Signet Banking Corp. plans to entice new customers into buying one of its stock mutual funds with a $100 cash bonus.
Beginning in January, the Richmond, Va.-based banking company expects to offer the payment to new investors who maintain a $3,000 balance in its no- load Blanchard Growth and Income equity fund for at least 90 days.
Signet will roll out the bonus in a nationwide direct mail test during the first quarter of next year, pending expected regulatory approval, bank executives said.
It is part of the $12 billion-asset bank's strategy to use direct marketing to hawk its mutual funds to customers across the country.
"The bank broker-dealer (channel) is a finite universe," said James Eads, president of Signet's brokerage unit. "It's pretty limited in terms of building a large business, and we want to build a business that's national in scope."
Several observers said the bonus strategy comes as mutual fund providers are scrambling to differentiate their products from one another. In fact, the Blanchard fund to be promoted is little more than a brand name - the assets in the fund are part of a pool that is managed by Chase Manhattan's Vista Capital Management unit.
Yet if the marketing gimmick proves successful in attracting new interest in the Blanchard version of the fund, it could spark imitation. "This is a price promotion, just like if you go to the pharmacy or the supermarket" looking for a deal on soap or toothpaste, said David Master, vice president at Optima Group, a Fairfield, Conn., mutual fund consulting firm.
Despite their efforts, many mutual fund marketers have had "trouble breaking through the clutter, because so many funds are trying to tell a story," said Mr. Eads.
This "experiment," as he described the cash bonus, may reveal one way to distinguish the bank's funds. "We have done this in the checking account area," he said, but it would mark the first time the bank would offer cash to mutual fund purchasers.
In July, Signet acquired the Blanchard Funds' parent company, Sheffield Management Co., a marketer of mutual funds by mail. Several observers said the direct marketing approach reflects a genuine synergy of Signet's and Blanchard's strengths.
"Blanchard's history is one of extraordinary ability in direct marketing," said Avi Nachmany, partner at Strategic Insights, a New York consulting firm. "And Signet is also well known for its direct marketing savvy."
Although Signet declined to reveal specific expectations for the promotion, Mr. Eads said the approach may be extended to other funds, depending on the results.