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The Power of Brands
An analysis of the impact of brand credibility on product evaluation and choice in financial services

Executive Summary It is important for marketers to discover how consumers reduce risk in buying situations in order to manipulate these strategies tot the advantage of their brands. In the last decade, significant developments took place within Dutch financial services. New parties entered the financial playing field. A consequence of this increased composition is the introduction of new, innovative products. A question that naturally arises is how consumers make up their minds to choose among the many products offered. In this study I discuss and examine the effects of brand credibility on product evaluation and choice within financial services.

In trying to solve the problem statement, I review the literature on the value of brands, on risk perception and on the overconfidence theory. Previous research reaches the conclusion that brands play an important role in the choice process both by signaling product quality as well as reducing a product's perceived risk. Erdem and Swait (1998) have performed much research in this field. This risk-reducing function seems to be stronger for products that are new. In addition, overconfidence, which is a subjective perdception might determine whether someone will take on a risky investment. Based on the literature review, I develop three hypotheses regarding the main and moderating effects of brand credibility on product evaluation and chocie.

To test these hypotheses, I perform two Studies. Study 1 has been performed in San Fransisco and consistst of a sample of 62 respondents. Study 2 adopts a similar approach as Study 1, but this time in The Netherlands. In total this sample consists of 135 respondents.

The results of my empirical analyses provide strong support for Erdem and Swait's (1998) framework. More specifically, I find that brand credibility affects prodcut evaluation and choice in both countries (US and The Netherlands). In addition, my results reveal a moderating impact of overconfidence and a moderating impact of the amount at stake. THe results show that people only feel comfortable in taking risks in all circumstances are right. Brand credibility is a requirement for taking more risk; preference for a new (vs. an established) product occurs only at a credible bank and mainly for confident investors, male investors adn when stakes are low.

My study is interesting because it confirms previous results on brand effects of Erdem and Swait (1998), but for a different product ocntext. In addition, my research sheds new light on the relationship between overconfidence theory and branding.

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