Long Island Business News- Branding Mutual Funds

Mutual funds: Branding for the millennium. Napoleon once said, “There is a moment in every battle at which the least maneuver...

From The Long Island Business Journal

By Tom Dougherty

Napoleon once said, "There is a moment in every battle at which the least maneuver is decisive and gives superiority, as one drop of water causes overflow." Such an opportunity exists in the investment world today and the company that seizes it will own the day. As we enter the beginning of the century instability in the equity markets is expected.

Even sophisticated investors who expect the market to grow this year are wary and a little gun shy. After all, the last few months have been turbulent and unpredictable. The only constant has been the continued influx of retirement monies pouring through the mutual fund floodgate. The question is not if the money will dry up but rather, where will it go? Many investors are tenderfoots in the equities game. They know the stock market through the heady '9O's and have no experience with serious corrections, let alone the arrival of the dreaded bear. They evaluate their portfolio through the media and pick and choose fund groups based on last years returns. If they are really savvy, they might look up Morningstar and pick funds, based on five-year averages.

One thing is for certain- money follows success and a mutual fund can expect investors to exit with gale force when returns lag the indexes. Tough luck for some sector funds. Tougher luck still for fund managers who are following a smart investment strategy that is in one of its natural down cycles. What's hot today ... value or growth? Such a year is bound to cause management drift and is a nightmare for marketing directors.

Enter "branding," the advertising· elixir. Remember, as sold, brand is supposed to protect margins and create a preference for your fund group over the competition. In some corners, when broadly defined, brand is supposed to be a "promise to the consumer." But a promise of what? If not stellar returns and large jumps in NAV then what on earth can we expect it to promise? Let's face it, if you are" the top performing fund in the market, you have no need to spend on brand equity. A top review from Morningstar or Lipper will carry the day. But all of us know that this little bit of heaven is short lived.

Great management and foresight help ensure smart investing, but if the market were that simple we would all have retired years ago. External forces, international debacles, and White House inklings are all beyond our control and planning abilities. Wouldn't it be nice if you could engender a preference for your funds, not just when they are up ... but when they are down? Isn't that what all the advertising dollars are DOW being spent against? Isn't this what your agency is currently selling you - a brand campaign?

Well, if this style of branding worked as it is sold we should be able to look around the market, even the supermarket, and see the results. The idea here is that an effective brand allows companies to market their products against the competition and do so at higher margin. In other words, brand is supposed to increase the profits and allow branded products to compete without having to fight on the battleground of price. Why is it then, that almost to a brand, products on our supermarket shelves are engaged in a price war? Why is it that our own market share drops as soon as our return lags the market?

The answer is simple: branding, as practiced in the hallowed halls of Madison Avenue does not work. It never has and never will. For a time, branding appeared to work, but only as long as the marketplace was uncrowded and a single unique benefit could be registered. Today, the problem is compounded by crowded airways and a consumer perception that everything offered for sale in a legitimate market works. If you don't believe this, ask a supermarket shopper who prefer one brand of soap powder to another if she believes any of the products for sale would fail to wash clothes. Of course they all wash clothes. They are laundry detergents."

My point exactly; Consumers believe the market validates products. Contrary to popular belief, consumers are not nearly as cynical as advertising executives believe and not nearly as cynical about advertising as the executives themselves. . So, is there such a thing as brand? You bet there is, and it is more powerful than the old guard realizes. It is a bit more complicated too. But when executed properly, it is more powerful than any promise of cleaner clothes and is more compelling than “better returns than the indexes.”

The first part of this equation is how the brand is positioned. Positioning tells the customer why your company or fund group is here. It is your mission statement distilled down to a single phrase. We are here because ... Think about it - not from your vantage point - but from the consumer’s perspective.

You must have a point of view that tells the customer that you stand for something, that you have precepts and beliefs. Unless you can define this aspirtional position clearly to the customer, you are left with a hand full of chalk dust trying to justify your existence.

Your position says something about your product as they relate to the needs of the customer. The next· step is where it begin~ and ends for most advertising agencies. When they talk about branding, this is what they mean. This is your logo, corporate identity, and consistency of message, personality, and the like . . . This is the only part of the formula that is about you. It is important in the scheme of things but not nearly as important as the other two elements. It might include a promise to the consumer but many agencies confuse this with USP. USP is a tactic.

Brand is a strategy. Ask any salesperson who is the most successful the salesman that talks incessantly about himself or the one who talks to and about the consumer? Go ahead, pound your chest. Brag about how great you are. Nothing will spoil a sale quicker than a self-centered salesman. Same is true with branding. That's why the lost and most important step is what we call "the brand's face — (we shorten it to brandface). This is all about the customer. It is the reflection that the customer sees when they use your product or service.

It answers the question of "Who am I" and speaks to the heart of the customer. It is active and helps them ultimately validate who they believe they are. All of us are in a constant state of becoming. We have a loose definition of who we believe we are (or would like to think we are) and we go about fil1ing our world with the things that reinforce that perception. As it turns out, purchase decisions are more often than not emotional choices.

What we end up “buying” is ourselves. In a market devoid of such equity we buy performance or benefit. In a market with such a message ... we buy who we wish to be and are willing to pay a premium (or accept a few less percentage points of gain) for the privilege. Don't believe it? Still think people buy benefits? Well please explain why Nike athletic shoes at a terrific premium without ever once telling those that buy their products that they will run faster, jump higher, or land a place on an NBA roster? No, what Nike sells is more powerful than that. It sells the customer a vision of who they are when they buy and wear their shoes.

A powerful brandface makes a prospect feel incomplete without it. They yearn for it. They covet it. They can't imagine another day without it. And, once they embrace it, they want the world to know all about it. You can't ask for more than that. You should demand no less from your advertising and advertising agency.

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