Vanguard Group Marketing Analysis


Vanguard Group is a US-based registered investment advisor with headquarters in Malvern, Pennsylvania. Under its management, the company has reported having around $7 trillion in global assets as of the beginning of the year 2021, as noted by Financial Times (Flood, 2021). At this time, the organization is the largest mutual funds provider and the second-largest provider of exchange-traded funds (EFTs). The company is known for handling its ‘mutual funds’ that are mainly in the ownership of Vanguard’s customers who gather their money together for investment purposes (Yochim, 2021). Thus, the company specializes in low-cost, high-value, and long-term investment, the goal of which is to help investors generate and keep returns higher.

Vanguard has segmented its retail clients into core customers who have up to $250,000 in assets the demands of which are addressed by customer service, voyagers who have between $250,000 and $1 million, given personalized services. Also, there flagship clients who have $1 million and more and have a dedicated employee serving them (Vanguard, 2022). Therefore, the marketing strategy of Vanguard is creating a focus on a specific group of customers for positioning product or service offerings on the basis of what customers want and need. In many cases, it can be complicated or detrimental to try appealing to a larger market of customers.

In the mutual funds sector, customers invest for gaining profits, both on short- and long-term bases, and they usually aim for high return rates, emphasizing value for money and loss minimization. However, due to the high stakes within the industry, the environment is quite competitive, which means that Vanguard is challenged by such powerful competitors as Putnam and Fidelity. However, the majority of competitors tend to focus on clients with a high net worth, while Vanguard emphasizes the importance of offering the positioning of a lower cost, which is more attainable and can be meshed to the customer-focused business model.

The core problem at hand at Vanguard is the increasing customer churn, in which some of the former customers of the organization ceased doing business with it. As reported in the case study, the weighting of the client redemption ratio increased from 5% to 7.5% because redemption rates had risen from 11% to 13%, partly due to the boom in the technological expansion (Quelch & Knoop, 2004). Such an increase is quite problematic for the company because of its focus on attaining the loyalty of its customers. In addition to the rising customer churn, other problems that Vanguard faces include the limited activities in terms of advertisement and promotion, which can further result in decreased brand awareness. Consequently, the company may have to work toward developing a better grasp of the various types of clients to meet their needs and demands.


Vanguard’s Business Model

The low-cost business model and the emphasis on long-term investors are critical to Vanguard’s operations. By following these principles, the company has the capacity to cut down on its advertising expenses and other areas of business for maintaining its focus as a low-cost provider, which still allows investors to get a sustainable flow of cash, which is the main point of differentiation and competition. Even though the redemption rate of customers has increased, it is still seen as an overall low by industry standards, mainly because of the customer-oriented business model that induces customer loyalty. Therefore, the business model’s focus and the organization’s success is to gather as many loyal customers as possible to yield the highest return.

The Churn Problem

The customer churn problem has possibly developed because the marketing department of Vanguard used to spend a lot of funds on customer relationship management and advertisement campaigns. After observing this for some time, customers discovered that the money that they were investing was spent on matters other than returns (Quelch & Knoop, 2004). This could have resulted in customers leaving the company, contributing to increasing redemption rates. Therefore, the company was challenged by the need to maintain the reputation of an affordable provider to communicate to potential customers that Vanguard would not be spending much on high-cost marketing. The churn problem could be addressed by guaranteeing long-term investors that there would be no discrepancy between its activities and positioning.

Client Segmentation

In 2003, Vanguard was differentiated into such four segments as full service institutional, investment only institutional, core retails, and high net worth retail. To improve its customer management system and understand the background behind the increasing number of customers who choose to seize investing, Vanguard financed a client segmentation study. From the study, it was found that institutional clients accounted for $226 billion in assets under management. Many of the company’s full-service customers asked Vanguard to manage their 401(k), 403(b)(7), and other defined-contribution plans (Quelch & Knoop, 2004). The survey found that the company was the most effective in satisfying customers’ 401(k) needs, having the highest loyalty score in its industry (Quelch & Knoop, 2004). As to investment-only clients, which included foundations, universities, healthcare organizations, and others, needed Vanguard services for investment management, education services, and plan administration.

The research that the company carried out the differentiation between seven segments of investors defined on the basis of their motivations using Vanguard services. They included “players, managers, adviser dependents, complacent independents, strivers, live for todayers, and financial avoiders” (Quelch & Knoop, 2004, p. 8). The wealthiest segment of customers included players, managers, and adviser dependents, while strivers were expected to gain more wealth over time as they tended to be young executives and referred to in Vanguard as “Millionaires in the Making” (Quelch & Knoop, 2004, p. 8). The differentiation between customer segments meant that the company could identify strategies that would fit the particular groups. Going against the segmentation could be problematic for the company because of the misalignment between customer relationship management and the company’s business operations.

The Marketing Mix

Because of the issues with customer churn, Vanguard could benefit from an effective marketing strategy in the form of a marketing mix. It includes several areas of focus that help an organization develop a comprehensive marketing plan. It is classified into product, price, placement, and promotion, all of which work together for the purpose of formulating consumer-centric customer mixes that emphasize the role of customers and their needs expectations. Being a customer-centric company, Vanguard will significantly benefit from the marketing mix approach in the long run. However, it must be noted that the company is service-focused rather than product-focused, but it does not mean that the marketing mix will not apply.

When it comes to promotion, Vanguard uses advertising as the primary strategy of attracting new customers to consider using its services. However, the advertising efforts must take the form of low-cost solutions, with institutional clients often targeted through online promotions and conferences where advertising is mainly done through word-of-mouth marketing (Malone, 2020). Vanguard has already made the mistake of putting $3 million toward a survey and costly TV and print ad campaigns (Quelch & Knoop, 2004). Even though the survey provided valuable insight into customer segments, the costs are too high to warrant the expenses.

In terms of price, Vanguard emphasizes the importance of loyalty pricing as a way to attain new customers and keep loyal ones satisfied. The pricing of the services that the company offers is designed for promoting customer loyalty, and such a strategy is rare for the industry in which it operates. For example, the company introduced Admiral shares back in 2000, which were available to clients who had kept a minimum of $50,000 invested in Vanguard for at least ten years or $150,000 for at least three years or who had over $250,000 currently in their balance. In the Vanguard 500 Index Fund, Admiral shares were charged at 0.12% a year compared to ordinary shares of 0.18% (Quelch & Knoop, 2004).

Finally, the place category is illustrated in online transactions, with digital channels being largely successful and beneficial to the company and its customers. According to the case study, more than 40% of transactions were carried out online, which significantly decreased the operating costs by cutting the demand for more workers to advise clients (Quelch & Knoop, 2004). Due to the convenience of online transactions, customers get better accessibility to Vanguard services, which is a significant factor in its business success.


In order to attract more customers and address the challenge of the increasing churn rate, it is recommended for Vanguard to focus on customer acquisition. Using the segmentation findings, the company can identify which specific segments of customers to target and rely on how well they can fit Vanguard’s business model. Drawing from the segmentation, the target group of customers appears to be the most suitable because of their tendency to buy and hold, which is a massive investment strategy (Beers, 2020). Besides, this customer segment does not need many financial services in contrast to those who are dependent on advisors.

Public relations tactics should be employed to target the manager segment. An example of this is the possibility of publishing financial reports to popular business and financial websites with high numbers of subscribers. These may include the Financial Times, the Economist, MoneyMorning, the Street, This Is Money, and many others. The information posted on the websites should communicate to prospective customers in the manager segment that the company is outperforming the competition and should be seen as an attractive option for investing in mutual funds. It is essential to avoid costly mass marketing campaigns within the recommendation because of the mismatch with the business model and brand positioning. The focus must be placed on low costs as a means to emphasize the fact that Vanguard is dedicated to lowering spending.

Another possible scenario for increasing the churn rate is concerned with a customer referral program in which the already-existing investors that work with Vanguard will invite their friends or partners to join the company. In turn, those referring other customers will get discounts as they help boost brand credibility with the help of word-of-mouth marketing, which is also an affordable strategy. Such a tactic will have a positive impact on already existing Vanguard customers because they do not have to get involved in any additional spending to bring new customers.


Beers, B. (2020). Buy and hold definition. Web.

Flood, C. (2021). Vanguard’s assets hit record $7tn. Financial Times. Web.

Malone, S. (2020). The importance of word-of-mouth marketing through social media. Forbes. Web.

Quelch, J., & Knoop, C-I. (2004). Marketing at the Vanguard Group. Web.

Vanguard. (2022). Corporate portal. Web.

Yochim, D. (2021). Vanguard mutual funds: What they are, why they’re popular. Web.

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