What's in a name?
Ask R. Gregory Knopf, the managing director of Union Bank's $2.4 billion-asset mutual fund family, the Stepstone Funds.
The Los-Angeles based fund house took its former name - Union Investors - from the bank. Trouble was bank executives and customers alike thought it conjured up images of labor unions, not the kind of associations the bank wanted to make..
"We thought we could build a more successful marketing strategy around a new name," said Mr. Knopf.
So in March 1994, Union Bank unveiled the Stepstone Funds, playing on the notion of helping customers with their investment "steps" through life. The bank then began backing up the new brand name with ads in California papers. Since then, the fund family's assets have jumped 60%
Increasingly, other banks are placing more emphasis on building the brand identity of their proprietary funds. Many industry bank experts argue that they don't have much choice.
With nonbank competitors with names like Fidelity, T. Rowe Price, and Vanguard constantly flogging their funds with national advertising, banks without strong brand identities will have a tough time differentiating themselves from the madding crowd, bankers and brand experts agree.
"A brand name is a promise," said Elsie Maio, senior vice president with Diefenbach Elkins, a New York based brand consultant. "It's a shorthand, distinct signal of hopefully what the market is looking for."
Mellon Bank Corp. realized this when it purchased Dreyfus Corp. for $1.8 billion. The Pittsburgh-based banking company was essentially paying for one of the strongest brand names in the mutual fund business.
But short of paying big bucks to acquire brand identity, most banks are faced with the task of building a brand on their own, using advertising as the key means to achieve that end.
Many observers think they have a tough challenge ahead.
"Bankers in general haven't understood the role of brands in consumer selection - they think they are in a commodity business," said Alan J. Bergstrom, a managing director with Dove Associates, an Atlanta, Ga. brand strategy consultant.
But he said that "this is beginning to change as more non-bank competitors begin to chip away at franchises."
Indeed, a few banks, most notably Wells Fargo & Co., have developed reputations for being unusually effective marketers of their mutual funds.
Wells has played off its 19th-century roots in selling its Stagecoach fund family. When the bank launched the fund family three years ago, it ran striking television ads in several languages showing stagecoaches stirring up dust as they moved through old Western towns. The bank has continued to run print ads touting the funds.
"The bank is selling the glory and the promise of the old West, a place where anything is possible," Ms. Maio said.
Bank of Boston has similarly used history in marketing its 1784 Funds, a play on the bank's founding date. "It implies reputation and safety," Mr. Bergstrom said.
But a clearly articulated brand identity can do more for a fund complex than boost sales, Ms. Maio said. "A well-positioned brand will embody the promise of the organization, not only within the marketplace but internally as well," she said.