Marketing At The

Vanguard Group

Group 10, Section B

About Vanguard

US based investment management company,

considered to be the mutual fund industrys
growth leader

Catered to customers interested in low cost, long

term investments in mutual funds

In 2002, Vanguards 118 mutual funds were worth

$557bn, 10% of all US mutual fund assets

About Vanguard

Industrys lowest Average Expense Ratio-26 basis

points for equity funds and 17 basis points for
bond funds

Vanguard funds had ranked 1st or 2nd in net cash

inflows for 8 of the previous 10 years

Redemptions from Vanguard funds were about

10% of the assets held in 2002- a rate that was
half the industry average

About Vanguard

The mutual funds organization, meaning that it was

owned by the clients

Between 1985 and 1995, they reduced the number of

employees per $1 billion in assets from 55 to 22

Devised a partnership plan to reward employees for

productivity increase

Cut $320 million out of annual shareholder expenses

and cut its expense ratio 17% in 7 years using Six
Sigma and a system of Dashboards

Customer selection and

Retention
Retail

Ideal Vanguard customer - a substantial, cost-conscious

investor with a long-term investment horizon

Companys marketing strategy discouraged active traders

from participating

Introduced Admiral shares as an unique pricing strategy to

encourage loyalty among customers

Customer selection and

Retention
Institutional

Divided customers as Full-service clients and Investmentonly clients

Grew its defined-benefits services to more than 300

pension plans in 2001

Institutional Marketing

Word-of-mouth advertising

Print media advertising via books and

brochures

Institutional marketing developed websites

to support the sales process

No mass media advertising

Investor Demand Study

Financially
confident

Players
Managers
Advisor dependents
Complacent

Confide
nce
Ranking

Independents
Strivers
Live for todayers
Financial Avoiders

Financially
Insecure

Opportunities

80-90% of Vanguard clients had funds with other

organizations

Most brokerage firms did not recommend Vanguard funds

as Vanguard didnt pay sales commissions

Emerging mass affluent level segments ($50000- $1mn

worth assets)

Suggested Marketing
Strategy

Aggressive marketing and self promotion to different

financial advisors and brokers to attract more business

Use past performance figures in their marketing campaigns

so as to attract more customers

Increase advertising expenditure and target the specific

market segment

Action Plan

Focus on core competency - mutual funds

Streamline website information to increase customer

interaction, thereby increasing customer retention

Enter the international market and improve overseas

business

Educate leaders and crew on marketing strategies

THANK YOU!