Consumer behaviour & Risk

Looking at consumer behavior without taking into consideration the topic of risk is almost impossible.Since the creation of tension in potential consumers because of an unwanted need which leads  them to evaluate alternatives until the time when purchase decision is mconsumerbehavior1made,risk is playing a critical role.One single glance at consumer decision making process in enough to realize how extensive risk is intertwined into almost all the stages of this model.I think we  unconsciously do an instant risk analysis when facing  cues such advertisements. On the spot we reject to consider buying an advertised product group or a brand because we predict an enormous level of risk associated with that purchase decision.Different types of risks including social ,functional,physical,financial, time and ego risk could stop us from even considering a brand which is being promoted everywhere.When I relate risk topic to my real life I realize how I have assigned different weights to various risk types at different stages of my life.When I was younger social and ego risk were my major concerns but as I grew up functional,financial and time risks have got higher level of importance from my view.I remember when I really liked a pair of shoes at the age of 15 and I did not care much about how long those shoes were going to work for me but nowadays at the age 32 I try to make an estimate of the expected life of a product cosidering to buy and try to ensure that the product will perform the function I expect and buying that is not a waste of money.I truly believe that risk and consumer behavior are entangled and analysis of consumers behavior without taking risk into account would be unreasonable as the level of risk perceived in regards to a purchase decision would determine whether we buy or not and if we buy when?Whether I am an early adopter or laggard could be highly related to the degree of perceived risk with a product    group.

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7 thoughts on “Consumer behaviour & Risk

  1. Mitchell (1999) provides a good summary of consumer perceived risk.

    Mitchell (1999) discusses the role that risk plays in marketing; from being a tool used to see from the consumer’s perspective; being a versatile tool that can be adapted to many different situations; as well as risk analysis being useful in marketing resource allocation decisions.

    Another aspect of risk to be considered is also objective versus subjective risk, or actual risk versus perceived risk. Mitchell (1999) states that as in most cases consumers have a limited information base to make a decision, therefore subjective risk more commonly influences behaviour. So in your shoe example, you may perceive one shoe to be riskier than the other in terms of lasting longer, however you most probably aren’t making that decision because you have trialled wearing both shoes for the last 5 years and know which shoe will most likely last longer.

    As well as mentioning trust and involvement as ways to reduce perceived risk, Mitchell (1999) also describes different risk models that have been developed for different scenarios.

    Reference:
    Mitchell, VW 1999, ‘Consumer perceived risk: conceptualisations and models’, European Journal of Marketing, vol. 33, no. ½, pp. 163-195, doi: http://dx.doi.org.ezproxy-b.deakin.edu.au/10.1108/03090569910249229

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  2. Few factors to be considered in evaluating risk with respect to consumer, if the product to be purchased is a high Involvement product than most of the consumers will be risk averse and will go through many stages of information search and many stages of evaluation and may also be having a benchmark to assess the specific good and consequently build a consideration set and then may give importance weights to the attributes of the product. But there are many consumers who are motivated and are distinguished by there risk seeking or risk averse behaviour, consumers with risk averse motivation may also quantify low involvement product and try to avoid their perceived risks of the product, on the other hand, people who are risk seeking may seek risk taking as an opportunity and may be the opinion leader of the society. It is a challenge to the marketers to change the motivation of the risk averse consumers and have them build faith in their products and offerings.

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  3. I very much agree with the above comment; a lot of my low involvement purchases I’ve had a thought process of ‘if it doesn’t ____ oh well, it was only $___, big deal”. The risk of wasting a few dollars doesn’t cause concern. I recently had to purchase a number of household items such as white goods and furniture, and the thought process was definitely the opposite. How long will they last, what’s the warranty, is it big enough, will the pets destroy the furniture etc etc.
    There was a lot of research, and definitely an internal risk assessment before purchase.

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  4. I very much agree with you that risk is playing a critical role when purchase decision is made. Refer to the three types of consumer purchase in the text book, I will say that convenience purchases have low customer involvement and low risk. I will not spend much time to think which brand of milk I should buy. Should I try the new flavor biscuit? If I buy it and it is not good taste, which is fine. It’s not a big money (low risk). While in my opinion, shopping purchases have medium customer involvement and medium risk. We need time to think and do some research. Moreover, specialty purchases would have high risk because of the expensive prices. Risk management will be involved in this situation. For example, when we buy a property, we have to put a lot more time and effort in the whole process to make sure it is a good experience.

    Perceived risk is the level of risk customers believes exists when they purchase specific goods from specific retailer. ‘The more important the purchase is to the customer, the greater the perceived risk.’ Perceived risks are also higher if the customer is dealing with a new retailer and buying new or unbranded goods (Answers 2015).

    Reference:
    Answers 2015, What are the types of perceived risk in consumer behavior? Answers, retrieved 29 March 2015, .

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  5. Economic theory views consumers as rational decision making agents and this ties in well with the view expressed in this blog post. To avoid regretting purchase decisions later – consumers weigh up the various risk factors on the spot and are not just drawn in by the advertising.

    It is interesting how the ages of the consumers play a role here. The author states that at 15 they would not have cared how long the product would have lasted but at 32 they try to estimate the expected life of the product. In other words as the author grew older they became more sensitive to the risks associated with making certain purchases or they just became more careful with their spending.

    Either way this could make for an interesting and possibly very effective marketing strategy now that we know that youthful consumers are more eager to make purchases and are less aware of the risks involved.

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  6. It seem to be true that difference weights to various risk types related to customer demographics factor such as age, gender ,stage in life cycle, education and income. For example most of men likely engage in more risky behavior that women. It can be seen from the men lift style, they engage in various risky activities such as sport and gambling.
    AS well as, age factor including experience and income, the more they have experience and knowledge, they are more likely to consider about rational thinking and risk.
    As a marketer, launching the new product, how to attract the people who have a difference level perceived risk. Marketing communication in term of positive differentiated product can create a trust of product quality, product safe, satisfaction in product feature as well as various price which the different type of customer can accept. This is a basic factor to attract customer to want to risk the new product. However, the difficult things is how to attract a people who is high brand loyalty to another brand to become our customer. It might use high level market strategy to change their attitude.

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  7. I think before we decide to purchase a product or attract by an advertisement, we all draw a pro& con list in our mind quickly. We do balance the benefit as well as risks that the purchasing action would endure. After we analyse the level of perceived risk, as consumers, we choose a behaviour which is wealthworthy and wise.

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