This is another concept that is related to economics but this time this economic concept is related to the consumer, not the producers. So we are going to discuss consumer Risk in this article and its types as well as impact.
So, consumer risk is known as the risk that consumers are willing to take while purchasing a good or any service. Although the risk cannot be avoided after the transaction is made, still the consumers can try to mitigate the risk by self-education about the goods or services which they are about to buy. So there are majorly three types of consumers risk which we will be briefly discussed below:
The very first type of consumer risk includes personal risk. In this type of risk, the consumer who is purchasing the particular goods and services is endangering themselves which means the goods and services might have potential personal risk. This category includes the purchase of those goods which require a certain level of good experience to use that good. This means a lack of knowledge to use the good might increase the personal risk as well. To avoid this category of risk, a consumer must purchase the goods and services from experienced sellers. The other things that can help with mitigating this type of personal risk from economic purchases are by consulting with other owners or talking to the users of the goods and services.
The second type of risk that a consumer might face is known as social risk. This kind of risk includes the consumer's purchased standing with others based. This type of risk is linked with the social perception of the consumers and not with the entire marketplace. Thus, social risk creates an unfavorable look of society towards the buyers who are buying certain goods or services which might be unnecessary, extravagant, or maybe improper as well. In the example of these types of goods, you can include several things such as the goods made outside the country, expensive goods such as luxury cars, etc. It can also include the activities tagged as the bad ones such as smoking, drinking, clubbing, gambling, etc. The only solution for the consumers to escape the social risk from these types of goods and services is that either they can avoid purchasing such products or they can purchase them secretly to avoid unnecessary comments.
Another type of risk that a consumer can face while purchasing a product is the economic risk. It is generally the financial risk that a consumer faces. A consumer faces economic risk in the purchase of overpriced goods, inferior substitutes, or goods that have limited usage. In this risky phase people also go through the theory of the opportunity cost that if they purchase a thing for today, they'll underestimate the ability to save money for future financial conditions. So ultimately the economic risk is not perceived by the producers, it is perceived by the consumers because the goods and services are valued differently by the consumers. This is because one good or service can be cheap for a consumer and on the other hand for some of the consumers it can be as expensive as they couldn't even afford. So economic risk depends upon the consumer.
How to overcome Consumer Risk?
So, we discussed the consumer's risk as well as its type but the major thing is to eradicate such risk. So here are major 5 strategies that will probably help you to reduce the risk in perceiving any product or service. Also do remember that these strategies are from the point of view of the producers or the sellers so that they can lower the risk of their consumers.
1.Mention the quantitative data of products: Make sure that you have displayed the maximum data that supports your proposal to the consumer. Also, it will be more beneficial if you can add up both the internal documentation along with the validation of the external sources. It will be best if you can read the analyst's reports or research.
2. Maintain Transparency: Don't shade a single piece of information from the buyers. You need to understand that anything that you are trying to hide can be uncovered by the consumers through social platforms. This is why make sure you are transparent with your consumers and share everything with them to lower their risk and maintain consumer Loyalty.
3. Meet the consumer's expectations: The producers need to be clear about the objectives, budget, scopes, deliverables, and many more things to develop trust. You need to understand the fact that what kind of goods or services a consumer is expecting from you. If the producers fail to meet the expectations, they won't only lose the consumers but the consumers will also face the risk.
4. Engage multiple stakeholders: Before you are going to make any proposal you must make sure to consult with all the other people engaged. This will also create transparency between the stakeholders and also will give you a bright perspective. This will be a good part of your decision-making process.
5. Provide other references to the consumers: When a producer comes forward to openly share some other references and prospectus, then this can make a good chance. This will give a brief knowledge about the product to the consumer that will help them to choose the product wisely and prevent any of the possible risks.
Hence, consumer risk is not a good sign for both the consumers as well as for the users. So, not only the consumers but the producers should also make sure to prevent such risks. The consumers can prevent it by properly knowing about the products and doing some research on it and also by making proper planning considering all the opportunity costs.
And on the side of producers, they need to make sure that they share all the required information with the consumers and prevent any kinds of risk for them so that they can build consumer loyalty.