Last year small banks allocated more of their marketing budgets to selling mutual funds than larger institutions did, according to a recent survey.

But for banks overall, mutual fund marketing expenditures were relatively small, according a survey of 440 institutions early this year by the Bank Marketing Association, Washington.

The trade group, which is affiliated with the American Bankers Association, made the data available earlier this month.

The trade group found that the median spending on mutual fund marketing by institutions with between $10 million and $25 million of assets was found to be 3.5% of a bank's total marketing budget.

The median mutual fund marketing expenditure by banks with between $25 million and $50 million of assets was found to be 5% of the total marketing budget.

Larger institutions had lower median expenditures. For banks with between $1 billion and $5 billion of assets, the median was found to be 1% of the total marketing budget. For banks with over $5 billion of assets, the median expenditure was found to be 3.5%.

Median expenditures by respondents in the other asset categories ranged from 1% to 3% of marketing budgets.

Responses were split among eight asset categories ranging from banks with between $10 million and $25 million of assets to banks with more than $5 billion of assets.

The survey also showed that most banks did well last year at predicting mutual fund sales.

Banks with between $250 million and $500 million of assets had the lowest success rate at predicting sales, with 62% saying sales met expectations. Banks with between $10 million and $25 million of assets did best, with every respondent saying sales were "approximately at expectations."

Between 8% and 27% of the respondents in the various asset classes reported sales "below expectations."

Only institutions ranging in size from $50 million to $500 million and those with more than $1 billion of assets had sales that exceeded expectations. The proportion of institutions with sales exceeding expectations ranged from a tenth to a quarter of the respondents in the asset class.

A majority of banks in the study found direct mailing to be the most effective form of marketing. Referrals from bank employees were the most commonly cited "other" method for generating sales.

Zion Bancorp, Salt Lake City, is among the institutions that can attest to the success of direct mailing.

The bank found newspaper and television advertising it used in 1993 to be less effective than direct mail, said Gareld Hanson, vice president in charge of advertising.

But Central Carolina Bank and Trust Co., Durham, N.C., had a different experience. The institution received several inquiries about its proprietary 111 Corcoran Funds from advertisements in local newspapers, said Thomas H. Ficquette, head of marketing for the $3.2 billion-asset bank.

Mr. Ficquette added that the institution's secret to success was to buy "preferred" spots in newspaper business sections. He said he made sure that no competitor's advertising appeared on or near the pages that carried the bank's ads.

"To be able to compete with other banks and mutual funds, you have to make sure you're the only one seen," Mr. Ficquette said. Throughout the mutual fund industry, total sales have slowed this year.

But for at least some institutions, this has caused them to boost mutual fund marketing expenditures. For example, last year Bank of Montecito in California spent 2% of its total marketing budget to promote its investment services, said Kevin Moon, marketing director for the $21.5 million-asset bank.

Expenditures this year will be nearly twice that level. Unfortunately, the spending this year hasn't boosted sales. But Mr. Moon said next year the bank plans to jack expenditures up to 5% of its total marketing budget, which he declined to disclose.

"We realized we needed to be more active in tapping into our own customers base," he said.


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