OUT FRONT
Scudder Defined Contribution Services offers companies bundled 401(k) services. Scudder, part of Scudder Kemper Investments Inc., Boston, does investment management, offering its own and other investment companies’ mutual funds; record-keeping and administration of accounts; and communication with plan participants, otherwise known as employees.
Because these high-ticket services are usually sold directly by a sales team, this field has not been known for its direct marketing. But Scudder is different: It relies on a comprehensive DM program, part of a larger integrated advertising effort, to open contact with its base of medium-sized companies.
Why the departure from conventional wisdom?
“We’re offering services and expertise usually available only to much larger companies,” says Susan M. Cronin, vice president and marketing manager for Scudder Defined Contribution Services. “We use direct marketing to generate leads. It’s meant to break through the clutter and get to the person who makes decisions.”
Scudder doesn’t start up plans; it only takes over those formerly administered by others. It targets middle-market companies, defined by employees (500 to 5,000) or the assets in the company’s defined contribution plan ($5 million to $250 million). That makes for a universe of about 25,000 companies-10,000 at the low end of that market ($5 million to $10 million) and 15,000 at the high end ($10 million to $250 million).
Cronin joined the company in August 1998 after serving as vice president of corporate marketing at Fleet Financial Group (previously, she was a marketing manager for Fidelity Investments’ Institutional Retirement Services). She sees part of her mission as continuing to increase awareness of its position as mid-market specialists.
How does one use direct mail in a field apparently not used to it? “We know how the decision-making process is done,” Cronin says. “It’s not by one person, it’s several key people-the CFOs, the treasurers and the vice presidents of human resources. The higher upmarket you go the more people there are. So the job of direct mail is to break through all the other mail they’re getting, to make something interesting that gets through the administrative assistant.” These are the people who are responsible for having a service provider handle the plan, including the investments.
Scudder uses a three-dimensional piece-usually a box-meant to grab the recipients’ attention and get them to pick up the phone. Financial direct mail is usually pretty conservative, but Cronin says that in the defined contribution sector, there’s room for boldness. “It’s different when you do business-to-business direct marketing,” she says. “Your universe is smaller. You know more about the buying process.”
The theme for the latest mail piece was “How Illuminating.” Scudder sent out a box with the motto on the address label, “Did you know that Scudder professionals will evaluate your 401(k) plan against industry benchmarks and offer solutions to you?” The inside flap says “How Illuminating” and the box contains a yellow flashlight and a letter emphasizing Scudder’s ability to continually improve a plan by consulting, delivering and benchmarking. It also contains a business reply card.
The message tends to center on the entire offering, Cronin says. “We have an incredible story to tell because we focus on midsize companies. There’s so much to talk about: who we are as an investment management company, how we educate participants, how we service participants.”
Cronin says Scudder does not use outside lists but relies on its own database built when the company first got into the defined contribution business. “The challenge is to take your list and refine it and keep it up to date,” she adds. This is done mainly through the regional sales force’s basic knowledge of the companies.
Cronin points out that the time frame for 401(k) products is a fairly long one, so Scudder sends several pieces a year, often targeting the same person more than once. Sales agents follow up with a phone call. They can send a brochure or, if there’s high interest, set up an appointment. Scudder has eight offices across the country.
Says Cronin: “If you’re a company based in Chicago you get a business card from a Chicago sales rep and his signature is on the letter. We do have the leads come back here [to Boston] and we track them. We manage the metricsaround lead generation and move to bid.”
Scudder is one of the few companies of fering fully bundled services to use direct mail-the biggest players include Fidelity, Metropolitan Life, Vanguard, Merrill Lynch and T. Rowe Price. “Many searches are consultant-driven, they start with an request for proposal,” says Gerry Mullane, Vanguard’s director of sales. “We do have sales executives who cover regions of the country and send a limited number of prospecting letters and make cold calls but it’s not a lot.”
Fidelity Investments, Boston, does no direct marketing, relying wholly on its sales force, the request for proposal process and a small amount of display advertising, according to Perry Chlan, vice president of institutional client services.
Scudder does have a mutual fund division that tries to convince companies to take its funds, but Cronin says that’s more a one-on-one approach that doesn’t use mail.
In addition to direct mail, Scudder’s Defined Contribution Services business also runs direct response advertising with BRCs either tipped in or bound in the ad’s page. The ads and the BRCs also include a toll-free number. They run in trade publications aimed at CFOs and human resources professionals, such as Employee Benefit News, Plan Sponsor, Defined Contribution News and H.R. Executive.
Scudder also offers information guides because, as Cronin says, “In our market size they tend to use consultants to weed through all the service providers. The challenge for us is to differentiate ourselves.”
Cronin sees the marketing communications as an opportunity to share Scudder’s experience and to assure plan sponsors that the company is expert in these complex switchovers of management companies (called conversions) that sponsors do reluctantly. Organizations that choose to go that route might be unhappy with their administrator’s service, want to expand their offerings beyond what one mutual fund company offers, or need help getting employees excited about investing. “It’s usually not one thing that drives the decision to make the change. It’s a huge change. We do the conversion in a way that eases the pain and the trauma.”
In addition to managing the funds, Cronin’s division handles employee benefit legal issues, sends out the quarterly statements and takes inbound customer-service calls from plan participants, in addition to other services. It also has an Internet site for customer service.
On the investment side, Scudder recommends funds, including those that are not its own, and gets the money out to those funds. It’s a difficult business because it’s capital intensive; Scudder has to have the money on hand to distribute from the companies to the other funds, such as Vanguard or Fidelity. Scudder offers 40 of its own no-load funds, 12 Scudder-managed funds created with the American Association of Retired Persons and funds from 15 outside fund families.
