Buyer Power

• What does it mean by the bargaining power of buyers?

  The power of customers to negotiate prices, demand higher quality or a better service
• How does a higher bargaining power of buyers impact profits of existing businesses in the industry?

  Lower profitability and more pressure on firms
• What are the factors increasing buyer power?

  • Few large buyers (e.g. supermarkets buying from food manufacturers)
  • Low switching costs (easy to change supplier)
  • High price sensitivity (especially during recessions)
  • Undifferentiated products (e.g. milk)
• What are the factors decreasing buyer power?

  • Unique/Differentiated products
  • Strong branding
  • High switching costs
• What are the strategic implications of an increase in buyer power for existing businesses in the industry?

  • Focus on product differentiation to reduce buyer power
  • Build brand loyalty and emotional appeal
  • Increase switching costs (e.g. long-term contracts, high cancellation fees)