NFIB

Consider the Risk Factor When Attracting or Retaining Customers
04/ 11/ 2002

Have you ever thought about your main concerns when thinking about doing business with a company you're unfamiliar with? For example, say you've been in a fender bender and need a little bodywork done on your car. You take it to various places for estimates, and find that prices vary by 30 percent or more from one place to another, all for the same basic work. Your main concerns? That the work will be done expertly, with no future repercussions such as rust or chipping paint--and that the cost will be reasonable, based on the quality of work.

If you're not familiar with any of the establishments you visit, it's likely that you'll base your choice on the "risk" factor. In other words, you'll give your business to the company that seems to offer the least risk of doing the job poorly, as long as the price isn't too out of line with what other companies are asking. In today's Workshop, Jeffrey Moses shows why almost all customers base their purchasing decisions on the risk factor--and how your company can benefit from this knowledge.

When a customer has been going to one store or service provider for some time and is satisfied with the products or services received, it's extremely difficult to convince that customer to change to another provider. Why? Because the store or service provider that the customer is using has eliminated or greatly reduced the risk factor. The customer has experienced satisfaction, and therefore has little risk in continuing to use that supplier.

In fact, the customer doesn't even have to be completely satisfied to remain with a provider. The fear of going to another provider and not having the job done well (the risk factor), is so powerful that many times customers will continue to give their business to providers whose work is only marginally satisfactory.

There are always, however, a certain number of customers who are actively looking for new providers. To induce a customer to change, a new provider has to directly address the risk factor. The new provider has to assure the customer that the work will be done satisfactorily, and at a reasonable price.

All too often, businesses create and put out advertising that simply describes what the business does--without telling customers how they can be assured of satisfaction. There are many ways to assure customers, ranging from the physician or dentist who places diplomas on the wall, to money-back and no payment unless satisfied guarantees, to testimonials with satisfied customers recommending the business.

When designing your marketing pieces, you should always keep the risk factor in mind. Always ask yourself: What can I say to potential customers to reduce the risk factor? How can I most effectively show my expertise to customers? How can I let customers know about my previously satisfied customers? How can I guarantee the work I do for them?

Increasing your customer base will always be directly related to how effectively you can reduce or remove the risk factor from customers' decisions. When you can use testimonials in your ads, you'll gain an edge over other companies. When you can offer 100 percent money-back guarantees, you'll further reduce customers' risk fears. And when you can actually do a little work for customers before charging them, you can show them first-hand what you can do.

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