Page 79 - DMGT506_CONSUMER_BEHAVIOUR

Consumer Behaviour

Notes 5.3 Perceived Risk

Whenever consumers make decisions to purchase any new brands, there is an element of
uncertainty about the consequences and a perception of risk is involved in most such purchases.
Risk perception can be defined as ‘the consumers’ perceptions of uncertainty that they face when
they are unable to foresee various consequences of their purchase decisions’. The relevant risk
dimensions are the uncertainty and the consequences. It is worth noting that the influence of risk
depends on individual’s perception. This means that the risk actually may or may not exist and
even if a real risk exists but is not perceived, it will not influence consumer behaviour.
Several situations may influence the consumer’s perception of uncertainty or consequences.

Example: There may be uncertainty regarding buying goals, uncertainty about
alternatives, or uncertainty about perceived possible undesirable consequences.
Consumers may face several different types of risks in making purchase decisions. The major
ones are:
1. Financial or monetary risk which is the risk that the product will not be worth its cost.
Expensive products and services are most subject to this risk.

2. Performance risk which is associated with the possibility that the product will not perform
as anticipated or may even fail. The consumer wastes time in getting it repaired, or
replaced. The risk is greatest when the product is technically complex.

Example: An expensive computer.
3. Physical risk which refers to bodily harm to self and others due to product usage. For
example food and beverages, electrical or mechanical appliances, or medical services etc.
can sometimes prove risky. When cooking gas (LPG) was first introduced in India,
consumers’ physical risk perception about it was high. Similarly, some consumers consider
the use of pressure cooker as risky.
4. Social risk which means that a poor product purchase may not meet the standards of an
important reference group and may result in social embarrassment.

Example: Clothes, jewellery, carpet, or car etc.
5. Psychological risk which relates to loss of self-esteem or self-image as a result of poor
choice and making her/him feel stupid.

Example: High-involvement category products or services.

The degree of risk perception among consumers varies and depends upon the person, product,
situation and the culture. Some consumers who are high-risk perceivers or risk avoiders, limit
their product choices to a limited number of safe alternatives to avoid risking a poor selection.
More often than not, they stay brand loyal to avoid risk. Consumers who are low-risk perceivers
or risk takers tend to consider their choices from a wider range of available product alternatives.
They are prepared to risk poor selection instead of not considering several alternatives from
which they can make a selection. They are more likely to buy new products before they are well
established. Risk takers are often higher-income consumers, having upward social mobility and
show personality traits such as need for achievement, dominance and change.

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