Having worked with a risk management specialist for many years, I'm particularly interested in how brand owners, gaming companies and shoppers view risk
But looking specifically at customers, they are often risk averse because they want to avoid negative outcomes or losses. Risk aversion is a common behaviour in decision-making, and it is driven by the fear of losing something that is of real value to customer, whether it's money, time, reputation, or something else.
We know there are several factors that contribute to customer risk aversion:
Uncertainty: Customers may be risk averse when they are uncertain about the outcome of a decision. This uncertainty can come from a lack of information, conflicting information, or ambiguity in the decision-making process.
Previous negative experiences: Customers who have had negative experiences in the past may be more risk averse in future decisions to avoid similar negative outcomes.
Financial constraints: Customers with limited financial resources may be more risk averse because they cannot afford to lose money or waste resources on a decision that doesn't work out.
Emotional attachment: Customers who have an emotional attachment to the decision may be more risk averse because they fear losing something that is important to them, such as a valued possession or relationship.
Social pressure: Customers may be risk averse when they feel social pressure to conform to a certain decision or behavior. This pressure can come from friends, family, or cultural norms.
Our job as marketers is to help brands reduce risk for their customers.
Brand owners can reduce risk for customers in a number of ways:
Provide clear and transparent information: Providing clear and transparent information about products and services can help reduce uncertainty and increase trust. This includes providing information about
pricing, features, benefits, and any risks associated with the product or service.
Offer guarantees or warranties: Offering guarantees or warranties can help reduce the perceived risk of purchasing a product or service. This reassures customers that they can return the product or get a refund if they are not satisfied. some of these guarantees can be in the form of promotional marketing, so money back guarantees, or providing gifts with purchase.
Provide social proof: Providing social proof, such as customer reviews or testimonials, can help reduce the perceived risk of purchasing a product or service. This demonstrates that other customers have had a positive experience with the product or service.
Provide excellent customer service: Providing excellent customer service can help reduce the perceived risk of purchasing a product or service. This includes being responsive to customer inquiries and complaints, and providing timely and helpful solutions.
Build trust and credibility: Building trust and credibility with customers can help reduce the perceived risk of purchasing a product or service. This can be achieved through transparent and ethical business practices, high-quality products and services, and positive customer relationships.
Only by reducing perceived risk, can brand owners help to increase customer confidence and loyalty, which can lead (hopefully) to long-term business success.