The Hindu Business Line : Perceived risk and branding

Emerging markets such as India are unique. Unorganised markets in several categories, low penetration of products and a huge mass of consumers in the lower social strata are some reasons why brands should address perceived risks if they want to build strong brands that would inspire consumer confidence.

With markets opening up to several product and service categories, one of the important considerations is that of perceived risk. Perceived risk poses several interesting questions as well as challenges for the marketer. The following are some:

What kind of perceived risk is relevant to a given product category?

What are the perceived risks associated with new concept products?

Can perceived risk vary according to the target segment?

Product category and perceived risk

Consumer durable categories will be associated with greater perceived risk than fast moving consumer goods because of the price factor involved. But there could also be other factors, those that deal with the functional value, associated with the product. A hair colourant has social risk associated with it. A consumer would be anxious about the promise of colour and its impact on his/her appearance and social approval because the category is associated with image and self-esteem.

It is in this context that the brand name provides reassurance on the outcome of product consumption. A computer institute that advertises its courses has to address the placement risk associated with it. Such risks increase if the service advertised is something with which consumers are not familiar. A few institutes which advertise for their air-hostess courses make a mention of the placement potential to reassure the candidates (consumers) about the positive outcome of the course. Hospitals brand themselves for similar reasons. Such brand-building (not necessarily through advertising) is helpful especially consumers do not have much expertise in the given service/product category.

Even in a familiar product category, a well-known brand can help the marketer establish confidence in the mind of the consumer when there’s a new offering. Citizen’s Ecodrive watch is a good example. Being a new concept in watches, the perceived risk would have been far greater without the familiar brand name.

When the risk pertains to safety, branding is vital. In a category such as talcum powder for babies, Johnson & Johnson has been having a stranglehold over the market for several decades. Though the sub-category is a niche market which commands a premium, several other brands (including Pond’s) have not been successful in the Indian context. The target consumer segment of mothers is unwilling to try out any other option when the brand has been perceived to be safe for several decades.

A well-known brand of medicine usually taken for fever was found to be insufficient on several medical parameters by a reputed product testing association. But in reality, several consumers are likely to stock it as it has been perceived as the best by doctors and consumers for several years. Glaxo once produced two brands of milk substitute for infants — one branded Glaxo and the other something else. Consumers bought Glaxo in large numbers over the other brand because of the aura of assurance it gave off.

Other kinds of risks are associated with the positive intangible power of branding wherever the product category is appropriate.

New concept products

There is a difference between products with which consumers are familiar and those which are new. The fundamental aspect is if these new offerings are substitutes for the existing offerings, and solve a problem not addressed by the current offerings in the market. For example, the ATM is a new offering and to a great extent substitutes for the service at the banks if money withdrawal is considered. The consumer can withdraw money any time from several locations. The upwardly mobile in high-paying jobs and with a compressed time schedule will perhaps perceive lesser risk as against retired pensioners who also need to draw money frequently to manage their expenses. Fear of the machine not working, getting used to the operation, and more than anything else, not having human contact, like in a bank, is likely to discourage such segments from making use of the machine.

Diffusing durable categories

If a product such as a dishwashing machine is considered, even an upwardly mobile, high-income urban segment is likely to be resistant to the product due to several reasons. Though such a machine is a substitute to the manual labour normally employed in homes, it offers several other advantages. It can be used at any time. The first risk is value risk. Would it offer as much value indicated by the initial price of the machine? Another concern is the performance. Would it be as dependable as manual help? Usage risk is another. Would it be complicated to use? With these kinds of risks, it is usually a small percentage of consumers who are classified as innovators that try such a product. How can an unknown brand tackle such risks? Selling the concept and carefully locating the target segment is vital because word of mouth about new products is crucial during the initial phases of launch. The washing machine market, though a limited one, has grown in the urban markets over the years and the product was completely a new offering when it was introduced a few decades ago. In contrast, the vacuumiser (a product introduced by Real Value to preserve food in its original flavour) did not take off at all.

When such new offerings are introduced, it is imperative to find out how the product is likely to be useful to the maximum extent to a specific segment. This requires careful analysis of several segments. A dishwashing machine is likely to be useful to a high double-income family, which has a busy lifestyle. Being in the higher income bracket, such a segment will also be price-insensitive provided the product offering is good. Due to the demands which need to be met with regard to dishwashing, this segment is likely to perceive a better value in a dishwasher than a typical upper middle class family, which lives in a neighbourhood where employing help for such household purposes is almost part of the culture.

Performance and value risks are to be addressed if such a segment is the target. Product demonstration during the pre-sale phase is a good way to start the marketing effort. Door-to-door selling is one of the methods but given the time pressure of the segment and the need for privacy, it may not be the best alternative. Besides, adopting the method for an unknown brand may not add value as consumers may be even less willing to entertain a salesperson when he is associated with an unknown brand. The brand should demonstrate in high-end outlets the target segment visits. This is a situation where an unconventional approach to retailing is likely to benefit the brand. Following up on the leads generated through demonstration and ensuring complete satisfaction with the brand — right from usage aspects for best results to after sales service is likely to be effective in spreading the good word of mouth. The higher end segment today is exposed to several kinds of information. Conventional advertising with the claims of the brand may not be as effective as convincing word of mouth publicity, perhaps from a neighbour or a colleague at work.

The innovator-consumers have to be given extra attention as they may be opinion leaders. What is to be remembered by marketers is that the value of a new product to the market is defined by the target segment and it could be convenience, time-saving or anything else which will enable them to make the quality of life better given their lifestyle pressures: the value may not stop with just performance or functionality viewed in the traditional sense.

Intention to buy matters

There may also be consumers who may try out the product during the demonstration stage or follow-up stage but who may not buy the offering. These consumers offer a rich source of information concerning the reasons/resistance associated with the new offering. A consumer may not purchase the offering because he/she may feel like waiting till the offering gathers ground among a significant number of consumers. In an emerging market such as India, given the low penetration levels even of products with which consumers are familiar, the intention to buy is a strong factor in favour of the brand.

Consumers who have a strong intention to buy but who may not like to be innovators have to be approached in a different manner. They may perhaps like to interact with satisfied consumers; they may have to be convinced about the seriousness of the brand through specific information on manufacturing or the support infrastructure created by the company. There may be another segment which has been experiencing bad word of mouth not about the brand but with the category itself; the company should attempt to create the intention to buy. For example, the introduction of electronics in several products/devices such as cars, washing machines and electric cookers initially created apprehensions among consumers. Kinetic Honda, when it introduced the initial version of its scooter (which incidentally was not the first offering in the scooter category), faced apprehensions about its suitability for Indian roads. The company sponsored an event associated with a rally to the Himalayas to build the brand’s credibility.

Addressing perceived risk depending on the needs of a specific segment requires in-depth information about the segment and also a well planned approach. Direct marketing and selling can be a part of the approach after the intention to buy the new offering has been established in the mind of the prospective consumer. Perceived risk is an area where the conventional marketing mix elements could be used in an unconventional manner. A changing environment demands creativity of that kind.

(S. Ramesh Kumar is Professor of Marketing, IIM, Bangalore)

More Stories on : Branding | Back to Concepts

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
A phone of many parts

Looks can sell

Marketing magnified

Perceived risk and branding

Revisiting Prof Levitt

Men, the elusive consumers bookmark