Final Report

A REPORT

ON

“MARKETING OF MUTUAL

FUNDS”

BySandeep Negi

Mahindra financial services Ltd.

A reportOn

“Marketing of Mutual Funds”

BySandeep Negi

A report submitted in partial fulfillment of the requirement of MBA Program

Submitted to: -

Company guide Faculty Guide:- Mr. T. Raghunath Dr. Rekha Jagannath

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Acknowledgement

I would like to express my sincere gratitude to my Project Supervisors, Dr.Rekha jagganath and Mr. T.raghunath who equipped me with their novel ideas and helped me to complete this project entitled “marketing of mutual funds”. I am also grateful to all the staff of “Mahindra finance”, for cooperating with me & helped me carry out my project.

I would like to thank them for introducing me to the concept of “marketing of mutual funds” and for encouraging me to pursue this novel project idea under them. They were also instrumental in providing me with all the information resources, required for my project.

I would also like to thank our Director for providing the institute with an environment where one can use his intellect and creativity to develop something fruitful and where one is allowed to get in touch with new up surging technologies. This environment facilitated me in pursuing this project.

Lastly, I am also indebted to my batch mates for their valuable help, constant encouragement and constructive support.

Sandeep negiEnrolment no. 07BS3770IBS-Bangalore

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Declaration

I hereby declare that this project work entitled “marketing of mutual funds” conducted at Mahindra finance has been prepared by me during the academic year 2007-2008 under the able guidance of my faculty guide Dr.Rekha Jagannath and my Company guide Mr. T.raghunath.

I also declare that this project is the result of my effort and has not been submitted to any other university or institution for the award of any degree, or personal favor whatsoever. All the details provided in the report hold true to the best of my knowledge.

Place: Bangalore

Submitted to: Submitted by:Dr. Rekha Jagannath Sandeep negi Date: 15-05-2008 07BS3770

[email protected]

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Table of contents

1. Abstract…………………………………………………………………………………7

2. Introduction…………………………………………………………………………….8

3. About the company…………………………………………………………………….9

4. Mutual Funds…………………………………………………………………………...10

5. Types of Mutual Funds………………………………………………………………...11

6. History of Mutual Funds in India……………………………………………………..11

7. Advantages and Risk associated with Mutual Funds………………………………..15

8. Strategy used by Mahindra……………………………………………………………16

9. Analysis of Marketing Strategy as a Whole…………………………………………..19

10. Product life cycle of Mutual Funds……………………………………………………19

11. Ansoff’s Matrix…………………………………………………………………………20

12. Objectives and action plans of Asset Management Companies……………………..22

13. Marketing Mix………………………………………………………………………….23

14. Customer service strategies……………………………………………………………24

15. GAPS Model……………………………………………………………………………26

16. Steps in selling and buying process……………………………………………………28

17. Patterns of Non-verbal communication……………………………………………….32

18. Social Style Matrix……………………………………………………………………..34

19. SWOT Analysis of Mahindra Finance………………………………………………..35

20. Methodology Used……………………………………………………………………...35

21. Objective of the Project………………………………………………………………...38

22. Findings………………………………………………………………………………....38

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23. Recommandation……………………………………………………………………..40

24. Top Asset Management companies………………………………………………….41

25. Conclusion…………………………………………………………………………….45

26. Bibliography…………………………………………………………………………..46

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Abstract

The Project title is “marketing of mutual funds”. As the topic says it all, this project is all about the role of marketing strategy in selling of mutual funds i.e. how to make the business more effective both in terms of strategy as well as in efficiency.

The details provided in the project are briefly defined as below:1. About the company.2. Analysis of marketing strategy:a) Defining the sales processb) Generation of leads.c) Positioning of the product.d) Sales management.e) Product life cycle of mutual funds.f) Ansoff matrix.g) Service strategy.h) Buying process in consumers mind.i) gaps model.j) SWOT analysis.k) History of mutual funds.

In this report all the strategy used are analyzed and special attention is given to the service strategy. All the concepts related to mutual funds are explained like entry load, exit load, net asset value etc. The whole sales process is explained keeping in mind both the scenario’s i.e. the company and the customer.

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Introduction

The project was supervised by “Mahindra & Mahindra”. The project “marketing of mutual funds” was done under the financial division of Mahindra i.e. “Mahindra finance”.

Mahindra finance is a subsidiary of M&M group. Mahindra finance is one of India’s leading non-banking finance companies focused on the rural and semi-urban sector.

Their strategy is to provide a range of financial services to their customers through their nationwide distribution network. Forbes has ranked Mahindra group in its top 200 list of world’s most reputable companies.

Another major portion of the project is to understand the market and the strategies associated with it. So that firm can retain market share and find different ways of acquiring customer base.

As the project was about marketing of mutual funds, it involves these strategies: The market segment which the company is looking so that they can offer their wide

variety of mutual funds.

The target {urban or semi urban population}.

Positioning of their product.

Generation of leads.

Approaching companies for help desk in order to deliver value to the customer.

The company is dealing in all type of mutual funds so they adopt a different strategy for marketing every product.

Providing customers with fact sheets and the portfolio of every fund.

Using buzz marketing {mouth publicity}.

Using the brand name {ex. reliance} of that company to target the potential customers.

Analysis of the service strategy used and the satisfaction level of employees.

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About the company

The project is supervised by “Mahindra & Mahindra”. The project “marketing of mutual funds” will be done under the financial division of Mahindra i.e. “Mahindra finance”.

“Mahindra finance” is a subsidiary of Mahindra & Mahindra group. Mahindra finance is one of India’s leading non-banking finance companies focused on the rural and semi-urban sector. Their strategy is to provide a range of financial services to their customers through their nationwide distribution network. Forbes has ranked Mahindra group in its top 200 list of world’s most reputable companies.

Services

“Where your investment matters not its size”. This tagline defines it all. “Mahindra finance” is basically into investment advisory services.They are serving the nation with this value added service for almost a decade.

Fin smart

So far, investment advisory services were accessible to only those who could spare a sizeable amount of money. Common people were not on the list of investment advisors. But “Mahindra” recognized the importance of every investor, big or small.

Mutual fund distribution

Mahindra finance with due permission of “Reserve bank of India”, distributes mutual funds products through its network and thus contributes to the asset allocation of its customers while participating in their liability requirements.Some of the value added services provide by the company are:

Personalized service

Long term relationship-

(a) Take advantage of short term market opportunities without losing sight of long term objectives.

Access to research reports.

(b) They have a tie up with crisil, one of the leading financial research and rating companies in India. This help in better advice to customers.

Transparency and confidentiality.

Flexibility

Hassle free investment

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Mutual funds

Concept

It can be defined as “A mutual fund is a pool of money that is professionally managed for the benefit of all shareholders. As an investor in a mutual fund, you own a portion of the fund, sharing in any increases or decreases in the value of the fund. A mutual fund may focus on stocks, bonds, cash or a combination of these asset classes”.

Some other concepts related

Net asset value

The Net Asset Value is a term used to describe the value of an entity's assets less the value of its liabilities. The term is commonly used in relation to collective investment schemes. It may also be used as a synonym for the book value of a firm.

For collective investments (mutual funds), net asset value is the total value of the fund's portfolio less liabilities. The NAV is usually calculated on a daily basis.

For corporations, net asset value is the value of assets less liabilities.

TurnoverIt is a measure of the fund's securities transactions, usually calculated over a year's time, and usually expressed as a percentage of net asset value.

Entry load

It is the fees charged by the asset management company to the investor who is investing in any particular mutual fund. The standard entry load is 2.25%.

Exit load

It is the amount of charge deducted by asset Management Company, also known as exit fees.

Types of mutual funds:

Open ended fund

It can be defined as “A type of mutual fund that does not have restrictions on the amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end funds also buy back shares when investors wish

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to sell.” It can be said that entry and exit can be done anytime during the performance period of a fund.

Closed ended fund

It can be defined as “A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock I n a stock exchange. Also known as a "closed-end investment" or “closed-end mutual fund."

History of mutual funds in India

Inception

The concept of mutual funds was introduced in India with the formation of Unit Trust of India in

1963. The first scheme launched by UTI was the now infamous Unit Scheme 64 in 1964. UTI

continued to be the sole mutual fund until 1987, when some public sector banks and Life

Insurance Corporation of India and General Insurance Corporation of India set up mutual funds.

It was only in 1993 that private players were allowed to open shops in the country. Today, 32

mutual funds collectively manage Rs 6713575.19 cr under hundreds of schemes.

DefinitionA mutual fund is a trust that pools the savings of a number of investors with common financial goals. The collected money is invested in various instruments like debentures, shares, etc. The income generated from these instruments and the capital appreciation is shared by the investors in proportion to the number of units owned by them. Short historyThe government of India set up Unit Trust of India in 1963 by an act on parliament. UTI functioned under the regulatory and administrative control of the Reserve Bank of India till 1978. The Industrial Development Bank of India took over the regulatory and administrative control that year. The first scheme launched by UTI was Unit Scheme 1964 or the infamous Unit 64. The second phase of the mutual fund industry began with the public sector banks and Life Insurance Corporation of India and General Insurance Corporation of India setting up their own mutual funds in 1987. Finally, in 1993 Kothari Pioneer (now merged with Franklin Templeton) became the first private sector mutual fund to start operations in the country. A host of private sector as well as foreign funds set up shop after that. In 1996, a comprehensive and revised Mutual Fund regulation was put in place. The industry now functions under Sebi (Mutual Fund) regulations,1996.

The industry faced its toughest challenge when the US 64 fiasco shattered the confidence of investors. However, in 2003, the government bifurcated the erstwhile UTI. One entity manages the assets of US 64 and some assured return schemes. The other is a regular mutual fund working under the Sebi regulations. Thanks to the boom in the stock market, UTI managed to clean up its

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act and continue to enjoy the confidence of several investors. The whole industry also came out of the controversy without any major setbacks.

Conception and performance in IndiaThe industry has steadily grown over the decade. For example, before the public sector mutual fund’s entry, UTI was managing around Rs 6,700 crore on its own. Public sector mutual funds also helped accelerate the growth of assets under management. UTI and its public sector counterparts were managing around Rs 47,000 crore when Kothari Pioneer, the first private sector mutual fund, set up shop in 1993. Before the US 64 fiasco, there were 33 mutual funds with total assets of Rs 1, 21, 805 crore as on January 2003. The UTI was way ahead of other mutual funds with Rs 44,541 crore assets under management. The industry overall has performed well over the years. Of course, there were a few funds houses, which disappointed investors. However, overall performance has been good. However, lack of awareness still impedes the growth of the mutual fund industry. Unlike developed countries, most of the household savings still go to bank deposits in India.

Working of mutual fundsA mutual fund is set up by a sponsor. However, the sponsor cannot run the fund directly. He has to set up two arms: a trust and Asset Management Company. The trust is expected to assure fair business practice, while the AMC manages the money. All mutual funds except UTI functions under Sebi (Mutual Fund) regulations 1996. The mutual fund collects money directly or through brokers from investors. The money is invested in various instruments depending on the objective of the scheme. The income generated by selling securities or capital appreciation of these securities is passed on to the investors in proportion to their investment in the scheme. The investments are divided into units and the value of the units will be reflected in Net Asset Value or NAV of the unit. NAV is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the valuation date. Mutual fund companies provide daily net asset value of their schemes to their investors. NAV is important, as it will determine the price at which you buy or redeem the units of a scheme. Depending on the load structure of the scheme, you have to pay entry or exit load.

By Investment objectiveGrowth funds: They normally invest most of their corpus in equities, as their objective is to provide capital appreciation over the medium-to-long term. Growth schemes are ideal for investors with risk appetite.

Income funds: As the name suggests, the aim of these funds is to provide regular and steady income to investors. They generally invest their corpus in fixed income securities like bonds, corporate debentures, and government securities. Income funds are ideal for those looking for capital stability and regular income.

Balanced funds: The objective of balanced funds is to provide growth along with regular income. They invest their corpus in both equities and fixed income securities as indicated in the offer documents. Balanced funds are ideal for those looking for income and moderate growth.

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Money market funds: These funds strive to provide easy liquidity, preservation of capital and modest income. MMFs generally invest the corpus in safer short-term instruments like treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes hinges on the interest rates prevailing in the market. MMFs are ideal for corporate and individual investors looking to park funds for short periods.

Other schemesTax saving schemes: Tax saving schemes or equity-linked savings schemes offer tax rebates to investors under section 88 of the Income Tax Act. They generally have a lock-in period of three years. They are ideal for investors looking to exploit tax rebates as well as growth in investments.

Special schemes: These schemes invest only in the industries specified in the offer document. Examples are InfoTech funds, FMCG funds, pharma funds, etc. These schemes are meant for aggressive and well-informed investors.

Index funds: Index Funds invest their corpus on the specified index such as BSE Sensex, NSE index, etc. as mentioned in the offer document. They try to mimic the composition of the index in their portfolio. Not only are the shares, even their weightage replicated. Index funds are a passive investment strategy and the fund manager has a limited role to play here. The NAVs of these funds move along with the index they are trying to mimic save for a few points here and there. This difference is called tracking error.

Sector specific schemes: These funds invest only specified sectors like an industry or a group of industries or various segments like ‘A’ Group shares or initial public offerings. Let’s have a look at the graph of total number of assets (value in rupees) under management

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Take another look at the options of savings

INDIA’S mutual fund industry is surging ahead, as a growing number of resident and non-resident Indians are finding it a safe and relatively high-return investment vehicle.Assets under management (AUMs) of the mutual fund industry have shot up to a whopping Rs3.5 trillion. There are 33 mutual funds offering a variety of schemes, and investors are lapping them According to the Association of Mutual Funds in India (AMFI), there were 414 new fund offers (NFOs) in financial year 2006-07 (ending March 31, 2007), as against 190 in the previous fiscal. Funds were able to raise Rs1.4 trillion through NFOs, as against Rs705.83 billion in the previous financial year. Investments in equity schemes shot up by 47 per cent, reflecting the buoyancy in the Indian stock markets. But despite the growing popularity of funds, there is tremendous scope for growth in the sector. According to AP Kurian, chairman, AMFI, there is a vast untapped potential. Many of the asset management companies were realizing this, and are spreading their net across the country. Kurain notes that many fund houses are opening branches in tier-II and tier-III cities. There has been a 40 per cent growth in the number of accounts that were opened last year. Another reason for the frenzied growth in the sector was the popularity of schemes like ‘systematic investment planning (SIP), wherein investors can put apart a small sum every month in their mutual fund account. According to Kurian, there are about 1.2 million SIP accounts. The concept of SIP was launched just about three years ago, and has emerged as one of the most popular ways of raising funds. Mutual funds have also brought down the minimum investment amounts for SIPs – Reliance Mutual fund has reduced the minimum amount from Rs500 a month to Rs100, while ICICI Prudential has brought it down further to a mere Rs50.Investors in India, who had kept away from mutual funds for many years, are now convinced about the safety and rewards from the industry. Many are investing to maximize returns, as they have seen several schemes give handsome dividends. Reliance Mutual Fund, which is part of the

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Anil Ambani-controlled Reliance Capital, continues to be the biggest mutual fund in terms of AUMs.

Advantages of mutual funds

Mutual funds offer a number of advantages, including diversification, professional management, cost efficiency and liquidity.

Diversification: A mutual fund spreads your investment dollars around better than you could do by yourself. This diversification tends to lower the risk of losing money. Diversification usually results in lower volatility, because when some investments are doing poorly, others may be doing well.

Professional management:

Many people don't have the time or expertise to make investment decisions. A mutual fund's investment managers, however, are trained to search out the best possible returns, consistent with the fund's strategies and goals. In essence, your mutual fund investment brings you the services of a professional money manager.

Cost efficiency

Putting your money together with other investors creates collective buying power that may help you achieve more than you could on your own. As a group, mutual fund investors can buy a large variety and number of specific investments. They can also afford to pay for professional money managers and fund operating expenses, where they wouldn't be able to afford it on their own.

Liquidity

With most funds, you can easily sell your fund shares for cash. Some mutual fund shares are traded only once a day at a fixed price, while stocks and bonds can be bought or sold any time the markets are open at whatever price is then available.

Risks

Because mutual funds typically hold a large number of securities, their level of diversification provides them with a lower level of risk than investing in a single stock or bond.However, investing in mutual funds still contains a number of risks that you should consider before investing, including:

You could lose money. Your money may lose buying power. You may not achieve your goal. Your investment may rise and fall in value. Other risks.

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Strategy used by Mahindra

Marketing of mutual fundsThe project topic is addressed as “Marketing of mutual funds” The main focus of this project is to analyze the strategies used by Mahindra finance and other asset management companies. The main area of analyzing is also to define the whole sales process.

Some of the key factors are:

The market segment, which the company is looking so that they can offer their wide variety of mutual funds.

The target {urban or semi urban population}. Positioning of their product. Generation of leads. Approaching companies for help desk in order to deliver value to the customer.

The company is dealing in all type of mutual funds so they adopt a different strategy for marketing every product.

Providing customers with fact sheets and the portfolio of every fund.

Using buzz marketing {mouth publicity}.

Using the brand name {ex. reliance} of that company to target the potential

customers

Now coming on to the market segment, target customers:

The main focus of Mahindra finance is to segment that area of population who are interested in investment but they are not yet well informed.

They basically focus on 3-tier and 4-tier cities. The reason behind it involves image of Mahindra motors and tractors in rural areas and sub urban areas.

Their target customers in these cities are those who have the potential to save and are looking for alternative savings other than bank deposit.

In big cities like Bangalore they target working professional and business class.

Positioning of the product

“Where your investment matters not its size”. This tagline defines it all. The main areas of positioning are:

To tell the customers that importance of investment for the future.

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They heavily emphasize on the investment and not on the nature and size.

They believe in direct interaction with customers is the best way to position it in

the mind of a customer.

Now focusing on my area of findings:

The first to define is the whole sales process:

Direct marketing

Sales Lead Identification Prospecting Customer need Identification Proposal to customer Closing / Contract Deal transaction

Sales lead identification

In this process we define different sources which could be considered as the front line of interaction with the customers. Basically we use the company database to contact the prospective customers.The process includes:

References from existing customers.

Company’s employee’s network.

Internet database.

Generation of leads via help desk.

Direct marketing.

Cold calling.

Internet marketing.

Trade shows

Prospecting

Discarding unqualified leads from qualified to contact (just those who will with high probability to invest).

Criterion for qualified leads Metrics Selection tools Cluster tools Personalization/scripting(criterion may differ from campaign to campaign) Different actions (sending a white paper).

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Now selecting contact leads based on

Earlier closed transactions. Reference marketing. Strategic value Relationship with other customers.

Customer need Identification

Several sessions to clarify customer needs. Identify the gap between the current state and future planned state. This gap implies a suggested solution (sales opportunity).

Proposal to customer

It includes offering a particular product (mutual fund) which caters the need of the customer. The second stage involves the positioning element of that product i.e. solving all the queries of customer and making him/her all the necessary details of that product.

Closing

Closing of a deal differs from sales to sales and business to business.It this case it is:

Signing the application form. Giving the cheque or d-d in favor of that particular asset management company. Providing all the necessary details to the sales representative (account details, address,

pan card Xerox etc.)

Deal transaction

It is the process after closing the sales process.It is:

Exchange of money for a service. In case of mutual funds the application is logged in the name of particular sales

representative and the process of allotting units to that customer and sending all the account details is done.

Here marketing strategy lies in:

1. Sales lead identification.

2. Prospecting the potential customer.

Now the sales part is:

Customer need Identification Proposal to customer Closing / Contract Deal transaction

Here management control also plays a vital role in

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Sales management.

Advertising and promotion (help desk etc)

Sales forecasting

Also customer relationship management is there

Solving queries of customers.

Handling important information of customers.

Direct dealing with high network individuals(h.n.i.)

Here one of the major factors which is becoming the major source of prospecting customers and closing the sales deal is:

Telemarketing

1) Identification who is calling and to whom you call.

2) Affective access to all information about contact-sales and payment history, latest acquisitions, activities performed with that contact

Analysis of marketing strategy as a wholeProduct life cycle of mutual funds

Introductory stage

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The mutual funds industry is still nascent in India. Hence, investors have yet to fully understand the way they work, the benefits they offer, and the reduction in risks to investors that they can provide in today is complex and sophisticated capital markets. Perhaps the first study to emanate from India of mutual funds as important financial intermediaries and as asset allocators, Mutual Funds in India examines their increasingly significant role in India’s liberalized market economy. Keeping in mind the changing perceptions of investors and the emerging market structure

In the introductory stage the asset management companies rely on these strategies:

Product branding and return level (fund return) is established and intellectual property

protection such as patents and trademarks are obtained.

Pricing may be low penetration pricing to build market share rapidly, or high skim

pricing to recover development costs.

Distribution is selective until consumers show acceptance of the product.

Promotion is aimed at innovators and early adopters. Marketing communications seeks

to build product awareness and to educate potential consumers about the product.

Mutual funds have been a significant source of investment in both government and corporate securities. It has been for decades the monopoly of the state with UTI being the key player, with invested funds exceeding Rs.300 bn. (US$ 10 bn.). The state-owned insurance companies also hold a portfolio of stocks. Presently, numerous mutual funds exist, including private and foreign companies. Banks--- mainly state-owned too have established Mutual Funds (MFs). Foreign participation in mutual funds and asset management companies is permitted on a case by case basis.

So it can be said still people in India are not aware of the beauty of mutual funds .the main reason is the traditional methods of savings and also people in India still are not considered for their risk taking appetite.

Ansoff matrix

Market penetration

Market penetration seeks to achieve this objective:

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Market penetration Market development

Product development Diversification

• Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling

In case of mutual funds the market entirely depends on the equity market, and also the past performance of funds in terms of their return.

Companies like reliance are expert in market penetration as they use “blanketing strategy” (price penetration) i.e. they give good amount of brokerage to the distribution houses and in turn they (distribution house) promote their products.

In mutual funds to penetrate market you need excellent sales force to capture all the uncovered areas of the market.

Also the advertising for new fund offer (NFO) is targeted for the customers who are interested in investing but are not fully aware of the equity market. Large hoardings and banners are used to attract new customers. Also they use Internet as an effective medium to educate people about their product. The other medium are newspaper, television and radio.

Increase investment by existing customers – for example by introducing loyalty schemesA market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

Market development

Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.

There are many possible ways of approaching this strategy, including:

• New geographical markets; targeting 3 –tier and 4-tier cities. Potentially mutual funds are targeted to metro cities but an excellent marketing strategy is that to go for the virgin territories where there are potential customers and they are not tapped. Mahindra finance (distribution house) is an excellent example of this.

• Promotional strategy should not be focused only on the existing customers but to those who can be your potential customers. The best way to do this is to educate the mass about the equity and debt market. It can be done by distributing pamphlets’ and giving articles in news papers.

• New distribution channels

• Different pricing policies to attract different customers or create new market segments.

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Product developmentProduct development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.

If we compare the Indian market the market is very huge in terms of population and talking about money and savings per person, Indian market is still in introductory stage.

In terms of new product development mutual fund industry is very sensitive as the whole set up entirely depends on the equity market and the asset management company should be continuously looking for potential sectors which are doing good and will continue to do well in the future(for ex. infrastructure, natural resources).

Diversification

Diversification is the name given to the growth strategy where a business markets new products in new markets.

This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.

For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks.

We can take case of mutual funds the product is familiar to big cities and all the companies are serving a niche market.

But to diversify into new markets they need an aggressive promotional strategy and also more emphasis should be given to buzz marketing (word of mouth).

Take example of SBI mutual fund. SBI (state bank of India) is a popular name and is India’s largest bank, and if they launch their mutual fund to a new market (untapped) they will get a good response because of their brand image (bank).

Objectives and Action Plans of Asset management companies

The primary target of all the companies is to target the market in which the need for their product exists. In mutual funds the main aim of companies is to cater very segment of the market for example if a person is looking for a sector specific scheme then they provide him/her with that fund. Also they are targeting the working professionals. Also all the banks who are tuning into asset management sector know their customers over the past so they feel that it is important to continue to maintain and build upon this relationship by offering them a good saving option in

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terms of mutual funds. So it can be said that all the companies which are older in terms of other services know their target market and very well in the position to capture the market share.

Marketing mix

ProductThe product was developed based on customer need for alternate option for savings. Traditional options for savings and investment was limited to bank savings, fixed deposits, asset trading (land, gold) etc. But the concept of mutual funds satisfies all the needs in terms of investment and savings both and also providing a healthy return. This product development satisfies the 1 stage of marketing mix by providing the right product to the right market.

PlaceThe second stage is to place the product at the Right place. For that the strategy should lie in providing the customer excellent service within his/her reach. For this efficient network of distribution should be there.

PriceThe price charged i.e. the entry load 2.25% is same for all equity funds and the same exit load (within1 year) which is 1%. There is no entry and exit load in case of debt funds. Keeping all these facts companies should give the customer best and quick service and add value to their money.

Promotion They have different promotional campaigns that will help to bring awareness to this relatively new product. Therefore, as mentioned above, they concentrate their product launch only in the urban areas. Their promotional strategy revolves around the benefits provide by their product in terms of return only but they should target it as an alternate option of saving and good option for their future life. Also the promotional campaign should focus on educating customers about equity and debt market.

Competitive EnvironmentAs now a day’s every asset management is coming up with a new fund whether it is sectorial fund or fund with tax saving option. The competition is so intense that fund can only be differentiated on the basis of returns. But some of the funds with medium return or low return are doing well because of their brand names and good promotional strategy. Also effective sales force is required to face the intense competitive environment.

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SERVICE INDUSTRY AND STRATEGY INVOLVED

Customer Service Strategies

Customized

Greater potential benefits to customersGreater inconsistency

Higher cost

Standardized

Lower cost High consistency Meets but does not exceed expectations

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Cues Customers Use to Evaluate Service Quality

COURTESY

Friendliness of employees

Respect shown to customers

Interest shown in customers

ACCESS

Short waiting time to complete sales transaction

Convenient operating hours

Convenient location

Manager available to discuss problems.

COMPETENCE

Knowledgeable & skillful employees

Customer questions answered

RESPONSIVENESS

Returning a customer’s call

Giving prompt service

RELIABILITY

Accuracy in billing

Performing service at designated time

Accuracy in completing sales transaction.

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Closing the Knowledge GAP

• Customer research

• More interactions between managers and customers.

• Better communication between managers and service providers.

Closing the Standards GAP

• High quality service commitment

• Innovative solutions

• Define the role of service providers

• Set service goals

• Measure service performance

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Closing the Delivery GAP

• Information and training

• Internal communications

• Reduce conflicts

• Empower employees

• Providing incentives

Closing the Communications GAP

• Realistic commitments

• Managing customer expectations

Service Recovery

• Listen to the customer

• Provide a fair solution

• Resolve problem quickly

← -Reduce number of contacts

← - Give clear instructions

-Avoid jargon

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1. Approaching the customers-

It includes the following

a) Using old references to contact customers.

b) Collecting database and giving cold calls to all the prospective customers.

c) Approaching customers via help desk and trade shows.

d) Doing online marketing.

2. Collecting information

a) It refers to know your client in terms of financial strength, his social status etc.

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3. The third step is offering the product to the concerned person. For ex. Taking the above

scenario in 1 step an executive contact person via help desk and offer him the various

investment options he/she are looking for and try to offer the product i.e. mutual fund

which caters his/her needs

4. The next step is making the sale.

5. The last and never ending step is the foundation of building a potential market for the

future and establishing a good relationship with the customer.

Customer perspective in the process of buying

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1. Problem recognition

The 1 step in the buying process is the recognition of problem .It refers to the need which

is not satisfied and an immediate attention is required.

Take example of “mutual funds”: when a person is thinking for a good investment and

he/she are not happy with the kind of return they are getting from fixed deposits and

bank deposits. So they immediately are looking for an investment option which in turn

gives them a good return. So this is first step of buying process i.e. the problem

recognition.

2. Information search

A consumer who realizes the need for a product will try to gather information regarding

the product. Information search helps the customer understand the features of a product

and competing brands better.

In case of mutual funds the information can be gathered through sources:

A) Personal sources: Family. Friends, neighbor and reference groups who has invested

before in mutual funds.

B) Commercial sources: advertisements –print media, broadcasting media and internet.

C) Public sources: articles in newspapers and journals, and consumer ratings. Public

sources in case of mutual funds can be referred as the interviews of fund managers

and ratings of various mutual funds, CRISIL provides with all the ratings and NET

ASSET VALUE of each fund on a day to day basis.

Personal sources influence the buying decision of a prospective buyer. Though all types of

sources provide information, maximum amount of information is obtained through commercial

sources.

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3. Alternate evaluation

In this stage, a customer analyzes the information available with him to select the right

brand or product. In case of mutual funds the alternate evaluation is done on the basis of returns

given by each and every fund. Also category wise comparison is done between “tax saving”

options and “growth options”. Also service provided by each and every asset management

company is evaluated.

4. Purchase decision

Selection of a particular fund is dependent on the evaluation criteria and ratings. The

purchase decision also depends on the amount which a person wants to invest.

5. Post purchase behavior

A customer evaluates the performance of a particular fund after investing in it. The

behavior about a particular fund depends upon the portfolio offered by the asset

management company. The portfolio tells the ratio of units divided into equity and debt

market. If the portfolio is able to satisfy the customer’s perception then the buying

process is successful. Also the purchase behavior depends on the schedule of time a

person is going to invest. Return is a major issue to influence post purchase decision. For

example if person is investing for a term of 2 year will get a better return compared to a

person who is investing for six months {open ended fund}. So post purchase behavior

entirely depends on the fund purchased and the time for which investment is done.

Body language of a sales representative

Body language is an important factor for a sales representative. Marketing strategy is

somewhat confined to target the potential market and distribution of mutual funds but

meeting the customer is directly related to sales representative. So it is very important to

groom sales representative in terms of soft skills and body language. Also business

communication is very important in terms of interacting with customers. Let’s have a

look at “patterns of non verbal communication”:

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Sources of objections

1. The customer may be objecting due to lack of information.

2. The customer may be setting an objection.

3. The objection may be genuine.

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So it can be said that whether it is mutual funds or any other service industry the company needs

to follow all these strategies to capture the market. Service differentiation is very important

factor to differentiate as the mutual funds is not only differentiated on the basis of return but on

the basis of service. As all the concepts used above like service quality, gaps model, closing the

knowledge gap, steps in buying process, body language of a sales representative and the social

style matrix. All these concepts are very important to survive in the service industry. Also

continuous market research should be done in order to track the latest trends such as internet

marketing as now days all the big companies are facilitating their customers so that their time is

saved.

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SWOT Analysis of Mahindra and Mahindra

Strengths Healthy market share. Old customer base Brand name of Mahindra & Mahindra (tractors and sports utility vehicles).. Personalized service Reputed name in terms of distribution{target based} Strong hold in 3- tier, 4-tier cities and villages Excellent use of word of mouth (buzz marketing).

Weakness

Customer feedback system is not up to the mark. No proper system in place to respond to the customers in the desired lag time. Market penetration is low.

Opportunities Untapped potential market of small cities. Increasing awareness of mutual funds in India. Growing service sector ( target market) Upcoming small scale industries.

Threats

Companies like reliance are also having a good distribution network (for all mutual funds) and on the same network they are competing with Mahindra.

Distribution houses

Methodology used

The methodology used in this project is using primary database. As no database was provided by the company so own references was used. Basically primary research is only confined to questionnaires and face to face interviews. The technique used in this project is interviews.

Interviews

Interviewing is a technique that is primarily used to gain an understanding of the underlying reasons and motivations for people’s attitudes, preferences or behavior. Interviews can be undertaken on a personal one-to-one basis or in a group. They can be conducted at work, at home, in the street or in a shopping centre, or some other agreed location.

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Personal interview

In personal interview the opinion of a person is judged and one to one interaction is there.

Advantages:

Serious approach by respondent resulting in accurate information.

Good response rate. Completed and immediate. Possible in-depth questions. Interviewer in control and can give help if there is a problem. Can investigate motives and feelings. Can use recording equipment. Characteristics of respondent assessed – tone of voice, facial expression, hesitation, etc. Can use props. If one interviewer used, uniformity of approach. Used to pilot other methods.

Disadvantages:

Need to set up interviews.

Time consuming. Geographic limitations. Can be expensive. Normally need a set of questions. Respondent bias – tendency to please or impress, create false personal image, or end

interview quickly. Embarrassment possible if personal questions. Transcription and analysis can present problems – subjectivity. If many interviewers, training required.

Mutual fund scenario

Mutual fund interview was basically limited to meeting the customer and asking him/her for their satisfaction level. Let’s have a look at the whole process of meeting the customer.

a) In first step the appointment is fixed with the customer. The appointment may be official

or general (depends on the meeting place). After this process is over convenient time is

decided.

b) In the next step the meeting happens.

c) In the case of mutual funds the interview is basically referred to counsel the clients. In

counseling the queries of the customer are solved. If the customer is not aware of the

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product but he/she are showing interest in the product then the real counseling starts. The

role of a sales executive is to guide the customer to the right path and help him/her in

their selection of the product.

d) After that the details of the product are explained and depending on that customer choose

the right one.

e) In this scenario one to one interaction is done and this is the best way to know your

customer and measure the satisfaction given by your product.

In the end it can be said that face to face interaction are the best way to analyze customer feedback and can be used for further references. As far as human tendency is concerned the response may not be true in case of one to one interaction. So this can be misguiding for the sales executive who is true on his part but in turn getting false response.

Planning a meeting (interview):

List the areas in which customer require information.

Decide on type of interview. Transform areas into actual questions. Try them out on a friend or relative. Make an appointment with respondent(s) – discussing details of why and how long. Try and fix a venue and time when you will not be disturbed.

Objective of the project

Personal objective To understand and analyze the strategies adopted by the company in order to market the product and the “value delivering process”.

Company objective

The main focus was to increase the customer base so that they can increase

their sales.

Also the other area was scanning the current strategy in order to sustain into

the market and react to changes in the economy.

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The company provided healthy training sessions so that they can train us to

tackle various customers.

Special attention was given to service provided to the customers.

The training was designed in such a manner so that maximum corporate

exposure is given to all the trainees.

Findings of the project

a) The first and the most important finding of the project is that mutual funds are directly

related to equity market. It is not a new finding but if the market fluctuates the net asset

value fluctuates and in turn the returns are affected. But a good fund manager know the

market and try to put maximum money on those sectors which are continuously doing

good and will also perform well in the future. In other types of funds like debt funds and

balanced fund (half equity and half debt) risk is minimized but the return is low. As a

customer point of view the product portfolio offered by the asset management

companies is very good.

b) Specialty of mutual funds- It is a famous saying in the financial sector industry that

mutual funds are for all i.e. also for a new born baby and for older generation. The

beauty lies in the range of products offered to the customer. For example if you are

looking for tax saving option the product is there, debt funds for less risk, funds of

various sectors like infrastructure, natural resources, power etc. are there. In these funds

various income options are also there like growth option and dividend for those who

continuously expect some money.

c) A general finding is that Indians are not known for their risk taking appetite. A

common myth among all is that equity market is a gamble and we should not invest in

it. This is the reason perhaps why mutual funds are the subject of interest for those who

have a decent knowledge of equity market and follow the latest trends in the market.

d) Another major finding is that reliance is the major player in the mutual funds market

having thousands of crores of assets under management. Their funds like RELIANCE

POWER SECTOR DIVERSIFIED FUND, RELIANCE REGULAR SAVINGS

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FUND are among the top five mutual funds. Next to follow are SBI, ICICI, TATA,

DSP MERYLL LINCH, ABN AMRO AND FRANKLIN TEMPLETON.

e) The services provided by all the asset management companies are good, but still they

are not up to the mark. Sometimes the customer had to wait for a long time to get all the

account details and in turn the gap occur which is known as the service gap.

f) All the investors are not concerned about the return because mutual funds are giving

them better return as compared to other option of savings like bank deposits and fixed

deposits.

g) Informed investors are better than non-informed because the non-informed ones are

having a negative point of view about mutual funds and if a sales is done to non

informed ones then it is a big confidence booster.

h) Companies like reliance pay a good amount of brokerage to the distribution houses and

in turn they promote their products, so it can be said that reliance is an expert in market

penetration.

i) Using references is the best way to make a sale. The reason behind it is the references

which a sale representative get is half counseled and the remaining is done by the sales

representative. Help desk is also a good medium for personal interaction and to inform

customers about the various options for investment.

j) Sales is an art, and an art is a job of a perfectionist. It means that perfect timing is

required and no margin for error is there. It can be applied from the 1 stage of

approaching a customer to the last in which the deal is closed.

Value addition

1. The main focus of Mahindra finance should be to in capture the potential sectors

in Bangalore. Many small scale industries are coming up and they have a pool of

employees who are interested in saving money and they can be targeted.

2. Mahindra is basically targeting 3-tier and 4-tier cities. But to excel in the

distribution area the company should maintain focus on big cities. The volume of

business they can get from big cities can be very healthy.

3. Mahindra only relies on buzz marketing. It is a good ploy but to target big market

and for market penetration they need to heavily focus on advertisements specially

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they should make good use of print media. Television and internet can also be

used for educating customers.

4. As Mahindra is hiring a lot of project trainees from various colleges in order to

increase the market share and the volume of the business, this ploy is good in

terms of business, but the commission given is not satisfactory. Even sometimes a

project trainee is not able to recover the hidden costs associated with the amount

of business he/she has given. So in the future they should focus on quality not

quantity.

5. Co branding is a good method in terms of penetrating the market. They can tie

up with some reputed company like “Times of India” and they too will get a

good exposure in public as “Times of India” is the highest selling newspaper in

terms of volume.

Asset management companies

Some of the top asset management companies are:

1. Reliance mutual fund -

Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average Assets Under Management (AAUM) of Rs. 96,386 Crores (AAUM for 30th Apr 08 ) and

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an investor base of over 65.68 Lakhs. Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds in the country. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 118 cities across the country.

Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. "Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders." Reliance Capital Ltd. is one of India’s leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth.

Reliance Capital Ltd. has interests in asset management, life and general insurance, private equity and proprietary investments, stock broking and other financial services.

2. ICICI mutual fund

ICICI Bank is India's second-largest bank with total assets of about Rs. 344,658 crores as at March 31, 2007 and profit after tax of Rs. 3,110 crores for the year ended March 31, 2007 (Rs. 2,540 crores for the year ended March 31, 2006). ICICI Bank has a network of about 710 branches and 45 extension counters and over 3,271 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai International Finance Centre and representative offices in the United States, United Arab Emirates, China, South Africa and Bangladesh. UK subsidiary of ICICI Bank has established a branch in Belgium. ICICI Bank is the most valuable bank in India in terms of market capitalization.

3. Tata mutual fund

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Tata Mutual Fund manages around Rs. 27,938.11 crores (as on April 30, 2008) worth of assets across its varied offerings. Tata Mutual Fund offers an investment option for everyone, whether you are a businessman or salaried professional, a retired person or housewife, an aggressive investor or a conservative capital builder.

The Tata Asset Management philosophy is centred on seeking consistent, long-term results. Tata Asset Management aims at overall excellence, within the framework of transparent and rigorous risk controls.

TATA Asset Management Ltd is a part of the Tata group, one of India's largest and most respected industrial groups, renowned for its adherence to business ethics.

The Group has always believed in returning wealth to the society that it serves. Thus, nearly two-thirds of the equity of Tata Sons, the Group's promoter company, is held by philanthropic trusts, which have created a host of national institutions in the natural sciences, medical care, energy and the arts. The trusts also give substantial annual grants and endowments to deserving individuals and institutions in the areas of education, healthcare and social uplift.

By combining ethical values with business acumen, globalization with national interests and core businesses with emerging ones, the Tata Group aims to be the largest and most respected global brand from India. This way, it fulfills its long-standing commitment to improving the quality of life of its stakeholders.

4. Dsp Merrill lynch

DSP Merrill Lynch Fund Managers philosophy is designed to seek consistent, long-term results. When you choose DSP Merrill Lynch Fund Managers, you get a research-based, methodical approach to investing. DSP Merrill Lynch Fund Managers aims at investment excellence, within the framework of transparent and rigorous risk controls. Our global reach helps us to leverage a

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world-wide network built on local experiences and resources, thereby adding value through our knowledge, intelligence and ideas. They measure our strategic performance against the three guiding principles of:

Consistency

DSP Merrill Lynch Fund Manager's value oriented investment philosophy is designed to produce consistent results aiming to beat the benchmark at all times.

Flexibility

DSP Merrill Lynch Fund Managers offers investors a broad range of managed investment products in various asset classes and risk parameters, within the at most operational flexibility to suit their investment needs.

Stability

Our commitment to the highest quality of service and integrity are the foundation upon which clients can build their trust with us.

5. SBI mutual fund

SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country with an investor base of over 4.6 million. With over 20 years of rich experience in fund management, SBI MF brings forward its expertise in consistently delivering value to its investors.

The biggest benefit of state bank of India is that it’s the biggest bank of India and they have got good client base.

Top performing mutual funds

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Conclusion

After finishing the whole project the following conclusion’s can be drawn:

1. The Indian mutual fund industry is one of the fastest growing sectors in the Indian capital

and financial markets. The mutual fund industry in India has seen dramatic improvements

in quantity as well as quality of product and service offerings in recent years. But still it is

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in the introductory stage and lots of promotional activities are needed. Promotional

campaign should be based on educating all the customers.

2. SEBI (securities and exchange board of India) should take initiative in educating the

customers regarding the various saving options available to the customers in a general

way. This also will help in reducing the negative attitude of society towards equity

market.

3. In customer meetings it was discovered that all the customers are very sensitive towards

the services they need, so it can be inferred that if a company wants to penetrate the

market then they should give more and more emphasis on improving the service quality.

4. As an asset management company or a distribution house, the sales force should be very

effective because a motivated sales force can expand the business and can give a rise to

the brand name of the company.

5. Still in India many people are living in rural areas and they have limited options for

savings in which there is a fixed return, so all asset management companies should focus

on these areas to penetrate market

6. It is true that equity market is very sensitive and people should trust the right sale

representative who is honest. Also all the customers should read the application form

carefully before investing.

Bibliography

www.google.com

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www.esourcingforum.com

www.amfiindia.com

www.moneycontrol.com

www.photobucket.com

ICMR BOOK

www.mahindrafinance.com

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