Who is your customer?

by Seuk Kim

Fund firms shouldn't chase assets

Who is your customer?

 

That seems like a simple question, but until you really know the answers, can you have an effective marketing and distribution strategy?

 

Mutual fund companies define their customer-base differently—some will say that they’re going after intermediaries while others want to sell direct to retailer investors. Still others see the broker dealer channel as an important target market while others focus on institutions. Of course, there really is no wrong answer here, but the best answer is…whoever is investing in our fund or funds.

 

When statistics show that flows into mutual funds are coming from the intermediaries or broker dealers, it can be tempting to market yourself to those demographics, but if the majority of your flows are coming from the retail channel, does it make a lot of sense to focus your efforts on those channels? Rather than fighting the current, it may be wiser to swim downstream. Chances are, there is a characteristic of your mutual fund that appeals more to one channel of distribution over the others. Using your competitive advantage with that channel, then, will probably represent your best chance at growth.

 

Remember: 10% of 100 and 1% of 1,000 are the same, but one of them may be much easier to obtain than the other. Just as investors are advised not to chase performance, fund companies shouldn’t chase assets, especially if their distribution infrastructure does not support it. Identifying your customers and dedicating the appropriate resources to best serve those customers will often yield the greatest results.