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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 product-- related 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
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 EUR500m at the beginning of the decade to EUR4.5trn 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 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 EUR145.61m in 2001, which is more than twice as high as three years before (EUR66.75m).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 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 analyse explicitly. Above all, investment decisions are characterised by high exogenous uncertainty, as future product performance must be estimated from a set of noisy and vague variables. So investors' expectations about uncertain future events play a crucial role in investment decision making.6 Most importantly, purchase decisions in...