The pension fund market is maturing.  But, with market maturity comes a commoditisation effect on the very base product/service that funds are offering (particularly in a low-involvement/engagement category like pension funds).  Investment options, insurance options, pricing, call centre services and advice services can all be easily mimicked by competing funds and fundamentally look the same to members.

Most members aren’t actively comparing funds to find the subtleties between them.  They are forming views and making decisions on relatively limited information. And it certainly isn’t a rational decision made through comparing fees, service levels, investment options and insurance options across a range of PDSs.

Product and service improvements can provide a competitive advantage, but they will only do so for a short time until a competing fund copies it. 

The competitive landscape will be a very different one in five year’s time. 

Banks will be investing heavily in their wealth management businesses and achieving much higher levels of integration between their banking services and pension products making it easier and more convenient to have a single provider of ‘financial services’. They will likely introduce nil-commission products by taking a longer-term view of member value.

Industry, Government and corporate funds will continue to distribute in the workplace and will place greater emphasis on brand building at fund-level to attract and retain members in a much more open market place.

Self managed funds will likely continue powering on, driven by the recommendations of the closest of financial confidants, members’ accountants.

Overseas financial services companies will enter an increasingly attractive Australian market (a $1.5 trillion dollar market is hard to resist along with an appreciating $AUD) and bring a whole new level of competition and marketing capability finely honed from a much more competitive environment in their domestic markets.

So, with competition intensifying, member job churn increasing to create more regular fund choice decision points, switching costs for members decreasing and product and service-based differentiation not a long-term competitive advantage, what can funds do?

Invest in brand.  Or to be more specific, invest in brand equity

Brand equity provides competitive advantages for pension funds in a range of different ways.

• It differentiates a fund at a level that members notice and retain and affects their decision-making in relation to the fund (when deciding to either join or stay with a fund).


• It is not easily copied (no fund can have another fund’s brand – it is unique).


• It is enduring, providing a fund continues to build its brand equity (through its marketing programs) and it remains relevant to the membership over time.


• It is a powerful form of direct distribution and also supplements distribution network activity (be it participating employers or advisers).


• Members gravitate towards the familiar in what they perceive to be a complex area.


• It can help a fund attract and retain high quality staff and unite a fund behind one common goal and a marketing orientation.

Brand equity is a combination of brand awareness and brand association. Brand awareness is simply whether or not the target market knows of a brand’s existence. If you ask your target market ‘name all the pension funds you know’ and you come up in the list, then they are aware of your brand.  Better if you come up first. Even better if you are the only fund they mention.

Brand awareness is a prerequisite of brand equity as you cannot have brand associations with a brand you haven’t heard of.  To date, much of the marketing effort by pension funds has been on building brand awareness.  Interestingly, brand awareness alone has been a major factor in fund success to date and few funds have built any meaningful brand association beyond this.  Brand awareness alone will not cut the mustard when other funds build meaningful brand associations with your target market.  Unless you build your brand equity, you will have trouble attracting and retaining members in this environment.

Brand association is what the target market identifies with a brand. It is the words, images and feelings that your members and target market would use to describe a pension fund.  They are more than simply describing the utility of a fund such as ‘my pension fund’, ‘pays me interest’ or ‘the fund they told me to use at work’ (although utility such as trust, security and safety are all hygiene factors that need to be covered off in the minds of your members). They go to what meaning your fund has for members beyond the commodity of pension funds such as ‘top performer’, ‘caring’ and ‘ethical’.

Why do people choose Woolworths over Aldi when the latter is clearly less expensive?  Because of Woolworths’ brand equity.  Why do people choose your pension fund brand?  Because of your brand equity of [you fill in the blanks]. Brand equity adds real value and a real competitive advantage to an organisation that invests in it.  Pension funds will be no different when funds start to get this stuff right.

Being a low-involvement category with limited rational comparison between funds means that brand is often the only differentiating factor consumers consider when choosing to join or stay with a pension fund.  If your membership identifies with your brand equity and it means something to them, this is often what it takes to attract and retain them.

Brand equity can therefore be defined as ‘what’s left after you take the product (the commodity) away’.  Take the can of soft drink away from Coca-Cola and you are left with ‘fun’ and ‘good times’.  Take the mowing service away from Jim’s Mowing and you are left with ‘reliable’ and ‘trustworthy’.  If you take the product of pension provision away from your fund, what is left?

Brand equity often comes from the heritage of a fund and the nature of its membership, which is why industry-specific funds tend to have stronger brand equity.  In any case, there is often a kernel of brand equity in your membership already (often the reason why they joined your fund in the first place), you just have to uncover it and build on it in a highly focussed way.  It takes effort to identify and time to build brand equity.  Your effort today will pay off in the years to come when you really need it.

Bruce Stafford