Antecedents to consumer confusion in financial services industry

It is only the later part of the 20th century financial services institutions (FSIs) started morphing into a different shape altogether. Previously, a bank provided only banking services (i.e. mostly a place where you can deposit and withdraw money or similar assets). However, banks changed their role in a short span of time from consumer banking to multiple financial service providers (i.e. banking, mortgages, insurance, credit cards, capital and bond market services, internet banking, phone banking, investment finance, etc.). This new management of consumer credit and consumer debt had interesting implications for their marketing financial services.

An example of street markets accepting credit ...
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First, in trying to cover every corner of the envisaged legal problems, banks already had lengthy contract papers. However, with multiple services consumers were now subjected to a combination of plentiful and conflicting information, an excessive number of brands, and product replications.

Second, this one-stop service philosophy was brought about to create ease in transactions. However, as the number of services increased, the complexity did too. However, on the other hand, it created false confidence within the consumers regarding their financial judgment. Each of the above mentioned financial services require different set of skills to manage them however, a single provide and one-stop-shopping made consumers think that capital and bond markets investments were as easy as banking.

Researchers suggest that product variety can have a significantly positive effect on consumer decision making however, results from empirical studies found that over-choice and overload of information deters customers from engaging with a service provider due to confusion over a product’s value.

The multiplicity of financial services, which created the false confidence, may have similar results relating to consumer confusion and service value judgments as observed in other industries where product proliferations occurred. However, prior studies have not looked at consumer confusion in financial service industries.

In a recent paper, published in the association for consumer research conference, my co-authors and I, attempted to conceptualize and empirically test a model of consumer confusion in financial services industry. I am going to address the first research question in this post focusing on ‘what are the causes of consumer confusion in financial services industry?’

Looking at prior studies we believe that confusion is fuelled by consumers’ general expectations, attribute similarity between products or services (i.e. attribute confusion), and overload, conflict or ambiguity of information (i.e. information confusion).

Most researchers share a similar opinion that consumer expectations, prior to a service encounter, impact on customers’ evaluation of service performance. In the service literature the expectations construct has been divided into two parts namely, predictive expectations and evaluative expectations. The predictive expectations construct is associated with the level of performance and evaluative expectations construct is associated with an estimation of performance. For example, a consumer holding all his financial transactions including banking, mortgage, credit cards, and personal loans among others with a single FSI (approximately 40.5% of all FSI customers in the UK belong to this category) calls the customer services department for an emergency situation such as stolen cards or identity fraud. At this juncture, the consumer expects the call to be answered in reasonable time (predictive expectations) and also expects that whoever answers the call is in the right frame of mind and possesses knowledge related to the problem (evaluative expectations). In most of the FSIs, all the service departments operate separately and therefore the consumers will be asked to call each of them separately leaving the consumer angry, anxious and confused as to is he or she dealing with a single FSI or multiple FSIs? Therefore, we believed that expectations have a direct relation with overall consumer confusion.

Attribute confusion
Several researchers suggest that tangible and intangible attributes of products or services such as the similarity of the offer, lead to consumer confusion. For example brand image influences the manner in which consumers perceive a product. Similarity in available tangible and intangible features of products, services and brands in the FSI sector creates the likelihood of consumer confusion. For example, when a consumer looks at a brochure from any FSI with regard to a specific service, the terms of the services or the look and feel may hardly be different. Being a multi-ethnic and multi-cultural team we could observe this phenomenon in more than 1 country and therefore thought about the impact of attribute confusion on overall confusion.

Information confusion
Information relating to a product or service aims not only at informing but also persuading consumers to make a specific choice. We already know that consumers have limitations in their capacity to assimilate and process large amounts of information, which may lead to information confusion. Furthermore, researchers have suggested that information confusion influences the effectiveness of consumer decision making. This impact can be attributed to two phenomena namely; (a) consumers’ inability to locate the relevant information due to the sheer volume of information (overload); (b) oversight in identifying critical insights out of the information presented (ambiguity) and (c) variety of information provided through various information sources (conflict).

In this marketing research study we measured the impact of the above three antecedents on consumer confusion. Without going into the details of measurement, scaling and structural models, I shall now focus on the results.

The findings suggest that the hypothesized antecedents namely; expectations, attribute confusion and information confusion significantly affect overall confusion.

Increasing understanding of consumers and decreasing confusion is one of the major aims of any organization. Moreover, in markets like financial services, where many similarities of expectations, attributes and information exist within consumer minds, reduction in consumer confusion can become a source of competitive advantage. The framework we used for this study provides managers with a first hand idea of where and how consumer confusion is caused. This will assist managers in optimizing their organizational resources to manage the multi-faceted phenomenon of consumer confusion. Managers treating consumer confusion as a single tier construct may receive undesirable results. For example, just improving the product or service feature may reduce attribute confusion. However, poor communication and highly raised expectations may still elevate the overall confusion. Similarly, a good communication campaign with a less differentiated product or service may also elevate confusion in consumers’ minds.

In the next blog post, I shall focus on the second part of this study which relates to the consequences of consumer confusion.

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31 Comments to “ Antecedents to consumer confusion in financial services industry”

  1. Katherine says :

    I run an insurance related blog and the discussion you have here is really interesting. The confusion prevails far higher with regards to insurance than banking and other financial services industry. Having a look at that will provide much further insights I believe. Waiting to see the results of the consequences also.

  2. Yes. You may be quite right Katherine. Other sectors within financial services like insurance may have higher level of confusion. This may possibly be because of the trust issues involved. We have been thinking about incorporating trust issues within our model for a later study and see how that can be a moderating factor for consumer confusion. Thanks for the comment though.

    I am working on the consequences post and it will be uploaded soon.

  3. Social comments and analytics for this post…

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  8. Andrew Corin says :

    This is very interesting indeed. Thinking how confusion is caused. We are in a market of plenty and that causes it, isn’t it? I am thinking of markets of non-plenty right now which are trying for subsistence and here we are having a completely different effect of confusion.

  9. Kendrick Chen says :

    The confusion is financial industries is massive. It’s just impossible to decide which supplier is the best when they all look the same. Crazy but true.

  10. Clemente says :

    Andrew, the market of non-plenty is well covered in the argument by C K Prahalad in his book, market at the bottom of the pyramid. I believe the confusion occurs there too not on the consumer but the supplier side. What to supply them? How to make it affordable? What is the optimum feature range for these consumers? A different kind of confusion, isn’t it?

  11. Jayant deKoe says :

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  12. Mei Dong says :

    Yes. For emerging markets the confusion is very odd construct. In these markets the confusion is due to scarcity rather than of plenty.

  13. Ebonie Moorehead says :

    I really liked reading your post!. Quallity content. Such a valuable blog about research in the field of marketing. I believe there are many other antecedents to confusion also. Have you explored them further?

  14. Andy Harold says :

    I admit, I have not been on this site in a long time… by the way it was another enjoy to see It is such important subject and ignored by so many, even authority. I thank you to assist making people more aware of possible problems.

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  16. matthew says :

    Informative post! I agree to others who say that there can be many other things which may cause confusion. And confusion is not static but dynamic, it will change often from one thing to the other. How do you measure that?

  17. Alan Grossmann says :

    Most business research focusing on cross-sectional data so what we really measure is static dimension of information. There is a great need to measure such ‘confusion’ related data on dynamic basis.

  18. Brian Warm says :

    Really enjoyed reading your research on consumer confusion. People have also made some interesting comments about longitudinal data here. Very difficult get I suppose.

  19. Eric Jones says :

    Enjoying reading the posts here, thanks for sharing your research work in such simple language.

  20. Bob Maranhas says :

    While you have clubbed the information confusion dimensions together, I believe it would have been greatly useful to see their impact separately.

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  23. Tony Laurence says :

    This is my first visit here, but I will be back soon, because I really like the way you are writing, it is so simple and honest. You make it easier for a lay reader understand complex research. Good luck with your future research.

  24. Ellie Jones says :

    I work in an FSI and when I talk to my bf he always seems confused. I guess I can very well relate to it now. He just cannot grasp the information sent by FSIs. If I was a manager, I would surely try to reduce this bombardment of information.

  25. Courtney Hammond says :

    Hi There, I just spent some time reading through your posts. I found them entirely by mistake whilst researching one of my projects. Really enjoyed reading ur articles. Issues such as consumer confusion are never dealt from consumer perspectives and your attempt is really appreciated.

  26. Cherrie Parkinson says :

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  27. Price Eastridge says :

    Very good article. I recently discovered your blog and wished to say that we have really enjoyed reading your opinions on consumer confusion. The views are relevant to all other industries.

  28. Ashle Carrie says :

    I recently bought insurance from a company because of their low rates but after they sold me the policy they treat you horrible I was recently talking to a customer service representative and she was supper rude and would do nothing to solve my problem. I could see confusion all around.

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