Brand Credibility, Brand Consideration and Choice

Tulin Erdem
University of California at Berkeley
Joffre Swait
University of Florida

Overview of Findings

The authors of a recent study looked at the role of brand credibility (trustworthiness and expertise) on brand choice and consideration across multiple product categories.

These categories vary in regard to potential uncertainty about attributes and associated information acquisition costs and perceived risks of consumption.

Their results show that brand credibility has an effect on the formation of consideration sets, over and above its effect on brand choice.

When consumers are uncertain about brands and the market is characterized by asymmetric information (i.e., firms know more about their products than do consumers), brands can serve as signals of product positions (Wernerfelt 1988).

As a signal of product positioning, the most important characteristic of a brand is its credibility. A firm can use various marketing mix elements besides the brand to signal product quality: for example, charging a high price, offering a certain warranty or distributing via certain channels.

Each of these actions may or may not be credible depending on market conditions, including competitive and consumer behavior.

However, what sets brands apart from the individual marketing mix elements as credible signals is that the former embody the cumulative effect of past marketing mix strategies and activities. This historical notion that credibility is based on the sum of past behaviors has been referred to as “reputation” in the information economics literature (see Herbig and Milewicz 1995).

Credibility is broadly defined as the believability of an entity’s intentions at a particular time and is posited to have two main components: trustworthiness and expertise. Thus, brand credibility is defined as the believability of the product information contained in a brand, which requires that consumers perceive that the brand have the ability (i.e., expertise) and willingness (i.e., trustworthiness) to continuously deliver what has been promised (in fact, brands can function as signals since if and when they do not deliver what is promised their brand equity will erode).

Both the expertise and trustworthiness of a brand reflect the cumulative impacts of associated past and present marketing strategies and activities. The credibility of a brand has been shown to be higher for brands with higher marketing mix consistency over time and higher brand investments, ceteris paribus (Erdem and Swait 1998).

Consistency refers to the degree of harmony and convergence among the marketing mix elements and the stability of marketing mix strategies and attribute levels over time. The consistency of attribute levels over time - for example, consistency in quality levels - implies low “inherent product variability” (Roberts and Urban 1988), which can be achieved by a dedication to quality standardization. However, the consistency to which we refer is that of the brand positioning in general.

Brand investments, on the other hand, are resources that firms spend on brands to (1) assure consumers that brand promises will be kept and (2) demonstrate longer-term commitment to brands (Klein and Leffler 1981). Furthermore, it has also been shown that the clarity (i.e., lack of ambiguity) of the product information contained in a brand is an antecedent to brand credibility (Erdem and Swait 1998).

As also suggested by Aaker (1991), higher perceived (or expected) quality, lower information costs and risk associated with credible brands may increase consumer evaluations of brands. Indeed, Erdem and Swait (1998) have shown that expected consumer utility is increasing in perceived quality, and decreasing in perceived risk and information costs.

This research sheds light on how brand credibility (trustworthiness and expertise) influences consumer consideration set formation and subsequent brand choice. It focuses on the impact of credibility on consumer consideration and choice through perceived quality, perceived risk and information costs.

In extremely low risk and relatively low involvement categories (e.g., juice), our empirical study indicates that neither perceived risk nor information costs seem to matter in consumer choice processes. Thus, in such settings credibility effects operate through perceived quality.

However, it also finds that credibility affects consumer choices through perceived risk, information costs saved and perceived quality in most categories, even those with only moderate levels of uncertainty.

Furthermore, although credibility impacts brand choice and consideration set formation more and through more mechanisms in contexts with high uncertainty and sensitivity to such uncertainty, credibility effects are present in all categories.

This research also finds evidence for stronger credibility impacts for individuals who perceive higher uncertainty when choosing in a given product category. Finally, the results indicate that trustworthiness, rather than expertise, affects consumer choices and brand consideration more. 

Significance of research

Understanding the multiple roles credible brands play in consumer decision-making has consumer welfare (e.g., credible brands reduce consumer information costs), managerial (e.g., successful brand management requires managing credibility successfully in the long run and our research sheds light on how to manage brand credibility) and public policy implications (e.g., mandatory information provision rules in product categories where brand credibility is low, and consumer risk is high).

References cited

Aaker, David A. (1991), Managing Brand Equity, New York: The Free Press.

Erdem, Tülin and Joffre Swait (1998), “Brand Equity as a Signaling Phenomenon,” Journal of Consumer Psychology, 7 (April), 131-157.

Erdem, Tülin and Joffre Swait, (2004) "Brand Credibility and its Role in Brand Choice and Consideration," Journal of Consumer Research, 31 (1), 191-199.

Herbig, Paul and John Milewicz (1995), “The Relationship Of Reputation And Credibility To Brand Success”, Journal of Consumer Marketing, 14 (Winter), 5-10.

Klein, Benjamin and Keith B. Leffler (1981), “The Role of Market Forces in Assur­ing Contractual Performance,” Journal of Political Economy, 89 (Fall), 615-639.

Roberts, John and Glenn Urban (1988), “Modeling Multiattribute Utility, Risk and Belief Dynamics for new Consumer Durable Brand Choice,” Management Science, 34 (February), 167-185.

Swait, Joffre and Moshe Ben-Akiva (1987), “Incorporating Random Constraints in Discrete Choice Models of Choice Set Generation,” Transportation Research B, 21B (April), 91-102.

Wernerfelt, Birger (1988), “Umbrella Branding As A Signal Of New Product Quality: An Example Of Signalling By Posting A Bond,” Rand Journal of Economics, 19 (Autumn), 458-466.