Perceived Risk Management

Purpose – To contribute to the theoretical work on service-perceived risk management of knowledge-based services (i.e. intangible and heterogeneous) and experience-based services and to suggest a framework that helps to formalize these risks and the value associated with their management, by arguing that this risk management relies on a sequence of risks (Threat, Event, Ignorance and Damage, called the TEID model) and on 3 categories of control measures (preventative, detective and protective). Design / methodology / approach – A case study research using the guidelines developed by Eisenhardt (1989) in the context of travel agency industry about how to deliver added value by selling the expertise that helps to reduce customer-perceived risks. Risk management and control process constructs were compared in order to confirm the relevance of this approach. Findings – Customers feel that travel services which are bought encompass a lot of uncertainties and annoyances (risks) about what they will be experiencing. At present customers are not willing to pay for advice that they regard as free. In order to charge and deliver more added-value, knowledge-based service providers have to make their role more tangible, aiming at reducing and managing risks. By categorizing customer-perceived risks, and by integrating control measures and assurances into their offer, providers can design new and valuable services. Service value-chains involve various providers (implicitly or otherwise) who may engender annoyance and damages as risks are a sequence of events. For their effective management risks have to be considered from the customer’s point of view as this is the only way to apply an integrated approach. Originality / value – This chapter holds the potential to contribute to extending an understanding and management capacity of customer-perceived risks of knowledge-based services. It brings into play a new framework and new risk management process. It also helps with formalizing and making tangible customer added-value.