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The Four Factors of Risk


Last updated 8/5/2010

The critical factor in selling today is risk. Because of continuous change and rapid obsolescence, the risk of buying the wrong product or service becomes greater as change intensifies. Our greatest single need is for security of all kinds and any buying decision that puts us out on a limb triggers the feeling of risk and threatens that security.

There are four main factors that contribute to the perception of risk in the mind and heart of the customer.

1. The size of the sale.  The larger the sale, the more money involved, the greater the risk. If a person is buying a package of Lifesavers, the risk of satisfaction or dissatisfaction is insignificant. But if a person is buying a computer system for his company, the risk factor is magnified by hundreds or thousands. Whenever you are selling a high-priced product, you must recognize that risk enters into the buyer's calculations almost immediately.

2. The number of people who will be affected by the buying decision.  If you go out for lunch alone to a new restaurant, the risk is very low. But if you invite a group of business customers to a restaurant to discuss a large transaction the risk factor can be very high.

Almost every complex buying decision involves several people. There are the people who must use the product or service, the people who must pay for the product or service, there are the results expected from the installation of the product or service and there is the reputation of the person making the final buying decision. If a person is extremely sensitive to the opinions of others, this factor alone can cause him or her to put off a buying decision indefinitely.

3. The length of life of the product.  A product or service that, once installed, is meant to last for several years, generates the feeling of risk. The customer thinks, "What if it doesn't work and I'm stuck with it?"

How many times have you bought something personally that turned out to be the wrong item and you were stuck with it? You couldn't replace it with something more appropriate because of the amount you had already paid.

4. The customer's unfamiliarity with you, your company, and your product or service.  A first time buyer--one who has not bought the particular product or service before or who has not bought it from you—is often nervous and requires a lot of hand-holding. Anything new or different makes the average customer tense and uneasy. This is why new products or services, or new business relationships with your company have to be presented as a natural extension of what the customer is already doing.

What you can do to overcome the customer’s sense of risk.

There are two things you can do immediately to put these ideas into action.

  • First, demonstrate and prove to your customer that the people affected by this purchase will be happy and satisfied. Tell stories about other happy customers.
  • Second, show the customer that this purchase, even if it is new or unfamiliar to the customer, is a logical extension of what the customer is already doing. Show the customer it makes perfect sense.

Once you understand the feelings that may be holding your customer back from making a purchasing decision, you'll be able to make him feel confident that he'll have no regrets once he signs on the dotted line.