Marketing Audit: Russell Investment Group.docDocument Transcript
Russell Investment Group
Marketing Audit Part 1 & 2
April 4, 2006
Although not on the Fortune 500 list, Russell Investment Group is one of the most
respected investment companies in the world. Russell manages $167 billion in assets
directly, but also acts as a consultant on $2.3 trillion in assets. They also deliver
investment programs to more than 2,000 clients in 39 countries. Russell manages its $167
billion in assets in a variety of mutual funds, multiple-manager funds, retirement plans,
commingled institutional funds, and private accounts. They also provide a full-range of
investment services to firms, institutions, governments, and individual investors. Well
known clients include the pension plans of global corporations such as Toyota, AT&T,
BHP Billiton, Compaq, and General Motors. Globally, millions of individual investors
have access to Russell’s services through a network of alliances that includes many of the
world’s top banks, insurance companies, brokers, and independent investment advisors.
Frank Russell, a Wall Street broker, moved to Tacoma, Washington in 1936 and
established Frank Russell Company to market “Bond Stock,” a forerunner of today’s
mutual fund. Frank Russell has maintained its headquarters in Tacoma, and has grown
substantially, moving from small business offices in rented spaces, to eventually
constructing a luxury, technologically advanced 12-story building overlooking
Russell’s strategy is designed to minimize risk and build long-term wealth. To
develop long-term financial security, a financial advisor from Russell can diversify
portfolios at these three levels, based on investment goals and risk tolerance:
Multi Asset — Each of the major fields of investment can be included in a
portfolio, in proportion to the objectives of the client. This involves investing in many
different types of assets, including, but not restricted to U.S. Equities, International
Equities, Emerging Stocks, Bonds, T-bills, and Real Estate.
Multi Style —This investment strategy has representative managers from each
style category. No matter which style is in favor at a time, this blending of styles can help
reduce risk and work toward more consistent returns. The styles of certain money
managers are very important when choosing one. A manager that places a lot of emphasis
on small cap stocks may have volatile returns. A manager in growth could be number one
or last depending on luck, the market, etc. Russell seeks to combine styles to best fit the
ability and the goals of the investor.
Multi Manager —Russell often uses this approach when acting as a consultant.
The multi manager approach manager-of-managers approach. Russell has stringent
guidelines concerning which money managers they choose. Russell seeks money
managers that demonstrate consistent success. Russell does not choose the “hot pick” for
the year. Russell chooses its money managers based on their style of investing and takes
into account ethics, personnel, etc. Consistency is the key to long-term investment
Russell’s Investment strategy is focused on diversification. Diversification can
allow investors to eliminate diversifiable risk. Investors that have a large degree of
diversification can increase their earnings while still remaining confident about the
security of their investment. The following diagram is a representation of Russell’s
commitment to risk aversion.
“To Improve financial security for people
as we behave with non-negotiable integrity.
We have a genuine focus on our people, including family, community, and
We strive to exceed client expectations.”
This mission statement is strong because it explains what Russell is
serving (people) and what those people need (financial security.) It also portrays
Russell as a company with sound ethics. The mission statement is a little bit
vague on who the “people” are. The mission statement could be improved by
making it more clear who the target is.
1. Russell’s primary business goal is the same as most other financial managers; to
maximize the value of its clients’ portfolios. The firm seeks to achieve this goal by
devoting the necessary resources to research and analyze money managers around the
2. To stay on the cutting edge of technology. It is vital that Russell expand upon their
commitment to technology in order to maintain their competitive advantage.
3. Expand further into the global marketplace. This is an important objective because of
the rapid growth in the international market.
4. Increase the value of their products and establish their benchmarks as industry leading.
1. Improve the human condition. Russell engages in issue sponsorship to combat many
things affecting human progress, including the fight against AIDS and world hunger.
2. Maintain a worker friendly environment. Russell limits the workweek and attempts to
make work as fun as possible.
3. Protect the environment. Russell endorses recycling initiatives and generally supports
most actions to protect the environment.
The objectives are inadequate at this point in time. The non-business objectives
are good, but the business objectives should include a goal for increasing market share or
other quantifiable objectives.
Russell understands that advantages in cost are subject to volatility and therefore
focuses on product/service differentiation competitive advantages. Broadly generalized,
Russell competes on diversification and its degree of applied research. Russell excels in
the investment segment because of the amount and quality of research used to analyze
market options. The money-manager approach to investing is a sustainable competitive
advantage that has helped establish Russell as one of the most reliable investment
companies in the market. Russell also maintains a very personal relationship with its
money managers. Unlike their competition, Russell meets face to face with the money
managers, flying frequently all over the world to ensure the confidence of their clients.
Another advantage that Russell has over its competition is the ability to
customize. Russell has investment strategies for any investor. For example, Russell’s
approach allows employees of a Russell managed company to diversify different assets,
levels of risk, and management styles to customize their 401K plans. The customizable
401K-portfolio investment strategy allows employees to get the flexibility they require
without the inconvenience of having to invest through several companies.
Russell’s entire system of investing is based upon its relationships with its money
managers. Russell uses its state of the art technology to track the best money managers
and than create a relationship that is mutually beneficial to Russell, the money manager,
and the investor. Russell has had to make numerous strategic alliances to enter the
individual investor market. To reach individual investors, Russell has strategic alliances
with state banks, power brokers, large insurance companies, and independent investing
Russell Investment Co. is in position to continue its growth in the investment market. By
going global, Russell has stayed ahead of the curve. These emerging markets will only
become more important and profitable as development continues. Russell has also
entered the market for individual investor’s accounts. By diversifying their client base
without sacrificing their reputable investment strategies, Russell has situated themselves
in the middle of a market ready to explode with the retirement of the baby boomers.
Russell could benefit from a more aggressive marketing campaign to secure its name in
Wall Street. Russell should use its strong reputation to increase market share and firmly
entrench themselves in the highly volatile investment management market.
1. Company Culture: The Company culture at Russell is well defined and understood by
all of its employees. This culture was established by Russell being a family-owned
company up until 1990. Russell has a strong emphasis on integrity. Russell empowers its
employees to make sound decisions and represent the firm. Russell maintains that
employees should also value their free time and therefore does not operate on weekends
and limits the workday to five o’clock. Russell is currently listed as the 66th best company
to work for by Fortune magazine in 2006. A strong company culture helps avoid agency
problems. Employee satisfaction leads to low employee turnover, which helps the
company stay efficient by focusing on retaining clients, not employees.
2. Growth Rate: Russell, though still small compared to industry leaders has grown
substantially in the last 10 years. Russell has recently gone global, stimulated primarily
by internal growth. A steady growth rate is a sign that a company is stabile and capable of
delivering consistent profits and is very important to investors. If and when Russell
decides to go public, a stabile growth rate could allow Russell to achieve a very
3. Business Reputation: The business reputation of Russell is one of its biggest strengths
and reasons for their success. Russell’s reputation is based upon the firm exceeding set
benchmarks, which often become industry-leading benchmarks in themselves, for
example the Russell 1,000 index is used as an industry leading benchmark. The
investment industry is one dominated by reputation. Businesses and individual investors
alike are very coy about investing their life savings in a firm that does not have a
reputation for delivering high returns and security. Russell’s reputation is an intangible
asset, but is probably its most valuable.
4. Ethical Reputation: Russell donates a very large portion of its profits to charities.
Russell also encourages its employees to donate money to charities and also run
volunteer programs in local soup kitchens, etc. Employees that engage in
volunteer/charity work receive full pay for their time. In addition, Russell will match any
donation of $25 or more made by an employee. Russell sponsors a “jeans day” every
month where employees may buy a sticker for $5 allowing them to wear jeans to work.
The proceeds go to a charity of the month chosen by employees. Russell is also a strong
advocate for protecting the environment. A good ethical reputation is important because
it allows Russell to appeal to those companies or institutions that share the same
concerns. A company like Dupont, having proven its commitment to saving the
environment, may choose Russell over a company of similar business stature that does
not emphasize environmental awareness.
5. Employee Diversification: Russell strives to hire employees based on their abilities,
but also sees the benefit of having different perspectives in the workplace. Half of the
global equity team in the Tacoma headquarters is from different countries around the
world. Employee diversification has the ability to keep the workplace “fresh.” People of
different backgrounds and introduce new ideas that could lead to a decrease in costs or
increase in revenues. Diversification is also important to portray a commitment to a
global concept of business. Diversification is very important within the sales force. The
ability of the sales force to present the company positively can be greatly increased by
having a sales force that fits the company’s demographic profile.
6. Money-Manager Relationship: Russell has a very strong relationship with all of its
money managers. This is a strength because Russell can depend on its managers to
operate fairly and efficiently for them. The money managers have lots of clients besides
Russell, but may get preferential treatment.
7. Privately Owned: Being privately owned allows Russell to focus exclusively on its
operations instead of having to cater to the needs of stockholders.
1. Growth and Reputation: Two of Russell’s strengths could become weaknesses.
Russell relies dangerously on its reputation and its internal growth. As stated earlier,
Russell has a great reputation, but bad PR or successive losses could put the firm in
jeopardy. The ability to grow internally is a major bonus for Russell and a luxury that
many companies strive for, but is not efficient by itself. Even though Russell is a private
company it could still benefit from increasing financial leverage by financing a portion of
its operations with debt. This would also allow Russell to free up some cash for
2. Location: Although Russell has strong local ties to the Tacoma area and its
community, the location can be viewed as a weakness. Financial companies are
concentrated on the east coast; therefore the media that covers them is there too. Russell
slips under the radar in the media because it is not localized in the area most of their
readers and viewers are. Additionally, Russell is too far away from the east coast to fly
back and forth in one day for a meeting. This slows Russell’s response team, even if it is
only a day. One day in the financial world can play a huge role in the attempt to
capitalize on spontaneous investment opportunities.
3. Response time: Russell does not have the capacity, or the response time to react to
market trends and demands. The firm does not have as many employees compared to the
norm of businesses in this market. Russell has always been slow to respond, which can be
considered both a strength and a weakness because they do not overreact to trends.
However, since they don’t react quickly, they are giving up a large possibility of gaining
significant profits. Overall, Russell may be too cautious.
4. Privately Owned: Being privately owned is also a strength and a weakness.
Stockholders give firms the capital to grow or otherwise improve the company. Russell
still has the ability to grow, but is restricted by having to finance based through debt or
with its bottom line. This inevitably leads to a slower growth rate than publicly traded
1. Concerning pension funds, there is a huge opportunity for growth and profits due to the
trend towards retirement needs. Baby-Boomers are the largest age segment and are
increasingly seeking to secure their future finances. Russell is able to capitalize on this by
creating world-class pension plans for companies like AT&T. Russell gives clients like
AT&T the confidence that their pension plans will earn the best returns in the industry.
2. Russell has a better global footprint than most firms it size. Russell has roughly 60% of
its business inside the U.S. and the other 40% can be found in international markets.
Russell has “gone global” to take advantage of emerging international markets that could
offer a higher ROI than the U.S. market allows. This helps them stay competitive and on
the cutting edge. Russell’s emphasis on global growth has helped to secure the Russell
name in the international investment arena.
3. Russell has expanded its operations to manage both corporate and now individual
investors’ accounts. Russell has established an outstanding reputation based on real
results. This will no doubt make Russell a factor in competing for the accounts of
1. Competition: There are other firms that offer similar services such as Goldman Sachs,
TD Waterhouse and other large banker/brokerage firms. Russell has been under the radar
up until the last few years because of their small size. As Russell grows, they are
attracting more attention from their competition. Russell needs to protect its competitive
advantage from the larger brokerage firms. If one of the large companies decides to steal
Russell’s investment strategies they could be squeezed out of the market. This is mostly
because Russell has not yet built a commonly recognized brand name, despite its strong
2. The Market: Like all financial companies, the uncertainty of the market is always a
looming threat to the success of the company. If the stock of a money manager that
Russell has selected for its clients falls dramatically, this will bring down the whole
Russell benchmark and lose their clients a lot of money. This can be traced back to
Russell being too dependent on its reputation and relying dangerously on its ability to
Russell has a very direct market research approach involving their customers.
Their marketing research strategy involves direct communication with their clients.
Russell will frequently communicate with their clients via telephone, Internet, or in
person to find out what Russell can do better. The tips given by clients is gathered by
investment analysts, recorded and put on the company database. These files are spread
throughout the entire global company so that Russell can best implement the most
important suggestions. This also enables Russell associates to see how customers feel
about their services. This type of marketing research has provided many opportunities for
Russell including how to best enter the individual investor market.
This direct approach works well with Russell. Due to their clientele, it would not
be appropriate for Russell to use surveys or other techniques associated with consumer
markets. The one on one interaction shows to their customers that Russell is willing to be
flexible and gives the clients a feeling of worth. It also gives Russell the opportunity for
substantial learning about which products are doing the best and which need to be altered.
This also improves their quality of decision making by getting an outside opinion.
Competitor Mission Statement
-Our mission is to offer each client outstanding investment performance, research
excellence, investment discipline, world-class talent, and exceptional client service and
Goldman Sachs’ mission statement is strictly based on investment performance. It
is very clean and straight to the point. It gives the feeling of a big business, and does not
feel very personal. It strongly differs from that of Russell’s. Russell’s mission statement
still gives the feeling of a family owned business. It includes employee and customer
happiness, which Goldman Sachs does not. A company like Goldman Sachs is the
conglomerate of the business, and expresses this through their mission statement.
Although well written and gives a good overview of the company’s mission, it gives the
impression that the company cares only about profit.
Russell’s broader market for consulting includes individuals, corporations,
pension funds, non-profits, and governments worldwide that wish to take advantage of
Russell’s innovative multi-manager approach to investing. Russell has many investment
options for the broad portion of its market. Russell’s target market is in the middle of
broadening from its traditional reliance on businesses and institutions to incorporating
individual investors. Russell targets mainly small businesses, but when possible bids for
larger contracts as well. Russell has 40% of its assets managed overseas where a
significant portion of its target market resides.
Russell Investment Group would be classified by the North American Industry
Classification System as 523920 – Portfolio management, their index entry is investment
From our careful analysis, we have identified four distinct target markets for
Russell: the business, institutional, individual investor, and emerging markets. These
markets represent the most profitable points of focus for Russell.
The business market is the biggest and most important market for Russell.
Marketing in the investment industry is very different from any consumer industry.
Marketing is mostly in the form of PR because of the scale of the product. Russell is
offering a very complex and expensive product, both in its services and opportunity cost.
There are very few companies that would respond to a direct mailing campaign or other
“attention getter.” Companies are usually aware of the options for the management of
their employee’s pension plans and are looking for reputation based upon results.
Word of mouth marketing dominates the business market. For Russell to increase
their word of mouth marketing, they must achieve better results than their competitors.
Russell could also benefit from the free PR brought by media in the investment industry.
Magazines such as Forbes, Times, Business Weekly, target the people that are interested
in investing or managing companies, both of which are important demographics for
Russell. Other venues are periodicals, most notably the Wall Street Journal. The
psychographics of buying the services of an investment firm are very focused on trust and
reputation. Russell should therefore focus any advertising on establishing trust before
pushing their investment products.
Russell should advertise through the media outlets listed above. Advertising and
offering free investment advice will increase brand awareness. Russell’s weakness
described in the SWOT analysis is apparent in media outlets outside of the Northwest.
Russell sits in the back row compared to East Coast investment companies located in the
investors hub (Chicago, Boston, New York). Russell needs to show that although they
still follow the same values as a small scale, family-run business, they are not in that class
anymore. Free publicity is good and easy to find on the West Coast. Russell is dominated
by larger firms on the East Coast. Russell does not receive enough publicity to make a
difference. In order to reach their target market on the east coast, Russell must buy ad
Of the $155 million in funds managed directly by Russell, almost half belong to
institutions. Many institutions, like non-profits, have tax-exempt status. Russell offers a
special line of funds to take advantage of high tax investments that other investors usually
shy away from.
Russell researches money managers for the Bill and Melinda Gates Foundation.
Promoting greater equity in global health, education, public libraries, and support for at-
risk families in Washington State and Oregon, the Seattle-based foundation is a
substantial endowment from the personal generosity of Bill and Melinda Gates. Their
endowment funds are invested with a balanced portfolio of equities, bonds and real estate
funds with a focus on achieving long-term growth. This is the largest institution that
Russell manages, with a total worth of $25 billion. The Bill and Melinda Gates
foundation is a great example of a new demographic. Institutions that are created to
combat serious illnesses, such as cancer are growing into a considerable niche market.
Russell should take advantage of their ethical reputation and commitment to moral
programs. Non-Profits, such as the Bill and Melinda Gates Foundation, are an untapped
market. Russell should focus on improving communication between itself and institutions
dedicated to a cause. Issue sponsorship is a channel that Russell could use in targeting the
serious illness non-profits. By sponsoring special events or making public statements,
Russell could potentially generate leads. After generating leads by finding common
ground, Russell should attempt to create a working relationship. Any relationship that
manifests itself has the potential to become profitable.
This is an area where we believe Russell can achieve great success. The market
for individual investors is going to increase in the next 10 years with the aging of the
baby boomers. The baby boomers and generation X are by far the two most important
demographic groups. The baby boomers control 50% of consumer spending power. Their
wealth and concern over their retirement make them a perfect target market for Russell.
Baby boomers are notoriously skeptical of high-pressure sales. Russell’s relationship and
personal selling strategies would suit well to this demographic. The Generation X
demographic is made up of 40 million consumers. The Gen X group has the largest
percentage of women in the workforce. Gen Xers are a good target market for Russell
because many start to invest heavily in 401K’s. Both of these groups have the potential to
be very profitable to Russell.
Russell could try to enter the market alone or use push tactics to increase sales
through their subsidiaries. Russell could still use the same money manager approach that
it uses presently albeit expansion into the brokerage arena will take more marketing than
in the business sector. At the present time, the Russell name is known for its work
managing the 401K portfolios of large corporations like AT&T and GM. Individual
investors are much more fickle than businesses are. Pension plans are important, but
individual investors are betting their own wealth and are therefore much more
scrupulous. It will take a great deal more marketing by Russell to enter the individual
investor market on its, than through its subsidiaries.
The large brokerage firms dominate this market. If Russell is to compete with the
large brokerage firms, they must be innovative in their message. Russell has been
successful because of their innovations in the business market. The multi-manager/multi-
asset approach must be the center of the marketing campaign. Russell should seek a
diversification and market development strategy by offering the same products available
to businesses plus create some new funds unique to the individual investor market. The
best way to push their products to the market is through the ads of their partners.
India is fast becoming one of the biggest economies in the world. The target
market for India is its 10 million upper class citizens and its rapidly expanding middle
class. India’s middle class of 300 million people is the largest in the world. India’s GDP
has grown steadily for the last two decades. As of 2005, India has the world’s fifth largest
economy, behind the United States, EU, China, and Japan. Unlike China, India’s growth
has been a result of its booming services sector. India’s service sector growth is
considered less susceptible to change than China’s low cost goods and growth from
foreign direct investment. India does have problems with unemployment and poverty, but
the government has shown that it is willing to take steps to alleviate this problem.
GDP Growth in India
Percentage of Growth
Although India’s economy is the fifth largest in the world, it is important to note
that its GDP per capita is ranked much lower. The distribution of wealth in India is very
poor. The two states marked INV #1 and #2 are the highest per capita GDP states in
India. We recommend that Russell begin their marketing efforts in these two states.
Russell should create a subsidiary that attempts to capitalize on the growing wealth in the
two states of GOA and Punjab. The “Americanization” of these two states is much more
advanced in comparison to the rest of India. Television and magazines are both outlets
that could be used to market Russell Investment Group to Indian companies in GOA and
INV. #1 ⇒
-Other Emerging Markets
Russell has an edge over their competition within their existing target market. At
the present moment, Russell cannot compete with the larger firms for overall market
share, but have the potential if they continue to grow within their boundaries. The
marketing edge that Russell has over its competition lies in their reputation. Larger firms
like Goldman Sachs imply that they will manage your assets, but that’s it. For some
companies that approach works. Russell should focus on the companies that want an
approachable-ethical manager. By generating leads through outlets like issue
sponsorship, Russell can hope to create long lasting relationships. Russell is not just an
ethical company. Russell is an under the radar industry leader in ROI. It is important for
Russell to maintain their niche advantage in ethics to provide a platform, but Russell’s
future lies in their ability to market their effectiveness.
Figure 1: Yahoo Web Services India Pvt. Ltd. 2006.
Figure 2: http://www.indianembassy.org/ indiainfo/india_map.jpg
Figure 3: The Russell Investment Approach. Russell Investment Group. 2006.
David Burton. (2004). Emerging Asia: Outlook, Challenges, and India’s Growing
Role [Speech]. New Delhi. IMF2004.