Organizational buyers have a very strong desire to reduce the level of risk in making purchase decisions. The buyer’s decisions are modified, postponed or avoided if the decision is highly influenced by the risk. There are many types of risk-physical, financial, social, psychological, perceived risk etc. In case of making purchase decision two components should be kept in mind.
a. Uncertainty about the out outcome of a decision
b. The extent of consequences associated with making the wrong choice.
Organizational buyers normally use four types of risk reduction strategies.
1. External uncertainty reduction: Organizational buyers can reduce the level of risk by relying on familiar suppliers. To get their proper & adequate supply, the organization’s buyer can visit supplier’s plant. Through this they will be able to know, weather the supplier has enough capacity to supply the quality goods.
2. Internal uncertainty reduction: In case of purchasing industrial product, the buying center’s members consult with the other buyers to know whether they are satisfied or not by the existing suppliers. They collect the opinion about raw materials, quality and duration of delivery time etc.
3. External consequences reduction: For external consequences reduction, buying center purchases product from different sources not only one source. By multiple sourcing risks is divided. If one supplier’s product is hampered then risk is for one source, another sources may be risk free.
4. Internal consequence reduction: To reduce the risk buying center members consult with company’s top management. In this way the buying organization should carefully handle the risk which was elicited in case of purchasing.