NEW YORK -- Gaining entry to a supermarket does not guarantee a mutual fund that it will be prominently displayed or that it will attract millions of dollars, industry executives agree.
A mutual fund has to do a great deal of work in order to enlist the supermarket's help in distinguishing itself from all the other funds in the supermarket. This is increasingly so as funds continue to proliferate and as supermarkets stock up on as many funds as possible to look like the most well-equipped emporium to consumers. At a supermarket with proprietary funds, it is even harder for a fund to stand out.
There is a way to break through all this clutter to gain prime positioning though. To do so, a mutual fund company must take the initiative to build a good relationship with the supermarket. It also must develop its own marketing and sales strategy specifically for use in any given supermarket.
Funds should strive to be as appealing and as easy as possible for a supermarket to represent and do business with.
This was the consensus of supermarket and mutual fund executives who spoke last week at a conference, "Maximizing Distribution and Gaining Shelf Space Through Mutual Fund Supermarkets." The conference was sponsored by International Business Communications of Southborough, Mass. IBC organizes conferences for financial service companies.
It is as important for funds with stellar performances to work energetically as it is for newer or less successful funds, executives said.
"It's not nearly enough just signing up for a supermarket," said Skip Schweiss, vice president of DATAlynx, Denver, Col., and chairman of the conference. "It requires a lot of work and true partnership on the part of the mutual fund."
To be successful in a supermarket, a mutual fund must have a strong, distinctive story that can be reduced to a sound bite, said Steve Dunlap, executive vice president of Wiesenberger. Wiesenberger is a mutual fund tracking firm in Rockville, Maryland, and a Thomson Financial company. Thomson also owns Securities Data Publishing, the publisher of this newsletter. Dunlap cited Franklin Templeton as an example of a company that has chosen a story and projected it simply. It has focused on its style adherence as the overriding theme that it wants to project to customers.
The story or theme also must be used consistently throughout a mutual fund's marketing, advertising and sales collateral materials - including Web sites and prospectuses, said conference participants.
To decide on the story or marketing motif, a company should conduct focus groups, speak to customers and employees and use analytical software tools to pinpoint a fund's strengths, said Dunlap. The analytical tools, for example, can be used to determine that a fund is outstanding in the area of risk adjusted performance. Most funds fail to take this simple yet essential step, said Dunlap. Instead, they try to imitate their competitors, he said.
"There are a lot of good funds that aren't enjoying the sales they should be because the people marketing them haven't figured out what sets that fund apart, what's in the active ingredients' of the raw data, or what to emphasize besides performance or basis points of return," Dunlap said. "When was the last time someone came up with a really good story about why a fund is successful, centered around the unique benefits of the fund?"
A fund should be open to what it hears and be prepared to emphasize a point or a strength no one else has ever used, Dunlap said.
The results of the investigation might turn out to be something very simple like outstanding performance, noteworthy style consistency, or a low ratio of expenses to performance. What is critical is to make this characteristic interesting and understandable so that the supermarket can easily relay the message to investors and motivate them to buy.
The next most important task for a mutual fund is to have all of its data and fund characteristics complete, in order and up-to-date, said Joyce LaBelle, vice president of Fidelity Investments' FundsNetwork. It sounds obvious, but many mutual funds fail to keep all of the information a supermarket requires of them in order, and that delays them being marketed, LaBelle said.
Third, a mutual fund must build a strong relationship with its relationship manager, regional managers and other executives at the supermarket. They must identify and call on these people, bringing ideas rather than pleas to push the product.
Fund companies should also take advantage of the special occasions supermarkets organize to enable funds to meet branch managers, said Fidelity's LaBelle. Once a fund company builds these relationships, they can speak directly with supermarkets' branch managers and phone reps, said LaBelle. Fund companies have to work down from their relationship managers to the local branch managers. Branch managers, who are ultimately critical to a fund's success, are not interested in speaking with a mutual fund unless it has been authorized by relationship or regional managers, participants said.
Once a fund has made contacts at a supermarket, it should treat these relationships as two-way partnerships and not merely as conduits through which to push product, said Richard White, executive vice president of the capital management group at SouthTrust Bank, Birmingham, Ala.
"It's all about partnership," LaBelle said. "We really do want to partner with you. If you have an idea, we are very open to hearing it."
Fund companies should also learn as much as possible about individual supermarkets because they are not all the same, said Schweiss of DATAlynx.
"Know what drives them, how they make their money, their asset mix - so that you can leverage the relationship. Brainstorm with supermarket decision-makers," Schweiss said. Certain supermarkets, for example, might be low on no-load funds and looking for more or might be short of small-cap funds.
It is also important that the supermarket liaison at the mutual fund company is a financial or operations executive and not a marketing person, said Eugene Daly, vice president, western region for the ICON Funds of Englewood, Cal. Marketing personnel are not capable of answering detailed financial or investment-strategy questions, said Daly. In addition, companies should make their portfolio managers directly available to investors through e-mail. Supermarkets like funds that provide this level of personal attention to their end customers.
Funds willing to pay amounts above basic supermarket fees for special projects will also be promoted the most. As expensive as it is to join a mutual fund supermarket, supermarkets will sometimes look for more money. LaBelle cited a glossy, semi-annual magazine featuring the managers of six funds that Fidelity's supermarket, FundsNetwork, has just launched. The six fund managers in the magazine come from the six fund companies that paid for the project. Many supermarkets also offer co-op advertising programs.
Finally, companies should be patient with supermarkets. Supermarket sponsors add funds and promote them in groups so a fund company has to wait its turn to be represented on a supermarket's web site, in its sales materials and in mailers.