Vanguard Swot Analysis
This case looked at the operations of the Vanguard Group, the mutual fund industries growth leader. Unlike some of its competitors, Vanguard has been able to attract and retain clients without an extensive marketing campaign. Recently there has been discussion about implementing a more direct sales marketing campaign. However, given their extremely low expense ratios and their ability to consistently outperform the industry, there are some concerns over the financial issues that would accompany a large marketing effort. Instead, International expansion combined with focused U.S. market advertising, may be a more profitable path to take.
Strengths
Mutual fund industry growth leader
Growing at 30% per year
Lowest average expense ratio
74% of funds earned above average returns (2001)
Added 800k shareholders accounts (2001)
Spent $.20 of every $10,000 invested to drum up new business
Very low employee turnover
Effectively utilize dashboards to interrogate and integrate real time metrics into staff meetings
Ability to retain customers and obtain additional investments
Weaknesses
$50 billion in assets leave Vanguard every year
Net cash flow decreased from 46 to 40 billion from 2001 to 2002
Redemption rates rose 2% (2000)
Marketing research measures were qualitative and not quantitative
Most brokerage firms do not recommend Vanguard funds to their clients to do lack of sales commissions
Opportunities
Appeal to clients by emphasizing "speed, low expense ratio"
Pick up 1/3 of any increase in mutual fund assets
Over 40% of customer transactions were conducted on the internet, increasing cost efficiency (2001)
Top name in mass-marketed industry despite extremely low advertising spending
Commissioned major client segmentation study to market more effectively to existing customers (2003)
Increase amount of data collected on customers to market more effectively to existing and new customers
Increase
Strengths
Mutual fund industry growth leader
Growing at 30% per year
Lowest average expense ratio
74% of funds earned above average returns (2001)
Added 800k shareholders accounts (2001)
Spent $.20 of every $10,000 invested to drum up new business
Very low employee turnover
Effectively utilize dashboards to interrogate and integrate real time metrics into staff meetings
Ability to retain customers and obtain additional investments
Weaknesses
$50 billion in assets leave Vanguard every year
Net cash flow decreased from 46 to 40 billion from 2001 to 2002
Redemption rates rose 2% (2000)
Marketing research measures were qualitative and not quantitative
Most brokerage firms do not recommend Vanguard funds to their clients to do lack of sales commissions
Opportunities
Appeal to clients by emphasizing "speed, low expense ratio"
Pick up 1/3 of any increase in mutual fund assets
Over 40% of customer transactions were conducted on the internet, increasing cost efficiency (2001)
Top name in mass-marketed industry despite extremely low advertising spending
Commissioned major client segmentation study to market more effectively to existing customers (2003)
Increase amount of data collected on customers to market more effectively to existing and new customers
Increase