JUST ANOTHER CAN OF PEAS: WHAT ARE FUNDS TO MARKETERS?

When Institutional Capital Corp. CEO Robert Lyon went shopping for a marketing chief to help launch the firm’s recent retail push into mutual funds, the Chicago pension fund manager didn’t raid another money manager.

Instead, Mr. Lyon hired Joel “Bud” Shapiro, a 53-year-old consumer products marketeer who had peddled everything from Viva paper towels to Johnson & Johnson bandages.

“A lot of people who do financial marketing have never marketed much of anything to a wide audience,” explains Mr. Lyon. “We wanted someone with a more sophisticated and professional approach.”

Adds Mr. Shapiro: “There are more mutual funds available today than there are brands of toothpaste. The challenge for fund managers is how do you stand out in the crowd and get your product off the shelf.”

Yes, mutual funds and insurers are finally following in the footsteps of banks and credit card companies, which several years back began turning to consumer-goods marketers – the toothpaste sellers – to gain an edge over competitors.

“Everyone in financial services is trying to switch from a product-focused approach to a customer focus, and how you organize and measure yourself from that perspective is radically different,” says Stephen Cone.

He introduced celebrity spokesmen and rock ‘n’ roll automated teller machines at Cleveland-based KeyCorp bank and this month took over customer marketing for Fidelity Investments’ personal investments and brokerage group. “It’s a much broader set of skills, such as understanding data base marketing and how that ties into every potential customer interaction.”

TV spending quadruples

Not only are more funds vying for investor dollars, they’re also pumping up their advertising budgets. Mutual fund companies quadrupled television spending to $140 million between 1995 and 1996, according to the latest numbers from New York-based Competitrack. All told, fund complexes spent $360 million on print and television ads in 1996.

Yet
while many of the industry’s largest mutual fund companies and insurers are seeding consumer-goods marketing talent into their teams at junior levels, few players are naming outsiders to top posts.

“The talk is probably greater than the reality,” says financial services recruiter Kevin Connelly with Spencer Stuart in Chicago. “Companies will start out saying they want somebody with a really strong consumer products packaged goods background, but there are very few organizations that are courageous enough to do that.”

Last fall, for example, Allstate Corp. officials scuttled plans to hire a senior AT&T Corp. marketer, and named Michael McCabe, its insurance claims manager, to the post. The Northbrook-based insurer is now back trying to recruit a consumer-goods marketeer for a lower-roster post.

Similarly, Chicago-based ABN AMRO North America Inc, a unit of Netherlands-based ABN AMRO Bank NV, is expected to name a marketing chief from inside the banking industry after searching both inside and outside the financial services arena.

Some industry observers say such trepidation is a mistake. Many of the consumer-goods marketers will eventually leave – frustrated over their inability to change the firm’s staid marketing plans.

“Insurers are bringing people in, but at too low of a level,” says Miles McKie, a consumer products industry specialist with executive recruiter Heidrick & Struggles Inc. in Chicago. “I have a sense that they will get very frustrated and rotate out.”

Yet some insurers and money managers are willing to bring outsiders – so long as they have been at least exposed to financial services.

A little over a year ago, Minnesota-based insurer St. Paul Cos. hired Bruce Martin to lead an effort to bolster the company’s U.S. brand image efforts. Though Mr. Martin spent a brief stint at GE Capital’s Fleet Services group, he cut his marketing teeth pushing Ivory soap and Downy fabric softener for Procter & Gamble Co. and autos for National Car Rental Syste
ms Inc.

A maturing industry?

Similarly, Robert Romasco, senior vice president of marketing for Kansas City, Mo.’s American Century Investments, joined from Boston marketing consultants Corporate Decisions Inc. (now part of Mercer Management Consulting Inc.).

Though American Century executives were attracted by Mr. Romasco’s consumer-goods skills, the fact that he also had consulted for the likes of Fidelity and Chase Manhattan Corp. certainly helped. Under Mr. Romasco’s aegis, American Century completed a rare corporate makeover 10 months ago, even jettisoning its aging Twentieth Century Investors moniker.

“The mutual fund industry has all the characteristics of a maturing industry,” he says. “Fund performance and investment expertise are very difficult areas to become uniquely distinctive. Marketing becomes the battle for differentiation.”

For American Century, that means employing sophisticated data base techniques to target new product offerings. Last year, for example, the company pitched 200,000 of its 2 million investors on a new real estate fund, based on risk profiles and behavior information the firm had developed.

Other fund managers are employing such tools on a much broader scale. Last September, Scudder Funds’ director of marketing, Jay Bresnehan, led a successful sales campaign targeting gay and lesbian consumers. Unconventional, perhaps, for white-shoe Scudder. But not for Mr. Bresnehan: He joined New York-based Scudder from slickster magazine house Conde Nast Publications Inc.

At Institutional Capital, Mr. Shapiro and Mr. Lyons are employing classic line-extension theory to broaden their base – corporations, pension funds and endowments – to retail investors.

Although it manages a single value-oriented portfolio of 45 large company stocks, the firm also has become a private-label adviser to a series of stock and balanced funds distributed by Chicago-based John Nuveen Co. And within a month, Mr. Shapiro expects to offer four funds – all cut from I-Cap’s core 45-
stock portfolio – to fee-only financial planners using Charles Schwab & Co.’s OneSource and other fund supermarkets.

“The basic principles are the same,” Mr. Shapiro says, “whether you’re trying to sell a can of peas or a mutual fund.”