Real Risk vs. Perceived Risk: 2 Factors to Grow Your Business in 2020
Addressing customers' perceptions of risk is a priority for business growth.
Without a doubt, 2020 takes the title of “The Year of Risk.” The dangers of simply going to the grocery store or gathering with friends and family cast a bright spotlight on the concept of risk, our perceptions of it, and its effects on human behavior. Yet I would argue that risk perception — how we perceive and interpret external danger — carries new meaning and implications amid the current crisis. Beyond the sphere of our personal lives, we see the dramatic influence of risk perceptions in commerce, where it remains a prevalent force that all entrepreneurs and organizations must address to succeed.
But first, let’s establish the differences in risk perceptions between entrepreneurs and the customers they seek to acquire. As popularized, the term “entrepreneur” means “risk-taker.” Many who earn this designation bet their livelihoods in pursuit of a vision with no guarantee of success. They display an unusual tolerance for risk, one not shared by the majority of the population, all of whom retain purchasing authority in business-to-consumer (B2C) markets and many of whom hold this power in business-to-business (B2B) realms. A 2016 study, published in the Journal of Business Research, highlighted the substantive differences in risk perceptions between B2B entrepreneurs and prospective customers. The study’s key findings? Entrepreneurs tend to underestimate the influence of risk, while overemphasizing the importance of reward, when attempting to sell a product or service to a prospective customer. As a result, the sales process rarely addresses or allays the concerns to the degree needed to secure the transaction.
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