Risk Reversal

Buying things can be scary. The reason is that in any business transaction, there is always one party which carries most—if not all—risk at the end of the transaction. For example, if you buy apples at the grocery store, you exchange cash for a bag of fruit. The risk in this transaction ends up entirely with you (the buyer): The apples might be awful, acid, or rotten, while the grocery store holds the (risk-free) cash. The feeling of risk can be so powerful, that it might lead any buyer to feel uneasy about the transaction, or even refrain from buying. 

Risk is therefore the most important part in any business transaction. There are only three ways to take away risk from your clients:

  1. Eliminate risk: Let customers taste the apples before buying to eliminate the risk that the flavor of the apples is awful. 
  2. Reduce risk: Let customers inspect and choose any apple they like before buying.  
  3. Transfer risk: Only charge customers after they have consumed all apples to their satisfaction at home. In this way, the grocery store carries all the risk and clients will be much more inclined to buy.

The deliberate strategy to take away risk for your clients is called risk reversal and is one of the most powerful and overlooked ways to grow revenue.

Which risk reversal strategy will help you most to achieve your strategic goals?

Photo Credit: iStockPhoto/marilyna

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