Fund Ads Miss Mark, According to Study
March 8, 1999
Although mutual fund companies spend millions of dollars annually on advertising, for the most part, their ads are not leaving much of an impression on their audience.
That is the finding of a recent survey of the impact 22 mutual fund ad campaigns had on 1,000 prospects, investors and financial advisors. The study was conducted by Marketing Matrix International, a private market research company in Los Angeles.
Only 13 percent of those surveyed could recall a mutual fund advertisement, the study found. Of this 13 percent, the message that individual investors recalled most often had to do with fund performance. High-net worth individuals with more than $250,000 most frequently retained images of stability. Professional investment advisors had the highest retention rate for details and said they were most struck by what an advertisement had to say about a fund's range of investments and strategy.
The study also asked respondents to rate mutual fund advertisements for the degree to which they motivated them to contact a mutual fund company for more information. On a scale of one to ten- with ten representing the ads that most prompted survey participants to contact a company- the ads averaged a score of only 4.4.
Using the same scale to rate how favorable mutual fund companies' images appeared in their ads, respondents gave the companies an average 5.1 score. Respondents gave the mutual fund advertisements an average score of 4.6 for trustworthiness.
"There's a lot of skepticism out there, even amongst financial advisors," towards mutual fund advertising, said Marcia Selz, president and chief research director of Marketing Matrix. "There are a lot of hurdles to overcome."
Advertising mutual fund products is inherently difficult because the products themselves are complicated, Seltz said.
"Consumers are not as familiar with mutual funds as they are with other consumer goods, like a car, so they don't always know what to look for," Selz said. This general lack of familiarity with mutual funds, in turn, leaves advertisers without a good sense of direction, Selz said.
Neil Bathon, president of Financial Research Corp., a mutual fund research and consulting company in Boston, was not surprised at the poor showing of mutual fund ads in the survey. Most mutual fund advertising is "stilted" and a "waste of money," he said. Mutual fund companies are not willing to be "imaginative" or "aggressive" in their ads, he said. They are afraid "to break new ground" and they do not appear to understand "basic Advertising 101: advance the image and identity, create new positioning and awareness, and give the target audience a call to action," said Bathon.
Marketing Matrix's findings did show that mutual funds are reaching prospects fairly effectively. Of the 22 fund groups surveyed, 15, or 68 percent, were reaching prospects. In contrast, seven, or 31 percent, were reaching current shareholders.
Selz says that reaching new customers is the main reason mutual funds should advertise. Fund companies can always reach current shareholders far less expensively through direct marketing, be it a statement stuffer or telemarketing call.
The survey found that magazine ads made the greatest impression on those surveyed. Newspaper ads were next, followed by television, direct mail and radio ads.
Competitrack, a New York firm that tracks advertising expenditures, estimates that mutual fund companies spent $360 million in 1998 on all forms of advertising.