Financial standard products: useful or not?
Study on the influence of standard products on choices, choice stress and deferral

The current range of financial products on offer is typically difficult for consumers to understand. Financial products are often difficult to compare, which may lead consumers to postpone or even defer decisions.

A possible solution proposed by the House of Representatives to facilitate product comparisons and reduce choice stress (and hence underconsumption) is the introduction of “standard products”. A standard product is a product that is perceived as a “good choice” for a large group of consumers, which every provider must include in their product assortment. Only the price of the product can vary between providers.

For the Dutch ministry of Finance, CentERdata examined whether the introduction of standard products in the market for (third pillar) pension actually has the desired effects, that is, more comparison behaviour, less choice stress, and less procrastination.

Study methodology

Two studies have been conducted to answer the research questions.

  • The first study was a lab experiment. In this experiment, we investigated – via eye-tracking – whether consumers’ search and comparison behaviour changed when standard products were included in the product assortment (versus not).
  • The second study was a controlled online experiment in the LISS panel among a sample of Dutch consumers between 35 and 50 years old. This experiment looked at the influence of the presence of standard products on choice stress and procrastination.

Figure 1. Example limited viewing pattern (total viewing time = 1,8 minutes)

Each circle represents an eye fixation and the size of the circle represents the duration of the fixation. The boxes outlined in black are the standard products. Participants could click on the products for more information.

Figure 2. Example intensive viewing pattern (total viewing time = 30,1 minuten)

Important findings

The results show that adding a standard product does not seem to have the intended effects. Although the presence of standard products did encourage product comparisons, it seemed to make the choice more rather than less difficult. Consumers did not experience less choice stress when a standard product was included in the assortment, and they were also not less inclined to postpone their decision. Standard products thus seem to have little added value.

Furthermore, the study points to another negative consequence of the introduction of standard products: adding standard products to existing product sets further expands the already broad range of products on offer. The results revealed that consumers had more difficulty understanding the product information and comparing the products as the number of products to compare increased. Consumers thus seem to have a need for less rather than more products. These results point to other types of simplifications of the product offerings, such as the reduction of the number of choice options and the simplification of product information, as potential solution.

The full report (in Dutch) can be found here.

 

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