Mutual Funds Products are classified based on the underlying securities. Broadly there are two categories, namely Debt and Equity. These categories are further segmented into Equity Diversified, Sectoral Equity, Debt, Gilt, Liquid Fund, Index Fund, Exchange Traded Fund, MNC Fund and so on.

Debt funds are also categorised into institutional and retail plans, based on the investment amount or into short-term and long-term plans based on the investment horizon. Derivative-based products, Fund of funds and Principal protection fund with the help of put option are perhaps products which may be tested here in India. A put option, for the uninitiated, is a financial contract that acts as a hedge against declines in a stock's value.

If the stock falls, the put option's value rises.

What are the demographic and psychographic profiles of the customers of the three most popular categories of MF products?
The three most popular categories of MF products are Income Funds with about 40 per cent market share, Liquid Fund with 35 per cent and Equity Diversified with 10 per cent. What we see is that a typical investor is ready to take an exposure of around 5-15 per cent of his portfolio to equity. Hence the basic psychology of the investor is the safety of his capital, followed by returns.

Throughout India, income products are preferred. However in select pockets, we see a marked difference in the investing patterns: like in Gujarat and Andhra, people are more inclined towards equity schemes than in other states.

What is the most optimum basis of segmentation MF products market in India and in what way would the same provide a better understanding of the customers' value expectations as well as help sizing future sales/profit potential of the industry vis-à-vis other bases of segmentation?
Segmentation based on psychographic profile is the most optimal basis of segmentation. However one cannot deny the usefulness of demographic/socio-economic segmentation while targeting certain products. When it comes to mass marketing or achieving economies of scale, psychographic profiles help us identify the need/expectation of the customer and thus fill the gap in our product portfolio by designing a new product. On the other hand, demographic/socio-economic segmentation helps in launching niche products and lowering our expense ratios.

Although this basic segmentation will be fundamental to the MF industry, the future sales in the industry will come through the introduction of niche products.

What drives the growth and decline of the MF industry? Specifically, what developments in macro economic regulations, equity & debt market and tax areas can alter the demand and relative competitive dynamics of the MF industry?
The prominent factors, which drive the MF industry, are TAX and RETURNS. Now, as the Government of India has made dividend tax-free, we are witnessing a good flow of money into MF. Tax rebates provide a level-playing field for MF vis-à-vis assured-return products of banks/government institutions.

What products offer direct and indirect competition to MF Products?
All the assured return schemes like FDs, Relief Bond and Post Office MIPs are direct competitors of MF products. Hence MFs must differentiate primarily through returns, liquidity, convenience and diversification.

What growth prospects are expected in Indian MF Industry and what will drive the same? What are the general risk factors and uncertainties that will be of concern?
With the interest rate softening and most of the assured returns schemes lowering their interest rates, investors are ready to explore Mutual Funds as an avenue for investment. They have come to realise that risk and return go hand-in-hand. We anticipate that growth in the MF industry will occur as result of falling interest rates, performance of equity market and launch of more niche products.

All investments in securities are subject to market risks and the NAV of the units issued under the different schemes may go up or down depending on the factors and forces affecting the capital markets. Performance of previous schemes/plans is not necessarily an indication
of future results.

How is UTI-MF positioned in the industry vis-à-vis competitions and how does it communicate its differential positioning?
We have positioned ourselves as a large and professionally managed organisation with sound infrastructure, readiness to cope up with change, a good market presence, good governance practices and professional fund management. In addition, we are transparent, progressive, dynamic and technology-savvy. We are communicating theses messages through all our marketing and advertising communications including brochures, POP material, attitude and approach of sales force, lenience of service team, distributor/investor meets etc.

What capabilities has UTI built over the years in such areas as new product development, research, information processing, customer grievance handing etc. which will help it deliver better value to its customers at competitive costs?
We have realised that to achieve the high target growth rate of 100 per cent, we need a high degree of coordination between all the departments, especially Marketing, Fund Management and Operations. This is achieved through brainstorming at various levels. So when a new idea is at the conceptual stage, this idea is brainstormed by the Fund Manager and Marketing Department. Based on this a feasibility report is created, which our marketing team takes up with the operations department. After getting clearance on the operational feasibility, especially in the case of niche products, marketing teams work with publicity and sales team. We take extra care to process information and handle customer grievances. Through the UTI Financial Centres (UFCs) and the Central Processing Centre (CPC), we are able to service our customer.

What initiatives are being taken by UTI to build BRAND EQUITY in the minds of the existing and future customers? In what way does this equity deliver tangible and intangible value propositions, vis-à-vis direct and indirect competition?
As a part of Business Process Re-engineering, McKinsey recommended that UTI revisit its current brand image and redefine its new Corporate Identity to fully capture its future promise of customer orientation while capitalising on the strengths and values that its brand embodies today. Based on the recommendations, UTI embarked upon the exercise of developing Corporate Identity and Branding with Rediffussion.

Our new logo is the manifestation of changes happening in the organisation, and it's the first step towards building a new corporate identity. This logo conveys characteristics like sense of approachability, humility, dynamism, strength of character, stability with a corporate image that is clean, no-nonsense, down to earth, modern and contemporary.

The colours used in our new corporate logo are unique and imply specific meanings. UTI Orange stands for dynamism, an outward growing colour, sunny, cheerful, bright and young juxtaposed with UTI Blue which gives a sense of calm, maturity, balance, depth and serenity. The white type face 'UTI' encased in deep blue box, while extremely striking, emphasises the clean, pure, and neutral image of UTI Mutual Fund.

The post-launch market study threw up a positive feedback about the recognition and retention values of our new brand identity. Thus we have certainly positioned ourselves at new heights on the horizon of the mutual fund industry. We believe we have set ourselves on the tracks to change, on the path of progress and growth.

K Madhavakumar spoke to our Consulting Editor, Dr. Ranjan Das