Industrial Risk Reduction in the Purchase of Microcomputers by Small Businesses

Abstract

The theory of perceived risk, despite its obvious explanatory power, has been little used in industrial buying behaviour. This article attempts to reawaken interest in the theory by bringing together established and more recent articles on industrial perceived risk, and applying the ideas to a rapidly changing and growing market, namely microcomputers for small businesses. Several factors have been identified from the literature which affect the degree of risk present; these include the risk type, buy type, decision‐making unit, buyer differences, size of the company, product characteristics and customer‐supplier interaction among others. A specific set of these factors will produce a certain degree of purchase risk, which buyers attempt to reduce using some of the following strategies: source loyalty, choosing a leading company, using approved supplier lists, considering more suppliers and visiting the suppliers′ operations. The purchase of microcomputers by small businesses is particularly prone to risk because of the short product life cycles of microcomputers, small businesses, lack of experience and expertise, and the (not insignificant) financial outlay. As well as the general risk‐reducing strategies the purchase of micro‐computers has its own additional set. This includes hiring a consultant, seeing demonstrations, ensuring maintenance back‐up and using industry norms. This highlights the product‐specific nature of risk perception and reduction. The article concludes by discussing several practical marketing implications, e.g. the development of salespeople as “para‐consultants”, the importance of stimulating relationships with trade associations, and the need for future product compatibility.

Citation

Mitchell, V. (1990), "Industrial Risk Reduction in the Purchase of Microcomputers by Small Businesses", European Journal of Marketing, Vol. 24 No. 5, pp. 7-19. https://doi.org/10.1108/03090569010003617