Customers may resort to various approaches in order to cope with the risk they perceive with a product or service. Essentially they endeavor to diminish the level of perceived risk to proceed to making purchase decisions. The strategy adopted by many customers is turning into loyal customers who are mentally committed to buying a brand. Because of having a favorable experience of using and consuming a good or service offered by that specific brand, customers would feel lower level of risk associated with buying a product produced by that known brand. It has been found that risk averse customers are more prone to becoming loyal customers as they always seek a solution to high perceived risk and try to lessen it. As a result they exhibit more tendency for becoming loyal to a brand in stark contrast to what risk taker customers do. Risk takers possess characteristics like variety seeking so they love experiencing new brands and products. They do not want to be bound to a set of brands because loyalty to brands would deprive them from trying a more diverse range of brands. Brand loyalty is been identified as a very common risk reduction behavior which suites segments of customers who do not like uncertainties accompanied with buying a brand new to them. The more customers trust a brand and recall a good experience of that, the more likely they are to become loyal customers who are happy to ignore all marketing messages of other brands and select the brand they are loyal to without any doubt (Matzler et al 2008).
When I started writing this post, I remembered the time when I had finished my undergraduate course at Deakin and was considering doing a master degree in a university in Australia but not at Deakin because I wanted to experience a new environment. I did lots of search about course content, tuition fee and many other variables in regard to more than 10 universities across Australia but finally on the contrary of my initial aim I choose Deakin again. This decision even surprised myself let alone my friends and family but the reason for that weird decision boils down to the word “risk”. I noticed high level of risk attached to moving to another university specially those located in other cities. I started thinking about many uncertainties that I could face and started comparing my familiarity with Deakin with all unknown things about other universities. What type of people I would have to deal with? How long it would take me to get used to the new environment and how different lectures and teaching style would be? These are just examples of issues I was contemplating about but finally high level of Perceived risk and high switching cost were two important contributing factors that made me a loyal student to Deakin.
Matzler, K., Grabner-Kräuter, S. & Bidmon, S. 2008, “Risk aversion and brand loyalty: the mediating role of brand trust and brand affect”, The Journal of Product and Brand Management, vol. 17, no. 3, pp. 154-162.