Mutual_Fund_in_China

Mutual fund industry Mutual fund first appeared in China in 1991 and experienced explosive growth following years. Generally, the market was dominated by open-end funds and mainly invested on stock fund, hybrid fund and money fund. Top 10 biggest companies account 50.44% market share as of Dec.31, 2008. Above 99% accounts are opened by individual investors. Investors mainly purchase funds from three distribution channel including banks, which are dominant channel, brokerage firms and mutual fund companies. Industry was highly impacted by global financial crisis in 2008, investment return declined rapidly to negative mostly due to recession on stock market. Typical Strategy In recent years, a growing number of companies have begun to focus on the role of marketing such like industry leader, CUAM, which focuses on “long-term investment and sustainable high return”, and AEGON INDUSTRIAL, which claims that the economic responsibility is the foundation of social responsibility foundation. All of these campaigns are engaged in building up a vivid brand image, providing high value-added service to its target customer group and therefore improving market share. Firm T Firm T is relatively new fund company which was established less than 6 years ago. The firm is known for its prudent and growth-oriented style with a good risk-control system. All of its stock funds for more than two years have received four-star or five-star rankings from Morningstar. From the table below, we see that Firm T’s customers are interested in long-term rather than short-term investments, reflecting this core competency of the firm. In addition, Firm T’s customers hold a great deal more trust for Firm T than investors in the general industry hold for other firms, further reflecting the firm’s established track record for successful long term investments. Table 1: Customer Investment Motivation (see Appendix 4 p 22) | |General Investors |Clients of T Company | |Higher Earning than Deposit Interest |68% |83% | |Short-term Yield |27% |1% | |No time for Financing |24% |35% | |Trust in Fund Companies |24% |57% | Additional information about our investors long-term investing habits can be inferred from the second table below. With much less concern for dividend information than the rest of the industry, we know that Firm T’s customers are not investing in investments which provide income. Firm T’s customers may be investing in preparation for major life events such as a child’s education, down-payment for a house, or retirement. Table 2: Customer Information Requirements (see Appendix 4 p 23) | |General Investors |Clients of T Company | |Market Trend Analysis |65.0% |69.4% | |Dividend Information |57.9% |26.1% | |Investment Strategy |43.0% |73.3% | |New Product Briefing |30.3% |9.0% | |Industrial Report |31.6% |39.3% | |Investment Team Introduction |8.6% |14.6% | |Nothing |3.9% |23.4% | While Firm T’s core competency is firmly aligned with its customers’ most immediate needs, Firm T suffers a number of problems which are obstacles to its further development, - AUM ranking: It ranked among lower-middle group in terms of asset under management in an annual ranking with market share less than 1%. - Brand Recognition and market segmentation : Survey results revealed that less than 30% people know the name of company. How to segment the mutual fund market has been an issue to firm T for a long time. It has no idea about what types of investors have invested the company and why they did it. In fact, from the chart below, we can see that the only investors aware of Firm T are those investors currently doing business with the firm. [pic] - Distribution’ Channel: In the mean time, firm T is highly dependent on banks for distribution. Banks are the dominant channel in the industry, and the online channel is greatly underutilized in the industry and by Firm T. “Within the direct channel, the fund companies’ own Web sites accounted for 5.46% of the sales” (p 13). Firm T has relied upon the banks to an even greater degree than its competitors, acquiring its existing customers 23% more, on average across all segments, from the banks than the general industry has (see Purchase Channel section of Appendix 8). As a distribution channel, banks have little incentive to provide customers with a thorough introduction to Firm T’s fund products. As a result, consumers have little awareness of the company’s brand. In addition, Firm T, compared with its competitors such like CUMA and AEGON INDUSTRIAL, has done little to establish a distinctive image to differentiate itself from competitors in the market. Customers From Table 2 in the previous section, we can gather an additional insight into Firm T’s customers. These current customers are much less interested in new product briefings than the general industry, and investment strategy is incredibly important to this group. They may even find regular recommendations or promotions to be an intrusion. Table 2 is our first evidence that Firm T’s customers are sceptical of industry recommendations and prefer to learn for themselves. The chart below further supports this revelation. We now see that Firm T’s clients view recommendations from others, whether personal or professional contacts, to be much less valuable than the general industry. Chart 1: see Criteria in Fund Selection, Appendix 6, p 25 [pic] Of Firm T’s customers who bought at bank counters, only 16% were interested in Professional Consultancy Services, compared to 37% interest in the industry (see Reason for Buying Funds at Bank Counters, Appendix 4, p 23). This behavioural data doesn’t begin to tell us a complete story until we examine the numbers provided in the customer segmentation. We know that most of Firm T’s investors are primarily high end – disproportionately so for the industry, and the Middle and Low End are less represented than the industry average (see Chart 16 p18). The most striking data comes from the Information Source table (see Appendix 8, p 30). Firm T’s clients prefer gathering information online almost 2:1 over the general industry. This supports our picture of the knowledgeable investor seeking more information to make their own decisions. Online contributes to their ability to learn. From the more demographic customer segmentations, we know that Firm T’s clients are 30-40, married with children, professional, and educated (see Age, Marital Status, Income, and Occupation in Appendix 8). This generation of investors is exactly the group of individuals who respond to online marketing and the online services of a mutual fund company; like the rest of the industry, Firm T acquired these customers through the banks. Marketing Proposal Increased investment is the key to Firm T’s goal of growing its assets and increase Firm T’s AUM ranking. We propose a marketing plan focused on increasing consumer awareness of the brand and emphasizing the firm’s competencies – namely quality long term investments, no hassle investing, and rich support for knowledgeable investors. In general, Firm T’s brand reputation is not well known in the industry, but two groups are more likely to respond to this clarification of Firm T’s market position – the mid-level and low-end customer segments, those with investments totaling less than 100,000 Yuan. The marketing plan targets the acquisition of new investors in these key segments because they are under represented in Firm T’s existing customer base. When compared to the general industry, Firm T is not maximizing their exposure to these investors, and an increased exposure is especially important given how closely Firm T’s competencies align with their needs. In addition, we will further sub-segment the above mentioned investor groups by targeting those potential clients with characteristics and buying habits like those captured in the segment data. These behaviors are representative of firm Firm T’s existing customers, and from the market data on these segments, we know that those clients are motivated to seek a higher return, interested in long term investments with little concern for regular income, and are interested in planning and managing their own financial portfolios with little solicitation or recommendation from professional advisors. We also know their preference for the online channel, and the marketing campaign will use the internet heavily as the advertising medium and distribution channel. Firm T can appeal to the needs of those key segments by developing marketing messages and pricing incentives which clearly signal to the new investor that Firm T has a longstanding reputation of trust and low pressure relationships with its clients. The marketing campaign will emphasize the user experience on Firm T’s website -- user friendly, secure, and easy to use for those interested in the self-help model of investment services. As part of the campaign, availability of information and tools on the website can be updated so that the customer experience is at least consistent with the marketing message. To deliver the marketing message, we propose a mix of online advertising – pay per click and pay per impression – and paid search ads. Ads would target sites that Firm T’s customers are likely to visit. Given the profile we have on them, these would include home loan sites, mortgage sites, financial information sites, sites ranking colleges and universities. We would also coordinate the bids for search keywords such as those related financial research and life event planning. The messaging would appeal to the willingness and need of this particular customer segment to trust their financial company. Slogans such as“Invest for your dream, let’s realize it together （投资梦想，助力未来）”and “Providing the tools you need to plan your family’s future.” Utilize targeted promotions to our key customer segmentsoffering price breaks to those using Firm T’s online investing tools rather than working with a financial advisor. We know that Firm T’s existing customers value preferential pricing (see Reason for Buying in Appendix 4 Online p22) and suspect that this will attract more of the same customer. Existing high end customer segment that are more focused on customer service are unlikely to respond negatively to such incentives. In fact, when presented with the online-only option, they will most likely opt out of these promotions. A potential conflict exists with the marketing position proposed for Firm T and CUAM, but we feel that Firm T’s position is differentiated enough in that Firm T does not provide regular income products like CUAM’s Periodic Payment Plan and does not heavily promote its products to clients. Conclusion Firm T’s customer base is highly a motivated group with awareness of the internet as a marketing channel and information source. Promoting the internet channel would appeal to them; moving forward, Firm T’s the marketing team would have access to a much richer data set of customers behaviours.