James W.

Taylor

•
The Role of Risk 1n
Consumer Behavior
A comprehensive and operational theory of risk taking in
consumer behavior.

RAYMOND Bauer first formally proposed that
consumer behavior be viewed as risk taking
in 1960.1 Over a dozen years have passed since
that proposal was made, and during that period
a substantial body of research has been conducted
and published. However, most of this research
has examined relatively narrow aspects of risk
taking and has been conducted without a broader
comprehensive theoretical structure. This lack of
a comprehensive theory of risk taking seems to
have worked to obscure the emerging picture of
risk as the pivotal element in consumer behavior.
Further, once perceived risk has been identified
in a purchase situation, there seems to be some
reasonable evidence that subsequent consumer
behavior can be determined in accordance with
such risk. If this view is correct, marketing man-
agers may now have the opportunity to use the
various elements of the marketing mix with con-
siderably greater precision than has been possible
in the past.
This article attempts to construct a comprehen-
sive theory of risk taking in consumer behavior
by specifying the principal concepts involved and
the interrelationships between the concepts. In
addition, some of the research relevant to these
concepts and interrelationships is presented. Fi-
nally, the author suggests how the theory might
be tested and put to work in marketing decisions.
The concept of theory used here is in the spirit
of Baumol when he says:
Roughly, the theorist uses the word "theory"
1. Raymond A. Bauer, "Consumer Behavior as Risk Tak-
ing," in Dynamic Marketing for a Changing World, Robert
S. Hancock, ed. (Chicago: American Marketing Assn.,
1960), pp. 389-398.
Journal of Marketing, Vol. 38 (April 1974), pp. 54-60.
to mean "systematic explanation." A theory
is a structure which describes the workings
and interrelations of the various aspects of
some phenomenon.2
Overview of the Theory
The central problem of consumer behavior is
choice. Si~ce the outcome of a choice can only
be known m the future, the consumer is forced
to deal with uncertainty, or risk. Perception of
risk is one pivotal aspect of consumer behavior
because risk is often perceived to be painful in
that it may produce anxiety, in which case it
must be dealt with in some manner by the con-
sumer. Both the amount of risk perceived in a
particular choice situation and the selection of
methods for dealing with the risk will be affected
by the individual consumer's level of self-esteem.
Any choice situation always involves two as-
pects of risk: uncertainty about the outcome and
uncertainty about the consequences. Uncertainty
about the outcome can be reduced by acquiring
and "handling" information. Uncertainty about
the consequences can be dealt with by reducing
the consequences through reducing the amount
at stake or putting off the choice. In a choice
situation, risk can be interpreted in terms of
possible loss. The loss can be in psycho/social
terms or in functional/economic terms, or in some
combination of both forms of loss.
Figure 1 presents a flowchart of the interrela-
tionships of these components of risk taking in
consumer behavior as they affect the purchase
decision.
2. W. J. Baumol, "On the Role of Marketing Theory,"
Vol. 21 (April 1957), pp. 413-418.
JOURNAL OF MARKETING,

54
The Role of Risk in Consumer Behavior
Generalized Specific
Self-esteem (X,) Self-esteem (X,)
Uncertainty
about Outcome (X,)
Psycho/ Functional/
Socia! Economic
Loss (X,) Loss (X,,)
FIGURE
Definitions
It is useful to introduce at this point working
definitions, or clarifications, of four concepts-
choice, anxiety, self-esteem, and uncertainty/risk
-as well as a discussion of the effects of anxiety
and a description of the consumer.
Choice in consumer behavior is seen only as a
particular case in the much larger view advanced
by existential theorists of choice as the central
aspect of human behavior. Fischer summarizes
this concept as follows:
Obviously, once a person perceives himself as
a separate entity, a being who is not com-
pletely embedded in his surroundings, he can
no longer conceive of possibility or any course
of events in the same manner as before ....
With this realization comes the problem of
choice. Awareness of the possibility of willful
action brings with it an understanding of the
fact of choice and the responsibility there-
fore .... Anxiety arises with this confronta-
tion of freedom in that the agent who must
choose and who has no guarantee of the final
55
Choice (X,J
Development of
Risk-reducing Strategies (X,J
Uncertainty
about Consequences (X,)
Psycho/
Social
Loss (X,)
Decision
to
Buy
L Risk taking in consumer behavior.
outcome, must also bear the full responsibility
of his choice.a
Anxiety (X3)
While it seems relatively easy to accept con-
sumer choice behavior as a minor example, usu-
ally, of a larger concept of human behavior, more
care must be taken with anxiety. Since so much
of the research and theory on anxiety is clinically
based from studying psycho-neuroses, the defini-
tion used here must be clearly understood as
having these characteristics: (1) anxiety is uni-
versal, (2) it is normal, (3) it is different from
fear, and ( 4) it can be constructive.
Fromm-Reichman makes the first two points
when she notes that: "we consider anxiety to
be an experience by no means limited to the
mentally disturbed. As initially stated, we realize
that anxiety in its milder forms is a universal
phenomenon. Philosophers and psychologists have
known and advanced this knowledge for a long
time." 4 May comments on the third characteristic
3. William F. Fischer, Theories of Anxiety (New York:
Harper & Row Publishers, 1970), pp. 86-87.
4. Frieda Fromm-Reichman, An Outline of Psychoanaly-
sis (New York: Random House, 1955), p. 113.
56
as: "To begin with, Freud makes the customary
distinction between fear and anxiety which we
have already noted in the work of Goldstein and
others. Freud holds that in fear the attention is
directed to the object, whereas anxiety refers to
the condition of the individual. ..." 5
Fischer suggests how anxiety can be construc-
tive when he says: "Jacobson's energy model ...
allows the organism to seek tension, to expand
tension tolerance and to enjoy and benefit from
what it once experienced as intolerable, or, at
least, unpleasurable." 6 He is even more specific
in: "It should be evident by now that Kierkegaard
considers anxiety to be both inherent in and
necessary for growth." 7
Self-Esteem (X 4 , X5)
Coopersmith offers a workable definition of
self-esteem:
By self-esteem we refer to the evaluation
which the individual makes and customarily
maintains with regard to himself: it expresses
an attitude of approval or disapproval, and
indicates the extent to which the individual
believes himself to be capable, significant,
successful, and worthy. 8
Self-esteem and generalized self-confidence are
considered as essentially interchangeable for pur-
poses of this theory. The similarity between the
kinds of items used by Coopersmith to opera-
tionalize self-esteem measurement, that is, "Would
you say you are the sort of person who finds it
easier or harder to make friends?" 9 and those
used by Bell in measuring self-confidence, or "I
feel capable of handling myself in most social
situations," 10 is judged to be strong enough to
permit this step.
Uncertainty /Risk (X2 )
Uncertainty is used by some authors inter-
changeably with risk, and that convention is ac-
cepted here. Cunningham makes the point that
many writers in other fields separate uncertainty
5. Rollo May, The Meaning of Anxiety (New York: The
Ronald Press Co., 1950), p. 114.
6. Same reference as footnote 3, p. 48.
7. Same reference as footnote 3, p. 87.
8. Stanley Coopersmith, The Antecedents of Self-Esteem
(San Francisco: W. H. Freeman and Co., 1967), p. 4.
9. Same reference as footnote 8, p. 51.
10. Gerald D. Bell, "Self-Confidence and Persuasion in Car
Buying," Journal of Marketing Research, Vol. 4 (February
1967)' pp. 46-52.
• ABOUT THE AUTHOR.
James W. Taylor is assistant professor of marketing in the
School of Business Administration and Economics, Cali-
fornia State University, Fullerton.
Journal of Marketing, April 1974
and risk by using uncertainty when the probability
is not precisely known and risk when it is ex-
actly known. 11 That distinction will not be made
here; rather, risk and uncertainty will be used as
equivalent concepts.
The Effects of Anxiety
Fischer has already suggested that anxiety can
create tensions that are "intolerable, or, at least,
unpleasurable." 12 Fromm-Reichman describes the
effects more specifically as: "the anticipated loss
of love and approval, or separation, social isola-
tion, or disruption of one's interpersonal rela-
tionships .... " 13 After describing anxiety as "dif-
fuse" apprehension with only a "vague" focus,
May states his understanding of the effects: "The
terms 'diffuse' and 'vague' do not mean that anx-
iety is less intense in its painfulness than other
affects. Indeed other things being equal, anxiety
is regularly more painful than fear." 14
Mild forms of anxiety are thus defined as being
associated with mild forms of, at least, discom-
fort.
The Consumer
Markin draws a reasonably accurate word pic-
ture of the consumer envisioned here as he sum-
marizes his ideas on the "existential consumer."
In summary, consumer behavior might very
well be viewed within the framework of
heuristic problem solving. The behavior of
the consumer is goal-directed and, therefore,
purposive. . . . He learns what later become
habitual modes of reducing tension. . . . He
learns to rely on dependable modes of re-
ducing tensions, but he is constantly slough-
ing off old habits and taking risks in search-
ing out new means of problem solving ....
it is only through risk-taking and variation
that growth . . . can occur. 15
Relevant Research
The Problem of Choice (X 1 )
The theory takes as a starting point the con-
cept that consumer behavior can best be under-
stood as a subset of the wider human problem of
choice as it is conceived of by existentialist phi-
losophers and psychologists. The author knows of
no direct evidence supporting this contention.
11. Scott M. Cunningham, "The Major Dimensions of
Perceived Risk," in Risk Taking and Information Handling
in Consumer Behavior, Donald F. Cox, ed. (Boston: Grad-
uate School of Business Administration, Harvard Univer-
sity, 1967), pp. 82-108.
12. Same reference as footnote 3, p. 48.
13. Same reference as footnote 4, p. 114.
14. Same reference as footnote 5, p. 191.
15. Rom J. Markin, The Psychology of Consumer Be-
havior (Englewood Cliffs, N. J.: Prentice-Hall, 1969), p. 60.
The Role of Risk in Consumer Behavior
However, if Cox's estimate that "the American
public has available to it not less than 3,750,000
separately identifiable items of goods"lG is com-
bined with Maslow's conception of man as "a
perpetually wanting animal" 17 and the knowledge
that practically all consumers have constrained
budgets of money and time, it may be sufficient
to simply assert that consumer behavior is a
problem of choice.
The Relationship between Choice
and Uncertainty /Risk (Y 1 )
The evidence that consumers do perceive risk
in choice situations is extensive. Arndt studied
the introduction of a new brand of coffee among
housewives and found that he was able to identify
the levels of uncertainty perceived in the choice
to try, or not try, the new product. 1 s Cox and
Rich studied women who shopped in department
stores and found clear evidence of perceived risk
in choice situations. They remark: "Non-phone
shoppers not only perceive intolerable amounts
of risk in telephone shopping, but also seem un-
willing or unable to deal with their uncertainty
in such a way as to reduce risk to the point
where it would be comfortable. . . ."19
This is a small sample of the research evidence
linking perceptions of risk and uncertainty to
choice in consumer behavior.
Uncertainty/Risk and Anxiety (Y 2 )
The evidence supporting this link in the theory
is far from complete. However, May provides
some fnsight into what to expect when he says:
Whenever possibility is visualized by an in-
dividual, anxiety is potentially present in
the same experience. In everyday experiential
terms, this may be illustrated by the observa-
tion that every person has the opportunity and
need to move ahead in his development. . ..
Such possibilities, like roads ahead which
cannot be known since one has not yet tra-
versed and experienced them, involve anxiety. 20
Although there is no known published research
that directly relates anxiety and perceived risk in
the area of consumer behavior, an unpublished
paper by the marketing research department of
16. Reavis Cox, Distribution in a High-Level Economy
(Englewood Cliffs, N. J.: Prentice-Hall, 1965), p. 45.
17. Abraham H. Maslow, Motivation and Personality,
2nd ed. (New York: Harper & Row Publishers, 1970), p. 24.
18. Johan Arndt, "Word of Mouth Advertising and Per-
ceived Risk," in Perspectives in Consumer Behavior,
Harold H. Kassarjian and Thomas S. Robertson, eds.
(Glenview, III.: Scott, Foresman, 1968), pp. 330-336.
19. Donald F. Cox and Stuart U. Rich, "Perceived Risk
and Consumer Decision Making-The Case of Telephone
Shopping," Journal of Marketing Research, Vol. 1 (No-
vember 1964), pp. 32-39.
20. Same reference as footnote 5, p. 33.
57
a major oil company has identified perceived risk
and the resultant anxiety as the primary determi-
nant in the purchase of brands of gasoline. This
construct was used successfully as a basis for
measuring the effectiveness of promotion and has
been reported in the literature.21
This linkage is the weakest, in terms of research
findings support, in the theory.
Choice, Anxiety, and Risk-
Reducing Strategies (Y3 )
The theory postulates that choice situations in-
volve uncertainty which creates some level of
anxiety. Since anxiety is uncomfortable, con-
sumers are thought to develop strategies to re-
duce the risk in choice situations and thereby
reduce the inherent anxiety.
There is a considerable body of research evi-
dence to support the concept that consumers do,
in fact, develop and use risk-reducing strategies
in choice situations where they perceive risk.
One of the most inventive and comprehensive
studies in this area was done by Roselius. 22 He
established the amount of "time loss," "hazard
loss," "ego loss," and "money loss" that consumers
perceived as possible in several different buying
situations. For each of these choice situations,
he asked the respondents, in this case housewives,
to rate the usefulness of eleven different methods
of reducing risk. The methods included brand
loyalty, money-back guarantees, free samples,
word-of-mouth, and the like. Roselius found sig-
nificant differences in consumer preferences for
risk-reducing strategies in relation to the types
of "loss" perceived as possible in a particular
buying situation. In addition, he found that con-
sumers who perceived greater amounts of risk
in a situation tended to have different preferences
for strategies than did those consumers who per-
ceived less risk in the situation.
The Composition of Perceived Risk (X7 , X8 )
It is contended in this theory of consumer be-
havior that every choice situation has two sepa-
rate types of risk involved in the decision. One
type of risk is uncertainty about the outcome of
the decision, that is, "If I buy this dozen eggs,
how can I be certain that none of them are
spoiled?" The other type of risk is uncertainty
about the consequences of making a mistake, that
is, how important is the possible loss, or, "If one
of the eggs is spoiled, could some member of my
family eat it and get very sick?" Both types of
21. James W. Taylor, "Two Requirements for Measuring
the Effectiveness of Promotion," JOURNAL OF MARKETING,
Vol. 29 (April 1965), pp. 43-45.
22. Ted Roselius, "Consumer Rankings of Risk Reduc-
tion Methods," JOURNAL OF MARKETING, Vol. 35 (January
1971)' pp. 55-61.
58
risk are thought to be present in every choice
situation but in varying importance to each other,
depending upon the exact nature of the deci-
sion. Further, the proportion of each type of risk
perceived in a particular choice is thought to
determine the types of risk-reducing strategies
employed by the consumer.
It is believed that the difference in the pro-
portions of outcome risk to consequences risk
explains why Cox and Rich found that approxi-
mately four out of five of their respondents would
not worry about ordering bed linens by telephone,
while approximately four out of five of the same
respondents would worry about ordering a girdle
by telephone. 2 3
It also seems possible that failure to account
for variation in the proportion of these two types
of risk, product by product, is the primary ex-
planation for Spence, Engel, and Blackwell's find-
ing that: "The hypothesis that mail-order buyers
of hospitalization insurance would perceive sig-
nificantly less risk in mail-order buying of other
products could not be i;tccepted." 24 The theory
would indicate that the' proportion of outcome
risk to consequences risk was different for mail-
order buying of fresh strawberries, 19-inch tele-
vision sets, and aspirin (a few examples of the
items used) than it was for hospitalization in-
surance, and that consumers would select a dif-
ferent risk-reducing strategy. By opting to buy
hospitalization insurance from a salesman in the
Spence et al. research, the respondents may be
viewed as having behaved as expected.
Even in the same situation, individual con-
sumers can perceive different proportions of out-
come risk to consequences risk and adopt dif-
ferent strategies.
Reduction of Uncertainty (X 11 )
Much of the available research supporting the
theoretical construct focuses on information han-
dling. Accordingly, the data will be examined in
relation to three subdivisions of information han-
dling: acquisition, transmission, and processing.
Information Acquisition (X 13 ). The main thrust
of this part of the theory is that there are dif-
ferent channels of information available to the
consumer and that the different channels are seen
as more, or less, appropriate in reducing various
types of risk. Arndt studied the introduction and
acceptance of a new brand of coffee and found
that the amount of risk perceived in trying the
new product was closely related to the use of
23. Same reference as footnote 19, p. 37.
24. Homer E. Spence, James F. Engel, and Roger D.
Blackwell, "Perceived Risk in Mail Order and Retail Store
Buying," Journal of Marketing Research, Vol. 7 (August
1970), pp. 364-369.
Journal of Marketing, April 1974
word-of-mouth communication. He also found
that the relationship is complex in that it involves
the amount and direction (favorable-unfavorable)
of communication.25 Cunningham found similar
reliance on word-of-mouth to reduce high per-
ceived risk in his study of headache remedies,
fabric softeners, and dry spaghetti.26 Barach has
found some interesting relationships between
women's risk-handling styles and the ability of
television commercials to induce attitude change.21
Woodruff has demonstrated that different chan-
nels of information produce different effects on
the nature and structure of consumer uncer-
tainty.28 While the evidence is far from complete,
there are a number of strong indications that
perceived risk does affect the channels of infor-
mation that consumers use.
Information Transmission (X 13 ). The ideas con-
tained in this part of information handling basi-
cally call for a refinement of the theory of the
"two-step" flow of communication. That theory
maintains that mass communication media reach
opinion leaders, who receive the information, in-
terpret it, and relay it verbally to other people.
Research in this area provides evidence that the
flow of information is a two-way, rather than one-
way, activity; that is, opinion leaders are asked
for information as much as they volunteer it. Arndt
surveyed the literature and found extensive sup-
fort for this idea. 2 9 He found exactly this kind of
behavior in his study of a new brand of coffee.ao
These data raise questions about the original
25. Arndt, same reference as footnote 18, pp. 330-336;
"Perceived Risk, Sociometric Integration, and Word of
Mouth in the Adoption of a New Food Product," in Risk
Taking and Information Handling in Consumer Behavior,
Donald F. Cox, ed. (Boston: Graduate School of Business
Administration, Harvard University, 1967), pp. 289-316; and
"Role of Product-Related Conversations in the Diffusion
of a New Product," Journal of Marketing Research, Vol. 4
(August 1967), pp. 291-295.
26. Scott M. Cunningham, "Perceived Risk as a Factor
in Informal Consumer Communications," in Risk Taking
and Information Handling in Consumer Behavior, Donald
F. Cox, ed. (Boston: Graduate School of Business Admin-
istration, Harvard University, 1967), pp. 265-288.
27. Jeffrey A. Barach, "Advertising Effectiveness and
Risk in the Consumer Decision Process," Journal of Mar-
keting Research, Vol. 6 (August 1969), pp. 314-320; and
"Self-Confidence and Reactions to Television Commer-
cials," in Risk Taking and Information Handling in Con-
sumer Behavior, Donald F. Cox, ed. (Boston: Graduate
School of Business Administration, Harvard University,
1967), pp. 428-441.
28. Robert B. Woodruff, "Brand Information Sources,
Opinion Change, and Uncertainty," Journal of Marketing
Research, Vol. 9 (November 1972), pp. 414417.
29. Johan Arndt, "Word of Mouth Advertising and In-
formal Communication," in Risk Taking and Information
Handling in Consumer Behavior, Donald F. Cox, ed.
(Boston: Graduate School of Business Administration,
Harvard University, 1967), pp. 188-239.
30. Arndt, "Role of Product-Related Conversations,"
same reference as footnote 25, pp. 291-295.
The Role of Risk in Consumer Behavior
concept of the "two-step" flow of information and
may well provide the opportunity for marketers
to add word-of-mouth communication to the
marketing mix.
Information Processing (X 13 ). Within the in·
formation handling area, information processing
seems to have received the most attention. The
perception of risk is subjective, as is perception
of information. The studies on information proc-
essing are primarily attempts to better under-
stand how consumers evaluate information re·
lating to the buying process.
Cox and Bauer studied the effects of new in-
formation on women who had made judgments
about the quality of identical pairs of stock-
ings.31 They found that women put differing
amounts of confidence on the new information
depending upon the individual's confidence in her
ability to judge the stockings and her ability to
judge the source of the new information. Hempel
studied the effects of information source in both
confirming and disconfirming contexts on judg-
ments of the quality of shirts, and found rela-
tionships between ability to judge sources and
subsequent quality judgments.:i 2 Barach has found
differences in women's perceptions of television
commercials that depend upon the importance of
the product category to the respondent.33
Additional research is available, but the fact
that consumers evaluate information subjectively
and use "cues" as surrogates for desired informa-
tion is probably well enough established. The
critical question is whether there is a direct re-
lationship between such behavior and the per-
ception of risk. The evidence seems to indicate
that such may well be the case.
Reduction of Consequences (Xd
The only known research data bearing on this
phase of the theory is Cox's study of two con-
sumers.34 While his results are certainly sugges-
tive, they can in no way be considered conclusive.
The Role of Self-Esteem/ Self-Confidence (Y ~. Yr.l
It is hypothosized here that the equivalent con·
cepts of self-esteem and self-confidence influence
consumer behavior in two ways. First, self-esteem
31. Donald F. Cox and Raymond A. Bauer, "Self-Confi-
dence and Persuasability in Women," Public Opinion
Quarterly, Vol. 28 (Fall 1964), pp. 453-466.
32. Donald J. Hemple, "An Experimental Study of the
Effects of Information on Consumer Product Evalua-
tions," in Science, Technology, and Marketing, Raymond
M. Haas, ed. (Chicago: American Marketing Assn., 1966),
pp. 589-597.
33. Same reference as footnote 27, pp. 314-320.
34. Donald F. Cox, "Risk Handling in Consumer Be-
havior-An Intensive Study of Two Cases," in Risk Tak-
ing and Information Handling in Consumer Behavior,
Donald F. Cox, ed. (Boston: Graduate School of Business
Administration, Harvard University, 1967), pp. 34-81.
59
contributes to the amount of anxiety that results
from perceptions of the situation. As Fischer puts
it, "the realization that something must be ac-
complished or possessed and the sense that one's
competence may be inadequate to the task, is
essential to the experience of anxiety.":m The
specific mechanism that is believed to link self-
esteem and anxiety is the ability to perceive the
possibility of loss, or the risk, in a choice situ-
ation. Coopersmith notes: "Experimental studies
indicate that a person with a low self-esteem is
less capable of resisting pressures to conform and
is less able to perceive threatening stimuli."36
The second way in which self-esteem influences
consumer behavior is that it is instrumental in
selecting appropriate risk-reduction strategies.
Again, Coopersmith explains:
any experience may be the source of favorable
self-evaluation, just as any experience can be
the source of devaluating appraisals. The
"facts" are not necessarily seen and weighed
in the same way by each individual. The
"facts" are the raw materials used in making
appraisals, but their interpretation is not uni-
form and invariate. The interpretation will
vary with the individual's characteristic ways
of handling distressing and ambiguous situa-
tions and with his goals and aspirations. His
manner of dealing with' threat and uncertainty
represents the individual's way of defending
himself against anxiety-or, more specifically,
of defending his esteem ... .s1
Also of importance here is the idea that self-
esteem, or self-confidence, may vary with specific
choice situations. In Coopersmith's words:
A second consideration is that self-esteem may
vary across different areas of experience and
according to sex, age and other role-defining
conditions. Thus it is conceivable that an in-
dividual would regard himself as very worthy
as a student, moderately worthy as a tennis
player, and totally unworthy as a musician.
His over-all appraisal of his abilities would
presumably weight these areas according to
their subjective importance, enabling him to
arrive at a general level of self-esteem.!! 8
An example of the research evidence linking all
three of these concepts-generalized self-esteem,
specific self-esteem, and perceived risk-can be
found in the work of Hisrich, Dornoff, and Ker-
nan.=rn They surveyed 300 households in Cincinnati
in an attempt to explore these relationships in
35. Same reference as footnote 3, p. 130.
36. Same reference as footnote 8, p. 4.
37. Same reference as footnote 8, pp. 42-43.
38. Same reference as footnote 8, p. 6.
39. Robert D. Hisrich, Ronald J. Dornoff, and Jerome B.
Kernan, "Perceived Risk in Store Selection," Journal of
Marketing Research, Vol. 9 (November 1972), pp. 435439.
60
the context of store selection and product pur-
chasing. They concluded: "For each product
studied, consumers' self-esteem and their self-
assessed ability to choose a store in which to buy
seemed to bear on how much risk they perceived."
The majority of the available research on per-
ceived risk and self-esteem has focused on the
selection of risk-reduction strategies. For example,
such studies have shown that the consumer's use
of brand loyalty,4o word-of-mouth communica-
tion,41 interpersonal relations, 42 and perceptions
of sales personnel 43 is determined to a great ex-
tent by level of self-esteem and perceived risk.
Discussion
In the spirit of "theory" as a systematic ex-
planation, an attempt has been made here to
identify the critical concepts in a theory of con-
sumer behavior and to describe the linkages be-
tween the concepts. Some of the research sup-
porting various parts of the theory has been noted,
but almost none of the limited amount of dis-
senting research has been presented. Two factors
were at work in this determination. One was the
very practical problem of space limitations. The
other was a general conclusion that many of the
problems found in the dissenting research stem
from a lack of a complete theoretical construct
which, in turn, leads to the omission of one or
more critical variables. One such example was
discussed in the case of mail-order buying of
hospitalization insurance.
There are two additional characteristics of this
theory of consumer behavior which warrant com-
ment. One characteristic is that it should be
fairly easy to put the theory into operation and
subject it to empirical validation. This is not
the case with all current theories of consumer
behavior. 44 Some of the researchers mentioned
above appear to have made operational tests of
generalized self-confidence, specific self-confidence,
perceived risk, and risk-reducing strategies. Type
of loss has yet to be examined in the manner
visualized by this theory, but Roselius seems to
be very close and this should not present major
difficulties. 45 Following is a general format for
the implementation and empirical validation of
the theory:
Measure self-confidence in relation to choice of
the product category
40. Same reference as footnote 18, pp. 330-336.
41. Same reference as footnote 26, pp. 265-288.
42. Same reference as footnote 10, pp. 46-52.
43. Same reference as footnote 31, pp. 453-466.
44. James W. Taylor and Jonathan Guttman, "A Re-Inter-
pretation of the Farley and Ring Test of the Howard and
Sheth Model" (Paper presented at the 4th Annual Con-
ference of the Association for Consumer Research Boston
November 9-11, 1973). ' '
45. Same reference as footnote 22, pp. 55-61.
Journal of Marketing, April 1974
Measure perceived risk in product category
choice
Measure type of loss associated with product
category
Measure perceived risk in brand choice
Measure preferences for various risk-reducing
strategies
Measure the approximate size of groups of con-
sumers with common characteristics in percep-
tion of risk, self-confidence, and preferred risk-
reducing strategies for use in evaluating cost/
effectiveness of various marketing programs
The second characteristic of this theory is that
it views the choice situation, not the consumer,
as the central issue. This suggests that empirical
research will have to be "purchase" specific and
that it may be exceedingly difficult to generalize
from one study to the next. This is, however, a
relatively minor problem in relation to the pos-
sibility that marketing managers may now have
a way of evaluating the interrelationships of
most of the elements of the marketing mix, that
is, product warranties, advertising, word-of-mouth,
endorsements, samples, demonstrations, price,
returns policies, trial sizes, temporary price reduc-
tions, premiums, and the like.
Application of the Theory
A few examples of how this might work would
be helpful. In the gasoline-buying example men-
tioned earlier, it was determined that the pre-
ferred risk-reducing strategy was a personal rela-
tionship with the service station dealer and that
the size of the group was a subset of the approx-
imately one out of five households that changes
residence every year. Accordingly, a program was
developed to permit the service station dealer to
establish a personal relationship with new cus-
tomers in his individual trading area.
Heavy use of ketchup is associated with lower
income households, and its primary function ap-
pears to be one of masking the flavor of inexpen-
sive cuts of meat. In this case, an advertising
strategy would be directed toward assuring house-
wives that a specific brand was compatible with
many different kinds of dishes, and media could
be chosen appropriately.
In the purchase of major appliances, it seems
likely that there is a high uncertainty about con-
sequences. Product warranties, or insurance poli-
cies, positioned directly against such consequences
would be a likely marketing program.
In each of these instances, it should be possible
to compare the cost/effectiveness of the suggested
programs against alternative programs designed
for different groups and in response to different
perceptions of risk.