Question

Explain what is meant by the term perceived risk. Provide an example for each of the six major types of risk and explain why understanding each type is important for marketers.

Answer 1

Perceived risk : Perceived risk is a set of uncertainities that consumers have in their minds while buying a product regarding the outcome of the product usage. There are six types of perceived risks are :

1. Functional risk : It refers to the fear that a product/ service will fail to deliver promised functions . For example : A new computer might fail to run the resource intensive or audio editing program needs to perform her job.

2. Social risk: It refers to the possibility that buying a product/ service can reduce a person's status . For example: A person purchases a pure bred dog and finds his friends consider adopting animals from shelters the socially responsible nature, he suffers a loss of status.

3. Financial risk : Every customer suffers some extent of financial risk. They are afraid that a purchase might strip them of their income sources at that time or in the future. For example: buying a car could leave them with little money or with loans that will affect their income for the next few months.

4. Physical risks : An product that could cause harm to a person . For example : buying a gun , it could accidentally malfunction .

5. Time risks: If a product breaks or fails a few days after purchase and needs replacement , this is known as time risk.

6. Psychological risks: Consumers also face questions about whether a given purchase is the morally right choice. For example: a customer may want to buy from a particular company because it offers inexpensive alternatives, but feel ambivalent due to the company's labor practices.

Understanding each type of perceived risk is important for marketers because any time customers consider purchasing a new product or service , they also face a set of uncertainities about the product / service is known as perceived risk . As part of the conversion process from potential customer to paying customer, businesses must develop startegies to assauge the types of risk.