What segment of customers to go after?
As a mutual fund industry's growth leader, Vanguard has targeted customers seeking low cost and long-term investing in mutual funds. Vanguard is interested in gaining long -term rather than short- term investors. Vanguard stands out from many of its competitors because it views the market by focusing just on one particular service and being better at it than its competitors. Vanguard's philosophy is about staying focused on who they are and what they are good at rather than trying to be everything to the customer.

Facing competition and market climate changes, Vanguard must now decide which segment of customers to go after and develop the best way to serve these customers, in order to keep and leverage their competitive advantage. We think Vanguard should continue with the current strategy to focus on servicing the under one million segment and providing the custom what they want. Because, the under one million segment represents over $6 trillion in potential investment dollars. Gaining 10% market share in this segment will provide for much needed growth. Specifically, Vanguard should focus on the Strivers and the Complacent Independents. Although the Strivers have limited income and holdings, their willingness to improve their situation leads us to think that the expected profitability and return on investment are high.

How to advertise to current customer/new customer?
Before, advertising and direct marketing was not a key interest to Vanguard. With competitors becoming full service financial companies Vanguard now has the increasing needs of taking control of its brand awareness. However Vanguard encountered concern of spending money on advertising and direct marketing. Since most of Vanguard’s existing customers, especially loyal customers are satisfied with Vanguard’s less advertising strategy. In other words, Vanguards low-cost position in the industry conflicts with money spent used on advertising.

To solve this dilemma, we suggest Vanguard to take different strategies to current customer and new customer. They need to concentrate on their current clients, deepen the relationship with them by focusing on client communication, customer service and technology improvement, while trying to attract new clients through mass advertising and direct marketing.

1. No mass advertising to current customer, focus on customer service and technology improvement.

Vanguard has one of the highest loyalty scores in the industry, with a redemption rate under the industry average and good reputation. The current customers are more approachable to market to and also easier to gather information on. Therefore, no mass advertising is need. Instead, Vanguard can use Internet to promote its product and improve customer service. For example, Vanguard can send out emails to targeted customers to promote its products. Meanwhile, Vanguard should enhance customer service and improve the client communication with current customer by developing a website to lower the transaction costs, and to best serve the customers that prefer to do transactions online. Using all available technologies to educate the consumers, and broaden their reach to attract new business is vital to the customers. The beauty of technology improvement is that the easier it is to use and navigate, the more likely the same client will be to explore additional options such as trying new investment vehicles with the click of a mouse.

2. Direct marketing on non-customers and turn them into future customer:

Although spending money on adverting might seem conflict with Vanguard’s low cost strategy, advertising will benefit Vanguard in the long run. Because advertising will be attracting new customers, which will then provide more profits to use for advertising and direct marketing. Therefore Vanguard should use mass advertising to inform the potential customers about Vanguard’s brand. Specifically, Vanguard can apply commercials as a tool for advertising for new customers.

By using commercials as a key tool for advertising, Vanguard can keep its reputation by emphasizing its low cost advantage over its competitors and previously high performance. Vanguard's philosophy and commercial message will stand out amongst other competitors that focus on advertising its specific products offered. Hence, attract more new customers.