Marketing Financial Products
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Chapter 10 : Mutual Funds
Evolution of Mutual Funds in India
Organizational Set-up of a Mutual Fund
Types of Mutual Funds
Classification Based on the Structure of the Mutual Fund
Classification Based on the Investment Objectives
Classification Based on Specific Purpose
Innovation and New Fund Launches
Designing a Mutual Fund Product
Systematic Investment Plan (SIP)
Factors Influencing New Fund Launch
Pricing
Terms in Pricing
New Fund Pricing
Distribution
Types of Distribution Channels
Cross-selling through Mutual Banking
Promotion
Advertising
Sales Promotion
Branding
Public Relations (PR)
Chapter Summary
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Mutual funds in India have come of age to cater to the needs
of investors. SEBI, which also controls the stock market operations, is the
regulatory body of the Indian mutual fund industry. Mutual funds can be
classified into open-ended funds, close-ended funds, and interval funds, based
on the fund structure. Based on the investment objectives, they are divided into
growth funds, income funds, balanced funds, and money-market funds. Based on the
specific purpose of use, mutual funds are classified into tax savings schemes,
index funds, and theme-based funds (including industry-specific or sectoral
funds). Many fund marketers have come out with innovative and customer friendly
products that aim at satisfying the investors’ financial goals. Systematic
Investment Plan (SIP) is an innovation in payment option for mutual fund
investors. It is designed for those who are interested in gradually accumulating
wealth in a disciplined manner over a long term.
Mutual funds are priced based on their net asset value, which the fund
houses declare on a daily basis. Investors can sell their units back to the
fund at the prevailing NAV. |
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Some funds attract entry and exit loads. Such
loads are used to recover the costs spent on distribution and other
marketing costs.
Mutual funds are distributed through five channels of distribution, namely,
direct channel, advice channel, retirement plan channel, fund supermarket
channel, and institutional channel. Apart from these channels, mutual
banking is also adopted, where cross-selling is used in association with
banks to sell the fund schemes through the banks’ branches.
Mutual fund marketers use advertising, sales promotions, brand
communications, and public relations to attract investors and to increase
their sales. Advertising includes print and electronic media, including the
Internet. Fund marketers give away incentives and gifts to the investors for
investing in their funds and such incentives and gifts may act as a catalyst
for attracting more sales. They also give incentives (in cash or kind) to
their trade partners and their representatives. Further, the fund houses
have started the process of overhauling their brand image to promote
themselves more effectively to the customers. AMFI, the industry
association, has been actively involved in public relations (PR), by
promoting the mutual fund industry, both at the domestic level and in the
international arena.
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Short Case Studies / Caselets