Best in Brief
MIT Sloan Management Review: Risky business
In an environment where competitors can match
any product improvements quickly, companies can influence purchasing decisions
in two ways: reduce interaction costs or make purchase and ownership less risky.
Buyers incur a range of costs in
learning about, acquiring, using, configuring and finally disposing of products.
It is also often missed that in purchasing a product or service bundle,
consumers incur the costs of not purchasing an alternative bundle. Thus, someone
might buy a people carrier for roominess and comfort, but forgo the fun and
image of driving a convertible.
Risk comes into play when consumers
consider the range of possible outcomes from interaction. A number of questions
may be asked, such as whether or not the product or service will perform as
expected. Will they lose money? Will the seller be around for repair and
maintenance? Can the seller's promises be trusted? If the risks seem too great,
they often decide not to buy. As a consequence, established products are often
bought in preference to better new ones simply because the new ones pose too
high a risk.