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Volume 18 • Number 4 • August 2010
Contents
The Wiggles........................................................................................... 2
Introduction....................................................................................... 2
Who Are The Wiggles?...................................................................... 2
Identifying And Satisfying A Need: For Consumers And Purchasers... 3
The Wiggles Target Markets............................................................. 3
Building A Brand. .............................................................................. 3
Achieving Global Success.................................................................. 4
A Successful Business Model............................................................ 4
Five Factors For Success.................................................................. 4
Conclusion......................................................................................... 5
References. ....................................................................................... 5
Web Marketing: To Web Or Not To Web? Or How To Web?................. 6
Introduction....................................................................................... 6
Marketing.......................................................................................... 6
Web Marketing. ................................................................................. 6
How Can A Business Use The Web In Marketing?............................... 6
Why Use Web Marketing?.................................................................. 7
Customer Relations Management . ..................................................... 7
Crowdsourcing. ................................................................................. 7
Affiliate Programs............................................................................. 7
Weighing Up The Pros And Cons........................................................ 8
Conclusion: Web Marketing And The Future...................................... 8
References And Further Reading ...................................................... 8
Media Watch. ......................................................................................... 9
Big Changes For Superannuation....................................................... 9
Lower Fees........................................................................................ 9
Superannuation Strategy................................................................... 9
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The Wiggles
By Ian Biddle
Past Head Teacher, Social Science Jamison High School
Part-time Lecturer, Education Method, University of Western Sydney
The Wiggles, in terms of length of survival and level of financial
and other achievements have been remarkably successful.
They have certainly identified a real consumer need and have
developed a range of products to effectively satisfy these needs.
The Wiggles have effectively established and maintained a
sustained competitive advantage.
Introduction
The Wiggles are a business. To survive, a business must
satisfy a real need and establish and maintain a competitive
advantage. This competitive advantage may be in areas such as
product advantage or price. The business must also ensure that
consumers are well aware of the product and it is available and
suitably accessible.
Who Are The Wiggles?
This situation applies to a wide range of providers of products
and services varying from running shoes to international travel.
To survive entertainers must also satisfy a need and do this in
an efficient manner. However aspects such as price are less
significant and the ability to best satisfy the quite complex aspects
of consumer needs are more vital.
At the core of The Wiggles are four middle-age men who wear
skivvies and sing and perform to quite young children.
• Murray Cook: The Red Wiggle
• Jeff Fatt: The Purple Wiggle
• Anthony Field: The Blue Wiggle
Survival in the broad area of the entertainment industry and
particularly that of performers is difficult and the survival rate
is exceptionally low. Factors for this include:
• Sam Moran: The Yellow Wiggle
The Wiggles are however much more than this. The business
encompasses aspects such as:
• Associated characters such as Dorothy the Dinosaur, Captain
Feathersword, Wags the Dog, Henry the Octopus and many
others. These characters are played by a range of actors.
• Vast numbers of suppliers and potential suppliers
• Relatively low costs of entry for performers who are often
willing to work for low returns
• Quite high costs for the providers of entertainment services,
as opposed to the performers
• Troupes of dancers and singers for tours and shows. Often
over 70 staff are involved on tours.
• A difficulty to identify and satisfy the wide range of
consumer needs
• Managers such as Paul Field and Mike Conway.
• A range of associated merchandise such as lunch boxes
and big red car beds.
• The fickle and changing nature of consumer tastes.
Figure 1: Wiggles Line-Up
Source: Wikipedia Commons
~2~
being challenged and they are thrilled by basic movements and
simple choreography, a limited number of objects and activities
and as well, the feeling of empowerment.
• Involvement in theme parks in countries such as Australia
and the United States of America.
• Recording studios and child entertainment centres.
• Highly successful T.V. shows, DVDs and CDs.
Figure 2: the Finger Wagging Picture
The success of The Wiggles is quite remarkable. Their income
in 2007 for example exceeded $45m. They have been BRW
top entertainment earners for four years in a row. They have
sold over 17 million DVDs and four million CDs and as a
result have received many industry awards. The Wiggles have
been awarded honorary doctorates and they have recently been
appointed Members of The Order of Australia.
Identifying And Satisfying A Need:
For Consumers And Purchasers
The products of entertainers are aimed at specific target markets
e.g. country and western music and science fiction movies have
specific audiences. The Wiggles and similar providers such as Hi5
also have specific target markets, that is, preschoolers and infants.
An issue for such businesses is that the primary consumer of the
product does not have the ability to make the purchase.
Parents and other adults are quite willing to purchase Wiggles
products as they perceive these products to be good value and
educational. The Wiggles have worked hard on their wholesome
image and this has served them well in them achieving a high
degree of acceptance by these purchasing adults.
The Wiggles Target Markets
Primary consumers: preschoolers and young children who
have a demand for interesting and enjoyable experiences
Richard Saverman from McCann-Ericson believes that the
Wiggles have very successfully highlighted to the parents/adults
the benefits of Wiggles products but also still focussing on
satisfying the demands of young children.
Major purchasers: their parents and associated adults. Have
the income to buy DVDs and CD’s, associated products and
concerts. They are seeking an educationally sound product that
is value for money
The Wiggles Product Manager, Paul Field, suggests that the
Wiggles have resisted relying on ‘pester power’ as a means of
selling their products. Pester power is a concept that implies
that the marketer builds up children’s demand for a product with
the realisation that children have a great power in persuading
parents (pestering) to make the purchase. This is particularly
relevant in areas such as junk food and electronic toys. Juliet
Scher in ‘Born to Buy’ suggests that children are no longer bit
players in purchasing. Matt Balogh from Integrity Research
believes that over 50 per cent of adults take children with
them when they buy products and in the US, children under
12 directly influence over $600 billion of household spending
each year.
STUDENT ACTIVITIES
Define these terms in their correct business usage
Competitive advantage, target market, brand, licensed products,
franchise, AUSTRADE, copyright, succession planning, business
model.
1. Identify reasons why most entertainers or acts have a limited
business life cycle.
2. The Wiggles is much more than four middle aged men in skivvies.
Describe the associated characters, facilities and events that are
part of the business.
3. Briefly state their achievements to date and why, in your opinion,
The Wiggles business formula is such a success.
4. Define the age of their target market.
5. How has the educational background of The Wiggles characters
influenced the style of their performances?
6. Parents ultimately make the purchasing decisions. What factors
influence them to buy Wiggles products?
Children have certainly increased in significance in consumer
decision making. This is due to factors such as:
• Older children are now consumers in their own right, often
with part-time jobs and large allowances
• Smaller family size, dual incomes and later births have
increased the amount available to spend on children
The Wiggles have successfully developed products for the
young target market but which are also quite acceptable to
the adults who pay the purchase price. Not all providers
have achieved both these goals. Lego for example provided
products that adults believed were good value and educational
but were seen to be boring by many children, and many
products that are superficially appealing to young children
are considered unsuitable by the adult who makes the
purchasing decision.
• Time poor parents to reduce guilt, substitute money for time.
Paul Field states however that the Wiggles never endorse junk
food and that it is a healthy thing to say ‘no’ to your children
sometimes. The Wiggles success has relied upon products that
appeal to young children but are seen as very suitable by adults.
Building A Brand
Business success is increased by creating and capitalising on
brand image. The Star Wars brand created more revenue (over
$23B) from the sale of associated products than it did from
cinema tickets. The BBC earns over $1B from the sale of
products such as Thomas the Tank Engine book and DVD’s.
Three of the Wiggles have degrees in Early Childhood
education. Kathleen Ward from Macquarie University believes
that the appeal of the Wiggles is partly due to the fact that they
understand that children have short attention spans, they enjoy
~3~
Hi-5 does not cover costs from concert ticket sales, but relies
heavily upon the sales of merchandise.
partners, the insistence upon maintaining brand quality, and
the combination of great products based on a solid educational
background has help establish and maintain The Wiggles as a
major global entertainment force.
Licensed products are now worth $64B in the US and account
for 50 per cent of the total toy market.
Capitalising on brand image is not new, Charlie Chaplin sold
‘Little Tramp Sweets’ in the 1920’s. The Wiggles have continued
this tradition and they now sell over 550 spin off products in
67 countries. These range from band-aids to ring tones.
A Successful Business Model
Many initially successful entertainers fail to survive due to poor
management practices and limited long term planning. The
Wiggles have through careful organisation and management
avoided most of the problems that plague many other
entertainers.
The Wiggles organisation has a shrewd merchandising arm.
The Wiggles are featured at theme parks in the USA and
Australia, they own entertainment centres in Texas and their
own production facilities. These add to the already substantial
income from their core activities.
Originally the Wiggles were informally organised but they
became consolidated in 2005. The Wiggles performers are
directors and Mike Conway was appointed General Manager
and Paul Field, General Manager of Operations. There
is a close link and overlap between the entertainers and
management. Material copyright was maintained and they
maintain ownership and control of their production facilities.
The Wiggles were not to become entertainers who earn vast
sums for others.
STUDENT ACTIVITIES
7. Explain ‘pester power’ as a marketing tool. Describe a product
where this technique is used.
8. Formerly, parents were the main decision makers and purchasers
of children’s products. Give reasons why this is changing.
9. The Wiggles have carefully developed a wholesome and healthy
image. How has this assisted their market penetration?
10. Visit the Wiggles website at <www.thewiggles.com.au>. Develop
a two column table that shows features of the site that would
appeal to adults and children
11. Visit the on-line shop. Describe the variety of merchandise
available.
12. Modern marketing is focused on what the ‘customer really wants’
and on developing ‘relationships’ with customers. How has The
Wiggles business model achieved this?
13. Develop a word wheel with ‘building a brand’ in the centre. Show
marketing linkages on the spokes of the wheel.
14. Branding creates a very profitable revenue stream. Give examples
of successful merchandising in the entertainment and toy
industries.
Entertainers, even successful ones, often have a limited
period of fame, popularity can be quite ephemeral. The
Wiggles who started in the early 1990’s look like continuing
well into the future. One reason is the attention to succession
planning and a low reliance on individual personalities. When
Greg Page had to leave due to ill health there was
an experienced understudy Sam Moran, to become the new
yellow Wiggle. Various actors play the associated characters,
for example Paul Paddick (Captain Feathersword) is talented
but it is Captain Feathersword who appeals to the audience
and not Paul.
Five Factors For Success
Why were the Wiggles successful and why did this continue?
Below are some factors that may explain these phenomena:
Achieving Global Success
Australia has 22 million people and this limited the growth of
the Wiggles. According to James Thomson from BRW, 75 to
80 per cent of Wiggles income comes from overseas. Paul Field
stated that there was no formal export plan and the Wiggles
became Exporters of the Year by just doing what they enjoy.
This is an oversimplification.
1. They understand the needs of their target audience. Their
educational background combined with their musical
experience from ‘The Cockroaches’ helped them achieve
this understanding.
2. They provide a quality product that appeals to both children
and adults.
Entertainers rely on cultural identification. What appeals in
some cultures does not in others. The Wiggles found that
however, young children have only a low level of cultural
identity. Material presented to overseas audiences did not have
to change much. The Wiggles believe that being Australian,
the most multicultural country in the world, greatly reduced
the need to diversify their product.
3. They avoid short term trends and fashions and stick to a
proven formula which is timeless. This has been aided by
the fact that the audience is in a narrow age band, each year
a large section move on but a new group of younger children
take their place.
4. They sought global markets to expand their potential
audience. The universality of the product and the increasing
importance of the undifferentiated global consumer have
helped this expansion. The use of the successful franchise
model has also been significant.
The model for much of the overseas expansion has been the
franchise method rather than using agents. Austrade research
indicates that 10 per cent of Australian businesses use the
franchise model. Successful examples include Boost Juice in
India and Mexico and Baker’s Delight in Canada. Cheryl Scott
and Tim Harcourt from Austrade believe that careful, proactive
initial selection and ongoing training is vital to protect the brand
image and ensure a successful franchise arrangement. Tim
Harcourt suggested that ‘the successful selection of franchise
5. They established and followed a successful business model.
The entertainers have been careful and insightful managers
who together with their specialised management staff have
maintained control of quality and carefully planned for the
long term.
~4~
STUDENT ACTIVITIES
Conclusion
15. Export success has been achieved by using the franchise model.
Identify its features.
Indeed the Wiggles are a business and a successful one, even
by international standards. Despite being entertainers, who are
usually strangers to successful business practices, the Wiggles
have highlighted key factors that contribute to the success of
any business. A real need has to be identified and a product
or service developed to satisfy the need. The characteristics
and demands of the target market must be clearly understood.
The product provided must be of quality so as to maintain and
sustain the marketing advantage.
16. How long have The Wiggles been performing
17. Construct an organisational chart that would describe The Wiggles
organisational model
18. Explain why the unexpected departure of Greg Page (the yellow
Wiggle) didn’t lead to difficulties.
References
Business success however does not only depend on the 4 P’s.
Effective management and planning are also essential. The
entertainment industry has many examples of appealing
products but destructive management practices. The Wiggles
have been successful and have survived due to a fortunate
combination of excellent products and sound management
practices.
Horsley, Michael 2003, Business Studies, Heinemann, Melbourne.
Pilch, Judy, 2004, Australia and Global Business, Pearson, Melbourne.
The Wiggles Official Web Site: <www.thewiggles.com>
Elliott, T. It’s a wiggly wiggly world, S.M.H. 13/1/2010
Fraser, J. The Wiggles go to the top of the class, S.M.H. 20/9/2010.
Neill, R. Toy Story, The Australian, 1/12/2007.
Sams, C. Wiggles four degrees better, S.M.H. 4/6/2006.
A.B.C. Online, U.S. success key to cracking rich list, abc.net.au/news/stories
13/4/2006.
A.B.C. Online, Wiggles floored by Australia Day Honours, abc.net.au/news/
stories 26/1/201
B.&T. Marketers plug into pester power, <www.bant.com.au> 30/03/2010
Media Awareness Network, How marketers target kids, <www.mediaawareness.ca> 30/3/2010.
NSW Business Chamber, Born global; the Wiggles, <www.
nswbusinesschamber.com.au> 19/3/2010.
Figure 3: The Wiggles stage, Oakland Arena, California, USA
Source: Author: heydrienne from San Francisco, Wikipedia Creative Commons
~5~
Web Marketing: To Web
Or Not To Web? Or How
To Web?
By Rachel Mules
Head Teacher HSIE at Newtown High School of the Performing Arts
marketing. This means that businesses are focussed on providing
the goods and services that customers really want, and develop
relationships with customers to ensure they understand the needs
of customers and are able to respond to those needs.
Introduction
Ever wondered why the ads on Facebook target your particular
age group? Have you wondered why your internet security
provider offers to help you out by automatically renewing
your subscription each year? Have you or your parents given
payment details to an online business that you use regularly
which stores those details for future purchases? Do you recall
seeing ‘Do you tweet? Follow us on Twitter’ on a website, or
‘subscribe to our RSS feed’? Welcome to the world of web
marketing.
Web Marketing
Web marketing, e-marketing, i-marketing, internet marketing,
online marketing… Whatever you call it, it’s everywhere you
look. Web marketing can be defined broadly as the use of the
internet and related technologies in the marketing process.
Marketing
How Can A Business Use The Web
In Marketing?
Marketing refers to the combination of business activities
designed to plan, price, promote and distribute goods and
services to customers.
Web marketing is a cost effective way to undertake a range
of marketing activities, from planning and conducting market
research, through implementation to monitoring and controlling
of marketing strategies. A business can use the web for the
The marketing concept refers to the modern view of marketing,
which is based on customer orientation and relationship
Figure 1: Web marketing
CRM software
Integrate with
Twitter
RSS feeds
Provide a
search engine
on your
website
Integrated
chat
Web
Marketing
Automatic
renewals
Website
Banner ads
Emails
Google Ads
Affilate
program on
the internet
~6~
Social
networking
sites
eg. facebook
If a business is going to use web marketing to increase sales
and perhaps expand market share, here are some ideas to
think about.
collection, analysis and interpretation of data, learning more
about the target market including customer and buyer behaviour.
Further, the nature of the web and the software available makes
it easy to implement, monitor and control marketing activities
and revise the marketing strategy where necessary. Think about
the information that you provide when you sign up to social
network media such as Facebook; and not just in the initial sign
up when you provide information such as your age, gender and
date of birth. Every application you add says something about
you, as does every type of game you play or every quiz you
complete.
STUDENT ACTIVITIES
Define these terms in their correct business usage.
Relationship marketing, social networking site, crowdsourcing,
interactive, blog, outsource, niche marketing, psychological, sociocultural, cost effective
1. What is the modern view of marketing?
2. What does web marketing involve?
3. As a group, gather examples of web marketing in the course of
web browsing. Attempt to categorise their activities.
4. On the pretext of being a simple application or survey, design a
series of questions that would reveal valuable information about
a potential customer’s personal information and buying behaviour.
5. Visit The Australian Bureau of Statistics website. Search
‘Australian schools’ and develop a brief profile of the number of
schools, students and teachers.
6. Compare and contrast the suitability of public access information
such as the ABS site with web marketing sources.
7. Should there be concerns about the type of information gathered,
its storage, security and privacy?
8. List the types of businesses more likely to use web marketing
techniques.
9. Why do businesses advertise on social networking sites such as
Facebook and Twitter?
10.Develop a typical demographic profile of a Facebook user.
Describe a range of products that this person will likely buy
in the near future.
There are a range of web based techniques businesses can use
in their marketing. Exactly which technique or combination
of techniques will depend on the nature of the business and
the goals of the business owners. Here are just some of the
possibilities for a business to consider:
Why Use Web Marketing?
According to the Australian Bureau of Statistics (ABS)
72 per cent of Australian households have home internet access;
86 per cent of these have broadband; 79 per cent of children use
the internet, increasing with age as 96 per cent of 12 to 14 year
olds use the internet. Households most likely to have internet
access will typically have children under 15 years old, be
located in metropolitan areas and be above low income levels.
This sort of information should send a signal to business owners
about the potential of web marketing in reaching customers in
Australia, not to mention overseas.
The use of web marketing will depend on the type of business,
its size and the goals of the owners. Businesses that might make
the greatest use out of web marketing include businesses that
can easily mail or email their products/services to customers,
businesses that have a presence in a national or global market,
businesses that want to expand into new markets and perhaps
go global. In Australia, businesses which derive a greater
percentage of their income from the internet tend to be in
industries such as Information, Media and telecommunications;
Financial and insurance services; Professional, scientific and
technical services; Rental, hiring and real estate services.
Customer Relations Management
Customer relations management (CRM) software can be
purchased by a business to manage the customer relationship
marketing process via:
• Tracking purchases
• Payments information
• Tracking customer communications
• Service calls/follow up
• Customer feedback
• Customer service
A localised business whose owners do not want to expand into
new markets may not have as much use for web marketing,
although it can still play a role. For example, a restaurant in
Melbourne with an excellent website including photographs
and menus, will attract customers travelling to Melbourne from
other parts of the country or overseas. It might not be worth the
time and money, however, to advertise on Facebook or to have
a following on Twitter.
Crowdsourcing
Crowdsourcing is when a business invites ideas or contributions
to a topic. A business could use this to get feedback on their
product/service, price, and service or on the website itself,
and use this information to make improvements and enhance
customer satisfaction.
Affiliate Programs
The use of social networks such as Facebook in marketing
may suit some businesses but not others. Facebakers.com
is an organisation which provides statistics and information
about Facebook use. According to this organisation, only a
few companies make it to the top online company pages of
Facebook, with most being actors, musicians, personalities
and games; and most Facebook users mainly participate in
games and personal communications. Further, the Facebook
demographic is mostly 18–44 year olds. So, having knowledge
of this sort of information is useful when considering which
web marketing tools or strategies to use.
An affiliate program is when you have a link to your business
website on another business’ website; that business is known
as your ‘affiliate’. You pay the affiliate business according
to how many times customers click onto the link to your
website. Next time you’re online, look out for this type of
web marketing.
Tips for a good business website
• Make sure that it is engaging, especially to your target market.
• Look at other websites to see what works and what does not.
• Make sure it is easy to use.
~7~
• You can develop a website cheaply and easily or pay an
expert to produce your website (outsource).
Conclusion: Web Marketing
And The Future
• Add new content regularly and often.
What makes web marketing unique, apart from its ‘newness’
and accessibility to such a large market, is its ability to create
marketing strategies directed towards individual customers –
finding out detailed information about the psychological, sociocultural and economic backgrounds of individual customers and
their buying behaviour; and its interactivity – creating a two
way relationship with customers, using customer feedback and
communication to continually improve marketing strategies and
develop the customer relationship into the future.
• Make it interactive, perhaps with a game or a simple quiz.
• Include images and perhaps a video.
• Add an RSS feed.
• Invite customer feedback, for example include a blog,
feedback forms, crowdsourcing
• Ensure fast response to queries and feedback
• List your website in a directory that is likely to be picked
up by Google
Whatever the size, nature or goals of a particular business, an
investigation into the potential for web marketing to suit that
business should be seriously considered by any business owner.
• Join an affiliate
• Include key words on each page of your website that people
are likely to use in a search
STUDENT ACTIVITIES
• Enter your key words into a Google search and look at the
suggestions Google shows
11. How can customer relations software assist in marketing?
12.Compare and contrast crowdsourcing and affiliate programs as
forms of information gathering for marketing.
13.Outline the main advantages and disadvantages of using web
based marketing techniques.
• Pay for advertisements in a search engine such as Google
or Yahoo so that your business appears first
• Recommend other products when a customer has made
an order
Weighing Up The Pros And Cons
References And Further Reading
‘Clicking for Gold: How internet companies profit from data on the web’,
The Economist, 25/2/10
<http://money.howstuffworks.com/affiliate-program1.htm> accessed 5/4/10
‘Children’s participation in cultural and leisure activities’, ABS publication
4901.0, 1/12/09
‘Household use of Information Technology 2008–9’, ABS Publication 8146.0,
16/12/09
‘Business use of information technology 2007–8’, ABS Publication 8129.0,
20/8/09
<www.facebakers.com> accessed 5/4/10
R. Mohammed et al, Internet Marketing: Building Advantage in a Networked
Economy, 2nd Edition, McGraw-Hill, 2003
4web marketing accessed 30/3/
<http://www.4webmarketing.biz/marketingmedia.htm>
International chamber of commerce accessed 30/3/10
http://www.iccwbo.org/policy/marketing/id30750/index.html
Even though there are many benefits of using web marketing,
businesses need to think carefully about whether or not it will be
useful and if so, which are the best strategies to use. Businesses
need to think through the positives and negatives and issues to
be dealt with to ensure the most effective marketing strategy.
Figure 2: Benefits/Issues re web marketing
Benefits that can be gained by using web marketing include:
• Relatively cheap
• Interactive
• Potential for niche marketing – target individual customers
easily
• Customer orientation
• Access to a much greater market
• Makes ‘going global’ easier
• Collect and analyse data efficiently
• Range of businesses to outsource to if you don’t have the
expertise
Issues that need to be considered in relation to web
marketing include:
• Impersonal compared with phone calls or direct contact
• Need to keep website up to date
• Need prompt follow up of customer feedback or queries
• Security issues with online payment - adds an extra cost
• Making and receiving international payments can be
complicated
• Lack of experience and skills in this area
• Competing with other businesses which may be far advanced
with web marketing
• Growing market both in Australia and globally
~8~
Media Watch
by Bruce Watt
Big Changes For Superannuation
Labor’s reform agenda is about to sweep through
superannuation.. This is the compulsory savings program for
Australia’s 11 million workers, to assist them in retirement.
The Cooper Review’s recommendations into superannuation
aim to make it cheaper, safer and easier.
Since it was introduced nearly 20 year ago it has generated a
savings pool of $1.3 trillion, but while it generated returns better
than inflation, it has not functioned as efficiently as it could.
Superannuation for most people is now their biggest asset
outside the home. One of the proposed changes is to increase
super contributions from nine to 12 per cent of employee’s
wages over the next decade. This would increase the
retirement income of an average worker over a lifetime by
over $100,000.
Lower Fees
Commissions, incentive based payments and kickbacks to
financial advisers though have reduced returns to investors
in many superannuation schemes. On average, retail funds
charge annual fees of two per cent, industry funds one per
cent and lost funds charge two and half per cent. Retail funds
such as AMP, exist to make profits for their shareholders while
industry funds return profits to its members in the form of
lower costs. Adviser commissions on insurance, which can be
up to 30 per cent of the premium, will be banned and trailing
commission on advice will also be removed.
One problem with superannuation is that as workers move
from job to job, they lose track of their superannuation. Over
$13 billion exists in lost or unclaimed superannuation accounts
and many people have multiple superannuation funds, each
being eaten up with management fees. In total Australians pay
$46 million in fees every day.
The government wants fees reduced to one per cent. One
recommendation of the report is the introduction of a cheap
default fund known as MySuper to reduce costs by 40 per cent.
At present there are nearly 447 superannuation fund, as well
as 438,000 DIY (do it yourself) funds. MySuper could replace
80 per cent of those. The Cooper review has called for greater
consolidation in the industry to reduce costs. The government
would like the number of funds to fall to 74 by 2035.
Superannuation Strategy
Superannuation is an investment strategy whereby pooled
funds of investors are applied to a range of investments. In
simple terms, there are three areas for investment. These are
cash, shares and property. Within each of these categories are
many options. For example, with cash, investments can be
in fixed interest deposits, government bonds or many other
options. Shares can be domestic or international, and property
can be residential, retail or commercial.
The final return will depend on many factors. In general,
the higher the fees charged, the lower the return will be.
Also, investors can choose different options depending
on the amount of risk that they want to be exposed to. An
example of a portfolio allocation of funds could be 15
per cent in cash, 50 per cent in shares and 35 per cent in
property. In general, the lower the risk, the lower the return.
Younger investors, with a longer timeframe to invest, may
choose the higher growth strategy. Shares or property will
return a larger long term return than cash. However, as the
Global Financial Crisis (GFC) showed, those with high
exposures to international shares suffered high losses, some
as much as 40 per cent.
Older investors, content to protect their nest egg, may opt for
a lower risk strategy and choose to invest a larger percentage
of their funds in cash. Superannuation funds offer subscribers
different growth and risk options.
STUDENT ACTIVITIES
Define these terms in their correct business usage:
reform, inflation, asset, commission, kickbacks, fund, fixed interest
deposits, bonds, portfolio, Global Financial Crisis, nest egg.
1. Why has the Australian Government commissioned a report into
the superannuation industry?
2. Who actually pays the superannuation contribution? What
impact may these changes have on this group?
3. In addition to an annual management fee, what other monetary
benefits can financial advisers currently receive from
superannuation funds?
4. Explain how superannuation entitlements may become ‘lost’.
5. Which recommendation of the Cooper reviews is the government
adopting to make superannuation cheaper and easier?
6. Describe a longer term reform to make superannuation more
efficient.
7. State the three asset classes that investment funds can be
applied to.
8. Explain the phrase, ‘the lower the risk, the lower the return’.
9. Suggest a strategy for a younger employee to adopt to maximize
final retirement benefits.
10.Identify dangers of adopting a high risk, high return strategy.
Warringal Publications are producers of excellent resources for teachers and students. For further information on study guides for
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General Editor: Bruce Watt, Head Teacher HSIE, Port Hacking High School
Student Activities Writer: Bruce Watt
Managing Editor: Denise Michie