If you can gear your advertising to address, reduce, or eliminate the major perceived risk, you go a long way toward removing barriers to purchase your prospect may be experiencing.
Monetary Risk
Is it worth the price?
Perceived monetary risk is simply the chance that the purchase won't prove to be worth the price the buyer paid. The amount of monetary risk depends on the degree of uncertainty about the value of the goods and on the size of the purchase price. Expensive gourmet foods, jewelry, and high-tech gadgetry are types of products that might be perceived as having high monetary risk.
Functional Risk
Will its performance fulfill my expectations?
The risk here is whether the product is effective and functions as anticipated by the consumer. The degree of perceived functional risk depends in part on the nature of the product and partly on the amount of functional risk capital the prospective buyer possesses. “Risk capital” here is similar to the way I used it in Chapter IV (Principle #2: Take Risks). More specifically, risk capital can be defined in terms of the degree of need (how important is it to you?) and the availability of substitute goods (are there alternative choices that might perform better?). A camera, computer software, or one of those cool gizmos advertised on late-night television are examples of products with a high functional risk.
Physical Risk
Could it endanger my health and well-being?
Products and services that are likely to have a high physical risk include those directly associated with health and safety, as well as products that could injure users. The degree of physical risk capital depends on how frail the consumer is. Examples of products with high perceived physical risk include snow skis, skateboards, and hang gliders.
Social Risk
Will this impact my social status?
Any consumer product that is socially visible is prone to perceived social risk. Specifically, social risk is the chance that buyers will lose social affiliation or status as the result of the purchase. These kinds of products include unfashionable clothing, plastic pink flamingo yard art, or anything else that is beneath one's social stature.
Psychological Risk
Can this threaten my self-esteem?
Perceived psychological risk is present when prospective buyers recognize there is a chance the purchase might jeopardize their self-image or threaten their self-esteem. This form of risk differs from “social risk” because there is no consideration of what others might think or do. The more positive the individual's self-image and self-esteem, the less psychological risk is perceived. An example is someone with strong moral convictions purchasing pornography or a vegetarian purchasing a steak.
Once you have determined which form of perceived risk your prospect will most strongly encounter when considering the purchase of your product or service, try rating the level of that risk. On a scale of one to five (five being highest), how high would you rate the perceived risk the purchase of your product/service represents?
Low Risk 1 - 2 - 3 - 4 - 5 High Risk
The final phase of knowing your prospect is to compile all the bits and pieces of information you have accumulated into a single composite profile. This composite profile is a “picture” of your best prospect. And with that picture firmly in mind, you can begin creating advertising that is, in effect, a personal “love letter” from you to your best prospect.
