Jayant Pai of PPFAS dismisses the view of outright copying of FMCG techniques to promote mutual fund products.
At a recent mutual fund seminar, there was the usual lament about how funds are failing to gain traction among 'small investors'. While several causes were cited, they mostly boiled down to mutual funds failing to resonate or 'connect' with investors.
It was then posited that mutual funds should take a leaf out of FMCG product marketing strategies. The underlying belief behind this was that small investors are no different from small consumers. As long as you attractively package the idea to them and educate them about the utility of the product, 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, FMCG products are not an unknown beast to many Indians. They have been consuming products like soaps, toothpastes, biscuits etc. since they were children. Hence, there is a feeling of familiarity and comfort. Within the realm of investments, while gold and bank deposits have been well accepted over many decades, mutual funds are a relatively new animal.
As an extension to this point, consumers view some FMCG products (such as band aids or OTC pharma 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.
Besides, there is an inherent degree of complexity in a mutual fund scheme, which is absent in an FMCG product. Hence while marketing mutual funds the focus should remain on education rather than on glamour or variety.
By its very nature, 'investing' involves delaying gratification. To top that, while investing 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 a pre-determined 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, as the value proposition can be outlined succinctly and the consumer can immediately verify if such claims hold water.
Conversely, in the case of financial products the benefits are more nebulous and hence more difficult to cast in stone.
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.
Mutual funds are fiduciaries first and marketers next. Their Regulator too frowns upon overly exuberant marketing tactics, and rightly so.
On the other hand, FMCG companies are not bound by such restrictions. Sure, they must ensure that the product meets certain safety standards, but they have a 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'.
Also, while one can complain against exaggerated claims of FMCG companies to the Advertising Standards Council of India, history shows that many offenders get off quite lightly.
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 ticket size is much larger and also one 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. New media such as YouTube and Facebook are also being harnessed.
Also, through innovations like Daily Systematic Investment Plans (which are the equivalent of shampoos in sachets), the investment ticket sizes have been reduced. Value Averaging, online investing etc. are a few other consumer friendly developments.
To summarise, 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.