheard someone saying that funds should take a leaf out of the marketing playbooks of FMCG companies, in order to better 'connect' with investors. The logic behind this was that small investors are no different from small consumers. As long as you attractively package the idea they will bite.

I feel that such comparisons are too simplistic, as there is a world of difference between the two.

Here are a few of them:

Nature of the product: First of all, we have been consuming products like soaps, toothpastes, biscuits etc. since we were children. Hence, there is a feeling of familiarity and comfort. However, within investments, while gold and bank deposits have been well accepted over many decades, mutual funds are a relatively new animal.

Also, consumers view FMCG products through the prism of utility. However, in the case of mutual funds, in many regions, a market has to be created, as investors do not really feel a compelling need to purchase them.

Also, mutual funds are more complex than FMCG products. Hence while marketing mutual funds the focus should remain on education rather than on glamour or variety.

Delayed feedback:  The act of 'investing' involves delaying gratification. Unfortunately, in a non-guaranteed product like a mutual fund, there is no certainty that this delay will result in an appropriate reward at the end of the period.

On the other hand, an FMCG product, gives the user some feedback almost immediately as factors like taste, fragrance, surfactant ability, etc. can be discerned quickly. This makes marketing of FMCG products much easier.

For instance, a toothpaste may sell more units on the basis of the tagline 'New Improved flavour' but a mutual fund will not, as it cannot immediately prove to consumers (investors) that it is really an improvement. Only time will tell whether such a contention is true or not.

Regulatory limitations: Being a financial product, the Regulator frowns upon overly exuberant marketing tactics, and rightly so. On the other hand, FMCG companies are not bound by such restrictions. They have a relatively free hand with regard to advertising and marketing. For instance, a mutual fund cannot market with the tagline 'Buy one unit, get another unit free'.

Finally, unlike a purchaser of FMCG products, a mutual fund investor has to jump through hoops like possessing a PAN, complying with KYC norms etc. Such last-mile irritants may stymie the snazziest campaign that any marketer may devise.

Ease of switching: Usually, one does not have to spend a lot of money in order to try out any FMCG product. Hence one can try out several brands / varieties as it is easy to switch from one brand to another.

It is not so easy to do so in a mutual fund, as the minimum investment amount is usually Rs. 1000/-. and we may incur costs in the form of exit loads and taxes if one switches too frequently.

Consequently, as financial products demand more commitment from the investor, marketing them like FMCG products may backfire badly.

Having said this, one must add that mutual fund marketing has certainly become more consumer-centric over the years. Today, several schemes do not just harp on their positive points but also attempt to state how the investor could benefit by investing. Also, communications contain less jargon than before. Media such as YouTube and Facebook are also being used effectively.

Also, through innovations like Daily Systematic Investment Plans (which are the equivalent of shampoos in sachets), the investment ticket sizes have been reduced. E-KYC, Online SIPs etc. are a few other consumer friendly developments.

To summarize, while there are certain aspects of FMCG marketing which can be adopted, blindly overlaying the marketing tactics of one upon the other is not prudent. Doing so will only lead to disappointment, for the consumer as well as the marketer.

 
 

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