Marketing at the Vanguard Group

Marketing At The Vanguard GroupGroup 10, Section B

US based investment management company, considered to be the mutual fund industrys growth leader

Catered to customers interested in low cost, long term investments in mutual funds

In 2002, Vanguards 118 mutual funds were worth $557bn, 10% of all US mutual fund assets

About VanguardIndustrys lowest Average Expense Ratio-26 basis points for equity funds and 17 basis points for bond funds

Vanguard funds had ranked 1st or 2nd in net cash inflows for 8 of the previous 10 years

Redemptions from Vanguard funds were about 10% of the assets held in 2002- a rate that was half the industry average

About VanguardThe mutual funds organization, meaning that it was owned by the clients

Between 1985 and 1995, they reduced the number of employees per $1 billion in assets from 55 to 22

Devised a partnership plan to reward employees for productivity increase

Cut $320 million out of annual shareholder expenses and cut its expense ratio 17% in 7 years using Six Sigma and a system of Dashboards

About VanguardRetail

Ideal Vanguard customer - a substantial, cost-conscious investor with a long-term investment horizon

Companys marketing strategy discouraged active traders from participating

Introduced Admiral shares as an unique pricing strategy to encourage loyalty among customers

Customer selection and RetentionInstitutional

Divided customers as Full-service clients and Investment-only clients

Grew its defined-benefits services to more than 300 pension plans in 2001

Customer selection and RetentionWord-of-mouth advertising

Print media advertising via books and brochures

Institutional marketing developed websites to support the sales process

No mass media advertising

Institutional MarketingInvestor Demand StudyPlayersManagersAdvisor dependentsComplacentIndependentsStriversLive for todayersFinancial AvoidersFinancially confidentFinancially InsecureConfidence Ranking80-90% of Vanguard clients had funds with other organizations

Most brokerage firms did not recommend Vanguard funds as Vanguard didnt pay sales commissions

Emerging mass affluent level segments ($50000- $1mn worth assets)

OpportunitiesAggressive marketing and self promotion to different financial advisors and brokers to attract more business

Use past performance figures in their marketing campaigns so as to attract more customers

Increase advertising expenditure and target the specific market segment

Suggested Marketing StrategyFocus on core competency - mutual funds

Streamline website information to increase customer interaction, thereby increasing customer retention

Enter the international market and improve overseas business

Educate leaders and crew on marketing strategiesAction PlanTHANK YOU!