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Retail Business Environment

Notes 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.
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. For example, clothes,
jewellery, carpet, or car, etc.
Psychological risk relates to loss of self-esteem or self-image as a result of poor choice and
making her/him feel stupid. For 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.

How Consumers Deal with Risk?

Consumers use various strategies to deal with perceived risk. This helps them to act with more
confidence in making purchase decisions. The strategies are designed either to increase certainty
associated with product purchase or to minimise negative purchase consequences. Some of the
strategies that consumers adopt to deal with risk are:

Consumers acquire additional information. This allows them to better assess the risk.
Consumers remain brand loyal. They stay loyal to a brand which has delivered satisfaction
instead of buying an untried brand.

Consumers buy most popular brand because they usually believe that well-known and
popular brands can be trusted.

Consumers buy the most expensive model or brand as they often associate price with
quality.
Consumers rely on store image. They trust reputable retail outlets and depend on them
regarding their choice of merchandise for resale.
Consumers seek money-back guarantees, warranties and pre-purchase trial. For example,
a marketer offers free trial and “no questions asked” refund of money, or there are
guarantees/warranties.

Buy the smallest pack size, or lowest-priced item. In an attempt to reduce the consequences,
consumers buy the smallest size or the lowest priced item.
Reduce level of expectations to reduce psychological consequences before making the
purchase.

Consumers’ risk perception has some important implications for marketers. Risk avoiders are
less likely to purchase new or innovative products compared to risk takers. Advertising should
not only be informative, it must attempt to build brand image and be persuasive to develop
brand loyalty among consumers. Guarantees, warranties, impartial test results, free samples
and pre-purchase trials can also help consumers to minimise risk.

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