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MF Submission Final

MF Submission Final

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Published by: Bhargav Borad on Jul 16, 2012
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One of the great threats to the MF industry is the competition from various investments
options available in the market like post office, insurance and so on. As insurance and post
office provides the return which is comparable to the MF industry with less risk so these is one
of the huge threat to the MF industry which should be taken care of.

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8

Study and Research on Mutual Fund

8 C's Model

1. Commodity (scheme) Planning

Mutual fund commodity (scheme) are basically investment-oriented and the savings mobilized by
the Mutual Fund are invariably invested in the instruments (shares, debentures) projected in the
schemes. There is little scope for flexibility. Therefore, due care needs to be taken while designing
particular commodity taking into account excepted changes in capital / stock market in view of
future investment returns. The changing profile of customers (investors) must be taken into account
in identifying the savings market.

Different segments of the potential savings market have different expectations-long term growth,
regular income, tax benefits, and so on. New commodities must be aimed at satisfying one or more
objectives. Tax laws and other related regulations also play an important role in designing a new
product because benefits can be offered to investors within the exiting framework of tax regulations.

Most of the schemes launched in India are either income or income-cum-growth schemes; few are
pure growth schemes. Investor's options have been restricted due to limited commodity range. This
has probably happened on account of lack of experience and the risk-averse, conservative attitude of
mutual fund managers.

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Commodity
(Scheme)
Planning

Cost

Commodity
Branding

Convenience

Channels

Customer
Service

Marketing
Plan

Campaign

Customization

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MARKETING & MUTUAL FUND

Study and Research on Mutual Fund

Like, commodity planning, commodity launching is a crucial element in marketing. Many Indian
Mutual Funds have performed poorly due to wrong timing of launch. Market research can help to
assess the needs of potential customers, availability of existing schemes and future growth in
demand. Before formally launching a new commodity, test marketing can be conducted.

2. Cost

The cost of Mutual Fund products is inextricably linked with returns. Indian Mutual Funds follow
the historic costing structure. The scheme may provide for the price (cost) at which the units may be
subscribed or sold to the independent participants in the scheme. The scheme may also declare the
price at which such units may at any time be purchased by the Mutual Fund. This repurchase price
(cost) is based on the Net Asset Value (NAV). It signifies the realizable value that the investor will
get for each unit that one is holding, if the scheme is liquidated on that date. It is computed by
deducting all liabilities (except unit capital) of the fund from the realizable value of all assets and
dividing it by number of units outstanding. The net asset value of the fund is the cumulative market
value of the assets fund net of its liabilities.

Mutual Fund is also to publish the sale and repurchase prices at least once in a week. Mutual Fund
Management should also ensure that the difference between the sale and repurchase price does not
exceed 7% of the sale price. While deciding on the price, incentives, brokerage charges, and
commissions are also to be decided in advance because the expenses towards these items will affect
the ultimate returns to investors.

3. Commodity Branding

An important function of scheme development is the selection of brand name and pricing of the
scheme. Brand name highlights the market segments, inherent benefits and investment objectives,
and ensures customer loyalty.

Brand identity is an important marketing factor because it facilitates product identification at the
market place. In India, most of the schemes are linked to the names of organizations: the "DHAN
Series" is identified with LIC Mutual fund, "Master Series" with Unit Trust of India and "Magnum"
with SBI Mutual Funds. It can be said that Indian funds have been quite successful in brand policy
and brand identification.

4. Convenience

Better advice: Mutual funds could provide better advice to their investors through the Net rather
than through the traditional investment routes only, where there is an additional channel to deal with
the Brokers. Direct dealing with the fund could help the investor with their financial planning. In
India, brokers could get more Net savvy than investors and could help the investors with the
knowledge they get from the Net.

New investors would prefer online: Mutual funds can target investors who are young individuals
and who are Net savvy, since servicing them would be easier on the Net. India has around 1.6
million net users who are prime target for these funds and this could just be the beginning. The
Internet users are going to increase dramatically and mutual funds are going to be the best

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beneficiary. With smaller administrative costs more funds would be mobilized. A fund manager
must be ready to tackle the volatility and will have to maintain sufficient amount of investments
which are high liquidity and low yielding investments to honor redemption.

5. Channel

A new mutual fund scheme may have all the qualities but that does not ensure its spontaneous
acceptance by customers. Success would greatly depend on appropriate channel. The identification
of appropriate market segment for the product, selection of channel and promotional aids are
essential. Mutual Fund is mainly sold through marketing intermediaries whose job is really
marketing of these types of financial services. Mutual funds are also marketing of these types of
financial services. Mutual funds are also marketed through stockbrokers who are members of stock
exchanges, institutional, merchant bankers, corporate agents etc. They are also marketed by
distribution of application forms through a tie-up with newspapers. Public sector mutual funds like
LIC MF, UTI have an edge over others due to their well-established agency network, Through the
corporate offices formulated the overall marketing strategy and co-ordinate the activities relating to
publicity and product distribution, local level activities are supervised and coordinated by the zonal
and branch offices.

In order to tap the savings tendency of the rural India, mutual fund are paying greater attention to
rural marketing. Investors can also buy units through direct subscription.
Some of the innovative distribution channels to attract prospective investors are:-

Direct sales:- In the case of direct sales funds are offered to investors directly at NAV and no
sales load is charged.

Sales through Underwriters:- Shares of open-ended mutual funds are available through
distributors (also called brokers / dealers / sponsors) who act as underwriters. An underwriter
purchases shares at NAV and sells them to the investing public. The commission of the
underwriters depends on the spread of bid and offering price. Underwriters / distributors are
prohibited from buying mutual funds shares for themselves unless it is for a bona fide investment
account.

Group selling:- many underwriters for maximum market penetration practice Group
selling. The entire members get shares at reduced prices, which enable distributors to realize
economies of scales.

Automatic Monthly Investing:- This is a very convenient way to acquire mutual
fund shares. Many companies operate this plan that allows shareholders to authorize a fund to
debit their bank accounts monthly for the purchase of bank shares.

Telephone or mail purchase:- Shares can be purchased over telephone or through
mail by sending filled application forms along with cheques to the mutual fund.

Share exchange plan:- Mutual fund investor can exchange there existing investment
in the mutual fund with another mutual fund of similar amount.

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6. Campaign

Scheme campaign / promotion in India has taken the usual routes of advertisement and publicity.
Mutual fund advertisements are regulated by SEBI, which prohibits material and contents of
publicity, which may mislead the investing public. Advertisement campaigns mainly aims at
creating awareness of the product, its comparative advantages and future potential, past performance
of similar products and superiority of the fund in relation to others in terms of assets, management
and performing servicing. Many mutual funds offer incentives for early subscription; some mutual
fund also offers insurance benefits to attract investors.

7Customization

The financial goals will very, based on investor's age, lifestyle, financial independence, family
commitments, and level of income and expenses among many other factors. Therefore, the first step
should be to assess your needs. One can being by defining the investment objectives, which could be
regular income, buying a home or finance a wedding or educate your children or combination of all
these needs. Also the risk appetite of the investor and his cash flow requirements need to be
mentioned clearly.

8.

Customer Service

The marketing of services is significantly influenced by the quality of service and the interpersonal
relationship between customers and the service organization. Servicing has great significance in
mutual funds, as in any other financial service industry. Prompt and timely service in issuing
certificates / cheques and in attending to any customer problems would make a distinct difference.
Expected return being more or less same for all the schemes, it is the quality of services which
becomes the deciding factor. In India most mutual funds provide after-sales service through both
external agencies and internal service department, although they rely on external agencies and
internal agencies (transfer and registrar agents) who are specialized in these jobs. Mutual fund does
need to develop to in-house expertise to render after-sales service more promptly and cost
effectively.

Marketing of FMCG v/s Financial Product

FMCG is a low outlay area. FMCG products, specially chocolates come in impulse purchase category.
Usually 15 to 20 rupees is the maximum outlay that you would want from a consumer in one go. In
gifting yes, it is higher, but only to the extent of 100 to 150 rupees. In case of a financial product, it is
a totally different ball game. Minimum outlay is 3000 - 3500 rupees. While you would be making
million - two million transactions in FMCGs, here you would need to make only 10,000 transactions.
And hence, the probability of holding on to your target group through direct contact is fairly high. The
need to use the other mediums beyond TV is fantastic.

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Importance of Brand in Mutual Fund

Most important thing that people see is longevity of the company's offerings. Secondly, it is very
important to have good brand name to develop trust in people's minds. Investors are actually going to
invest your money into it, so the brand becomes very important. The brand, more so in financial
sector, stands for trust and care. And it is extremely important to get people to invest with company. If
company look at the standard pyramid, at the first level they build brand awareness, they have already
attained that, they have been in India for five years now. And one of the things right at the top is
getting the consumer to invest in your brand. As Prudential ICICI was new, company started off with
building basic awareness. Has the brand been able to build realistic expectations? Has it performed up
to the expectations? How many have considered it? It is like an education program.

Mutual Fund Guidelines on Advertisements

SEBI has prescribed an advertisement code for mutual funds, the important features of which are as
follows:

(1) Advertisement should not be published unless approved by the designated person.

(2) Advertisement should be true, fair, and clear. It should not contain a statement, assurance, promise,
or forecast which is false or misleading.

(3) The sale offer should contain only information, substance of which is included in the fund’s
current prospectus.

(4) The advertisement should not be so framed as to exploit the lack of experience or knowledge of the
investors.

(5) It should not contain any information, the accuracy of which is dependent on an assumption.

(6) It should not compare on fund with another unless comparison is fair.

(7) The mutual funds, which advertise yield must use standardized computations such as tax/value,
annual yield, etc.

(8) If the advertisement guarantees a minimum return, it should also indicate the resources available to
back such guarantee.

(9) Mutual funds shall indicate in their advertisements—the settlers, trustees, managers, and financial
advisors to the fund.

(10) Mutual funds which advertise past performance should state that these are not indicative of future
returns.

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Media vehicles chosen by Mutual Fund Industry

Companies have very synergistic view on media planning. They try and are there in all the mediums at
the same time. Companies believe that it actually gives them synergies. If they feel that their target
audience is male thirty plus, they get him wherever he is. They want to target him at home, they will
use television and print, may be he travels a lot during weekdays, so use outdoor and radio and maybe
again print. And as research shows that 60% of all surfers check net from office, so the company get
him in office through the Web.

On weekend, again company get him through television advertising, they get him through in-cinema
advertising, and through magazines. Research shows that weekend reading of magazines is far higher
than weekday reading of magazines. If companies want to use one medium, sheer outlays that you
need to put to create enough impact tends to be very high. So, if they say that I would have presence
six months an year and be present in all the mediums v/s I will have a presence all the twelve months,
and half of that time I would not be present on other media, and measure the effect that you would
have in terms of increased brand recall and other fronts, first option works far better. So media
multiplier works.

A Role of Advertising Message

A very important aspect where an agency comes in is to move away from only obvious benefit to a
benefit that addresses particular needs of a customer. For example if you plan to invest in equity, the
obvious benefit would be I would take care of your investment you don't need to worry about taking
calls on stocks etc. That is what we as a mutual fund are supposed to do anyway- so that is the obvious
benefit. What is not so obvious is that a person from 25 to 35 age group is willing to take a high
degree of risk. But he also wants a high degree of returns, because he is looking at a number of things,
he is looking at building assets for himself, at taking a new house, maybe buying a second car and
henceforth. Over a period of five years, equity outperforms all other investments, so he would get a far
higher accumulation of wealth five or ten years later than he would by investing in any other financial
tool. So this is a need state that 10 years later he will get a larger chunk of money. From the obvious
reason for investing to a 'state of need' that leads to investment, is the jump an agency has to take.

Indian Television Advertisements for Mutual Fund

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1. Birla Sun Life

Hearing a child cry, a man turns off the
shower and dries himself.

Everything seems hazy as we see the world
through his eyes.

Fumbling through the house, he trips and
hurts his foot. MVO: "Invest karte wakt bhi,
yeh dekh paana...

...ki aagey kya hai, aasan nahin hota." Going
up to the table, our friend gropes for his
glasses.

Finally managing to trace it, he puts them on
and gets back his vision. MVO: "Isiliye
aapko sahi raah dikhaye
,...

...Birla Sun Life Mutual Fund." Super: 'Birla
Sun Life Mutual Fund. The name that inspires
trust.'

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Entering a room we find the baby howling
away. MVO: "Aisa naam jo vishwas jagaye."Finally in the arms of her father the baby
quietens down and smiles cheerfully.

Message / Theme of the Advertise.

Future safety of investment is emphasized with message that we are driving you to proper
direction for that you just trust on us.

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