As the exchange-traded funds industry continues to evolve, marketing campaigns to support its growth must become far more complex and richer, according to a report from Financial Research Corp., “ETF Trends: Insider Insights on Distribution, Portfolio Construction, Risk & Regulation.”

“In our interviews with industry leaders, we learned that the core/satellite approach has proven to be an effective way to introduce investors to ETFs,” said Bob Jenkins, president of FRC. “One important finding from our research, however, was that the terms ‘core’ and ‘satellite’ had different meanings to different people. ETFs and mutual funds are now used in both core and satellite, and so are active and passive strategies. RIAs are also blending strategic and tactical approaches, due to client demand for downside protection.”

As the ETF marketplace becomes more sophisticated, providers will have to figure out who their target market is and how best to communicate with them,” Jenkins added.

There are two major factors that have given ETFs a multiplicity of opportunities, Jenkins said. First, the market is young and, second, “firms see many options for market expansion, in terms of investor types, situations and goals, as well as distribution channels,” he said.

“Asset management firms traditionally use distribution channels, such as wirehouses or direct to consumer, as the basis for market segmentation. We know, however, that channel alone does not do a good job of capturing investor sophistication, and some competitors are studying the behavior of the end client and incorporating behavioral characteristics into their product approaches, communication efforts and tool development. Success in the future will rely upon strategic vision combined with well-conceived and comprehensive marketing processes.”