Buyer Power (the 3rd Force)

Today I have been...

Considering Buyer Power

 Why?

Unit 2, section 3.2.3 required reading p32

So What?

Price sensitivity among buyers increases buyer power. The price sensitivity is higher the less differentiated the product/service being bought (is it a commodity?)

Price elasticity of demand revisited! It measures the change in the quantity demanded in response to a small change in price. If demand responds proportionately, it is price elastic.

Perfect competition unlikely to exist as information (one of the factors affecting buyer power) is not equally available to all. We end up with Information Asymmetry - when different parties to a transaction have different information. Taking advantage of Information Asymmetry can sometimes be illegal, ie Insider Trading.

Switching costs represent the difficulty for the buyer of using a substitute product or service. The better differentiated your product the higher the switching costs. Brands and learning curves contribute to switching costs.


How will I use it?

How about $Employer. Are switching costs high or low. Why. Have there been attempts to raise the switching costs of customers? What forms have these taken?