Mutual Fund Advertising and Branding
Jan 16th, 2008 by Nut
As I wrote last week, it’s very rare that I come across a piece of news or an article that is relevant to all the topics this blog pretends to cover: advertising, writing, and personal finance.
So when I came across this article on Morningstar.com, I was like “Okay, maybe it’s not so rare.”
The article takes a look at how certain companies advertise their mutual funds and the strategies they use to try to differentiate their products from the competition.
Their overall consensus? That these ads are confusing to the point of dishonesty. It’s something I’ve written about before—when people don’t know a lot about something (and this happens a lot in personal finance), it’s easy talk down to them and get them confused.
If you’re going to get into investing, you need to realize that the very companies you look to for help are built to feed off of your lack of knowledge to make money. This may just be a general advertising principle, but it seems especially harmful when it comes to a product that you are actually expecting will make you money.
One last thing: most of the approaches mentioned were all very similarly confusing, except for one—Vanguard. From the article:
Vanguard took a completely different approach than the others. Its ad didn’t rely on returns, star ratings, or any other measures of past success. It simply showed a drawer full of ties and a paragraph of text discussing how choosing an investment can be easier than getting dressed.
This is what’s called branding in the ad industry. It’s what makes people think of safety when they think of Volvo, luxury when they think of Mercedes, durability when they think of Ford, and so on. When your product doesn’t have something that makes it different that the competition, you have to create an idea or thought in the consumers head that will separate you from the competition.
Are all hot sauces the same? Pretty much. Except for Tabasco. Nobody asks for Hot Sauce when they want Tabasco—they ask for Tabasco.
Even in the context of the article, Vanguard has managed to separate itself because of the strategy they use in their advertising. That is branding and that is what makes Vanguard different than other financial-services companies.
[sidenote: I'm not a customer of Vanguard's, though I hope to be very soon]
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