Advertising in the mutual fund business: The role of judgmental heuristics in private investors' evaluation of risk and
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Jenny Jordan is a research associate at Johann Wolfgang Goethe University, Frankfurt, Germany. Her research interests focus on financial services marketing, particularly on financial services advertising and branding.
Klaus P. Kaas is marketing professor at Johann Wolfgang Goethe University, Frankfurt, Germany, specialising in financial services marketing with numerous research projects, consultancy activities and lectures on the topic.
Abstract Effective advertising strategies are of growing importance in the mutual fund industry due to keen competition and changes in market structure. But the dominant variables in financial decision making, investor’s perceived investment risk and expected return, have not yet been analysed in an advertising context, although these productrelated evaluations can be influenced by advertising and therefore serve as additional indicators of advertising effectiveness. In this study, the authors use a large-scale experimental study (n=499) to detect how risk-return assessments of private investors are influenced by specific elements of print ads. In this context, judgmental heuristics used systematically by private investors play a crucial role. Keywords
Mutual funds, advertising, risk-return perceptions, judgmental heuristics
ADVERTISING IN THE MUTUAL FUND INDUSTRY
Jenny Jordan Klaus P. Kaas Johann Wolfgang Goethe University Department of Marketing, D-60054 Frankfurt/Main, Germany. Tel: + 49 (0) 69 798 23435; Fax: + 49 (0) 69 798 23402; e-mail: jenny.jordan@marketing. uni-frankfurt.de; kaas@marketing. uni-frankfurt.de
During the 1990s, the mutual fund industry was one of the fastest growing market sectors in the European countries. Assets held in mutual funds rose from less than =500m C at the beginning of the decade to =4.5trn C by the end of 2000.1 In the USA, mutual funds have become the largest financial intermediary.2 Due to fierce competition resulting from the internationalisation of financial markets, technological changes and fundamental changes in private households’ investment behaviour, effective marketing strategies
# Henry Stewart Publications 1479–1846 (2002)
Vol. 7, 2 129–140
are of great importance in the mutual fund business, and advertising has become an important marketing instrument to attract fund sales.3,4 Accordingly, advertising expenditures of mutual fund companies increased significantly in the last years. In Germany, they rose to =145.61m C in 2001, which is more than twice as high as three years before (C =66.75m).5 Similar developments can be found in other European countries and in the USA. But what is known about the way advertising works in the mutual fund business? There is no doubt that many theoretical and empirical findings of behavioural advertising research apply to
Journal of Financial Services Marketing
129
Jordan and Kaas
investment products too, for instance the attainment of brand awareness or the creation of emotional experiences through advertising. There are, however, special features of investment products which advertising research should
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