Does Perceived Risk Affect Your Purchase Intention?

Buying behaviour is directly linked to purchase intention. Hence, to understand and predict the purchase intention, the Theory of Planned Behaviour (TPB), an extension of the Theory of Reasoned Action is often used by marketers (Fishbein & Ajzen, 1969). TPB believes that attitude, subject norms and perceived behavioural control affect an individual’s behavioural intentions and behaviours. Ajzen (2011) asserts that behavioural intentions are determined by a combination of three factors, namely attitudes toward the behaviour, subjective norms and the perceived behavioural control.

According to Canniere et al (2009), personal norms and perceived behavioural control contribute to purchase intention attitude. Purchase intention mediates the impact of overall consumers’ behaviour, be it the purchase incidence or purchase behaviour. These behaviours include the amount spent, the numbers of store visits, the types of products purchased and so forth. It was further elaborated that consumer purchase frequency is also affected by the monetary value of the product, i.e. the higher price product triggers a lower purchase frequency.

Personal norms of a consumer are greatly influenced by their perceived risk towards a brand. By definition, consumers’ perceived risk is the feeling of uncertainty or doubt when making a purchase decision, especially buying big-ticket items. Consumer’s perceived risks can be analyzed through four major categories, namely perceived functional risk, perceived financial risk, perceived physical risk and perceived psychological risk (Bhukya & Singh, 2015). Let’s analyze each perceived risk on consumers’ buying behaviours.      

Perceived functional risk refers to the risk felt by consumers with regards to expectation. Perceptions are controlled by expectations, more so controlled by prior expectations. Having prior knowledge of products or events affect our judgement, thus determine the level of perceived risk towards purchase intention. Perceptual decision-making is largely triggered by prior knowledge of a person, i.e. higher prior knowledge lowers the perceived functional risk towards purchase intention. This argument was supported by Lange et al (2018) through their emphasis that prior expectation modulated the sensory processing of consumers when making a purchase decision. The outcome could be positive or negative, depending on consumers’ actual experiences. Assael (2005) indicated that the decision-making process also plays an important role in consumer purchase intention (pp. 27-51). Most of the time, consumer decision making is not a single process but a complex process that requires more information and deliberation. Complex decision making may include consumer involvement in the process of making as well as evaluating alternative brands. It may also involve multiple inputs required to make a single decision. For example, before a purchase decision made, a cross-check made with relatives, colleagues or friends. Therefore, needs arousal or recognition of a need is pivotal for the consumer to make a complex purchase decision. Hence, educating consumers on the functions and benefits of the product is essential. It can be done through various marketing channels.      

Moving forward, perceived financial risk is fear among consumers on the worthiness of their purchase, i.e. is the product they wish to purchase worth the money they wish to spend? Hence, the level of consumers’ perceived financial risk depends on their perceived value of the product, i.e. their identification of the product towards their needs and wants. Brand image is defined as how consumers perceived view of the brand. It is an association of minds within the minds of targeted consumers. To improve brand value, marketers should consider adopting the 5 key drivers in brand insistence. Brand insistence is a situation when a consumer is loyal to a particular brand, i.e. brand loyalty in layman term. It is considered a complete form of brand loyalty where a consumer stops comparing your brand with other competitors’ brand. Hence when your brand insistence, you will enjoy a ‘price insensitive’ phenomenon. Shapiro et al (2019) stated that when consumers’ identification of certain products of their liking is high (brand image), it will lower the level of perceived financial risk of those products.    

The third category of perceived risks that influence consumers’ buying behaviour is the perceived physical risk. A study was conducted by Wang & Hazen (2016) on consumers’ acceptance level to purchase remanufactured products. The findings proved that perceived physical risk can be lowered with the increased product knowledge by consumers. Marketers should adopt the concept populated by the marketing guru Philip Kotler, i.e. the 5 product levels. It focuses on the identification of products needs based on psychological expectations, emotional association and perceptual aspirations of a consumer about a product, i.e. created a product persona. With sufficient product knowledge, perceived physical risk become irrelevant and will not influence consumers’ buying behaviours or purchase intention. The confidence level of consumers will be strengthened with the increased of sufficient product knowledge and its usage. Strengthened consumers’ knowledge increases the chances of purchase intention.

The final category of perceived risk would be the perceived psychological risk. It has to do with the cognitive aspects of consumers, i.e. consumers’ intrinsic motivational factors. Realization is the keyword. For example, a study conducted by Kumar & Ghodeswar (2015) revealed that consumers are willing to support green consumerism and protecting the environment when all factors are in the right combination. They further reiterated that these factors are namely realization of responsibility towards the environment, easiness or availability of green products and social appeals. On the contrary, Junior et al (2018) discovered that insufficient knowledge among consumers leads to fixed buying behaviour based on past experiences. This is consistent with the study by Yeo et al (2017) which examined the structural relationship between intention to purchase with past fixed behaviours such as hedonic happiness, value-added pricing, time-saving orientation and so forth. Consumers tend to repeat their purchase out of ignorance.

In conclusion, the extent of perceived risks influence consumers buying behaviours or purchase intention is highly subjective. To understand the relationship, one must understand their pairings. For example, perceived functional risk is paired with prior knowledge, perceived financial risk is paired with product identification (brand image), perceived physical risk is paired with product knowledge and perceived psychological risk is paired with cognitive realization. The purchase intention of consumers is largely affected by the product brand image. It has been recognized as the driving force for consumers to crystalize their purchase intention. Zhang (2015) expressed his confidence that a brand image that is associated with a certain niche value will continue to serve, capitalize and retain their customers’ loyalty. This view is further supported by Kumar & Ghodeswar (2015) through their beliefs that in the long run marketers must focus on enhancing the brand image (goodwill) to maintain their loyal consumers.

References

Ajzen, I. (2011) The Theory of Planned Behaviour: Reactions and Reflections. Psychology & Health, 26(9), 1113-1127. DOI: org/10.1080/08870446.2011.613995

Ajzen, I. & Fishbein, M. (1969) The Prediction of Behavioural Intentions in Choice Situation. Journal of Experimental Social Psychology, 5(4), 400-416. DOI: org/10.1016/0022-     1031(69)90033-X

Assael, H. (2005) Consumer Behaviour: A Strategic Approach (Indian Adaptation). New Delhi: Biztantra, pp. 27-120

Bhukya, R. & Singh, S. (2015) The Effect of Perceived Risk Dimensions on Purchase Intention: An Empirical Evidence from Indian Private Labels Market. American Journal of Business, 30(4), 218-230. DOI: org/10.1108/AJB-10-2014-0055

Canniere, M.H.D., Pelsmacker, P.D. & Geuens, M. (2009) Relationship Quality and the Theory of Planned Behaviour Models of Behavioural Intentions and Purchase Behaviour. Journal of Business Research, 62(1), 82-92. DOI: org /10.1016/j.jbusres.2008.01.001

Junior, S.S.B., Silva, D. & Gabriel, M.L.D. (2018) The Influence of Environmental Concern and Purchase Intent in Buying Green Products. Asian Journal of Behavioural Studies, 3(12), 183. DOI: 10.21834/ajbes.v3i12.134

Kumar, P. & Ghodeswar, B.M. (2015) Factors Affecting Consumers’ Green Product Purchase Decisions. Marketing Intelligence & Planning, 33(3), ISSN: 0263-4503

Lange, F.P., Heilbron, M. & Kok, P. (2018) How Do Expectations Shape Perception? The Trend in Cognitive Sciences, 22(9), 764-779. DOI: org/10.1016/j.tics.2018.06.002

Shapiro, S.L., Reams, L. & So, K.K.F. (2019) Is it Worth the Price? The Role of Perceived Financial Risk, Identification and Perceived Value in Purchasing Pay-Per-View Broadcasts of Combat Sports. Sports Management Review, 22(2), 235-246. DOI: org/10.1016/ j.smr.2018.03.002 

Wang, Y. & Hazen, B.T. (2016) Consumer Product Knowledge and Intention to Purchase Remanufactured Products. International Journal of Production Economics, 181B, 460-469. DOI: org/10.1016/j.ijpe.2015.08.031

Yeo, V.C.S., Goh, S.K. & Rezaei, S. (2017) Consumer Experiences, Attitude and Behavioural Intention towards Online Food Delivery (OFD). Journal of Retailing and Consumer Services, 35, 150-162. DOI: org/10.1016/j.jretconser.2016.12.013

Zhang, Y. (2015) The Impact of Brand Image on Consumer Behaviour: A Literature Review. Open Journal of Business and Management, 3(1), ISSN:10.4236/ojbm.2015.31006