Types of Consumer Risks
17 OCT 2017
Consumer risk is an economic concept relating to the risk consumers are willing to take when purchasing goods or services. While risk is usually unavoidable in transactions, consumers try to mitigate risk by educating themselves before purchasing goods and services. Consumers also try to avoid cognitive dissonance from economic transactions, commonly known as "buyer's remorse." Cutting risk in purchases helps buyers feel better with the transaction.
1 Personal Risk
Personal risk involves consumers who might endanger themselves by purchasing certain goods or services. Some purchases might require a certain level of experience to use correctly, increasing personal risk. Mitigating this risk would involve purchasing the services of an experienced individual. Proper consumer education and consulting with other owners or users of goods and services may help limit personal risk from economic purchases.
2 Social Risk
Social risk involves a consumer's perceived standing with others based on a purchase. This type of consumer risk may only be related to the social perceptions of the buyer, rather than held by the entire marketplace. Either way, social risk consists of society looking unfavorably on a consumer who buys goods or services deemed extravagant, unnecessary or improper. Examples could be goods made outside of the U.S., large houses, expensive cars, or "sin" activities such as smoking, gambling or visiting gentlemen’s clubs. Consumers who are generally not willing to face social risk avoid purchasing these products or purchase them secretly, avoiding negative comments from other consumers.
3 Economic Risk
Economic risk is the traditional financial risks consumers face. Common economic risks involve the purchase of overpriced goods, inferior substitutes or goods with limited use. Consumers also face the economic theory of opportunity costs, which is purchasing a good today and forgoing the ability to save the money for a larger purchase or as a safety net for poor financial times. Economic risk may only be perceived by the consumer, since each good or service is valued differently by each consumer. Under this principle, goods and services one consumer deems frivolous and overpriced, another consumer may deem a good value.