Perceived Risk In the Purchasing Process

Consumers are continually making decisions concerning what product and service to buy and where to buy them. Since the out come or consequences of such decisions are often uncertain,the consumer faces some degree of "risks" in making a purchase decision. Perceived Risk is defined as the uncertainty that consumers face when they cannot foresee the consequences of their purchase decisions. This definition,highlights two important dimensions of perceived risk uncertainty and consequences.

 The degree of risk consumers perceive and their own tolerance for risk taking serve to influence their purchase strategies. We have to note here that consumers are influenced by risk that they perceived whether or not such risk actually exists. Risk that is not perceived, no matter how real or how dangerous would not influence consumer behaviour.

WHY CONSUMERS PERCEIVE RISK

In making product decision ,consumers perceive risk because they may have little or no experience with the product or product category they are considering ,either because they have never used it or because it is new in the market. Or they may have had an unsatisfactory or bitter experience with other brands and ate therefore concerned about making a similar mistake. Their financial sources may be very limited so their selection of one product may require them to forgo purchase of another. Finally they may feel that they have limited knowledge on which to base a decision ,or may lack confidence in their ability to make the "right" decision.

FACTORS ASSOCIATED WITH PERCEIVED  RISK

Several factors are likely to increase the risk consumers perceives in purchasing. Perceived risk is likely to be greater when;

(1) There is little information about the market category
(2) There is little experience with brands in the product category
(3) The product is new
(4) The product is technologically complex
(5) There is variation in quality between brands;
(6) The price is high or
(7) The purchase is important to the consumer.

TYPES OF RISKS: The consumer faces various types of risks in purchasing decisions which include;

Functional Risk;This refers to the risk that products will not perform as expected.

Physical Risk;This refers to the risk to self and to others which the product may pose.

Financial Risk; This is the risk that the product will not be worth its cost.

Social Risk; This is the risk that a poor product may result in embarrassment before the people.

Psychological Risk; This is a risk that the poor product will harm or bruise the consumers ego.

Time Risk; This is the risk that the time spent in product search may be wasted if the product those not perform as expected(schiffman and kanuk 1987)

THE PERCEPTION OF RISK VARIES

Studies show that the perception of risk by consumers varies depending on the person,the product,the situation and culture.

(1) Risk perception varies by consumer; The amount of risk perceived depends on the consumer. Some consumers tend to perceive high level of risk in various consumption situations ;others tend to perceive little risk. High risk perceivers have been described as narrow categories,since they limits their product to a few save alternative .They would rather exclude some perfectly good alternatives than risk a poor selection than limit the number of alternatives from which they can choose.

(2) Risk perception varies on product category; A consumers perception of risk varies with product categories. For example,in a study ,purchasers of headache remedies were found to perceive higher perceived risk than did purchasers of dry spaghetti. Similarly, it was discovered that consumer perceive than in the purchase of golf clubs.

(3) Risk perception varies with the shopping situation; Through studies it has been established that the degree of risk perception by the consumer is affected by the shopping situation. To cite an example,consumers were found to perceive,a higher degree of risk in ordering from non store retailers by mail or telephone,from catalogs or direct mail solicitations or from door to door sales people.

(4) Risk perception varies by culture; Not all people around the world show or exhibit the same level of risk perception.