Collective buying power

Collective buying power is a coming together of a group of consumers and the use of the old rule of thumb, there's power in numbers, to leverage the group size in exchange for discounts.

In the marketplace

Many different companies have used this concept to build business plans. Warehouse clubs function in a similar way by offering products in bulk to consumers who pay membership fees. In the same sense collective buying power is a cooperative approach to leveraging group size to benefit the consumer by offering

Internet companies have been leveraging this concept, bringing people together online. The company will arrange a coupon offering, that will only go into effect if more than a before agreed upon number are sold.

Dental industry example

One example of a business plan that uses collective buying power is found in the dental industry. Discount dental plans negotiate dental discounts on behalf of its members. Quality service is not compromised because it is a winwin scenario for all stakeholders. While dentists are offering their services at discounted rates, it's still beneficial for them because they increase their patient volume. Patients benefit because they are getting services at discounted rates.

Similar terms

Collective buying power should not be confused with "purchasing power", "consumer purchasing power", or "collective purchasing power", which is a consumer's ability or a group of consumers' ability to buy goods and services as distinguished from the amount of money a consumer has.

It should also not be conflated with "buying power" or "consumer buying power", which has two definitions. The first, a consumer behavior definition, found in economic psychology implying the income available for discretionary spending among segments in the population. In short, it is a measure of the ability and willingness to buy goods or services. The second is an industrial definition, which refers to the relative influence an individual or a job function (engineering, purchasing, production) has in a purchasing decision. Power may be based on reward abilities (granting monetary or perceptual benefits), coercion, legitimacy, personality, or expertise.

References

    This article is issued from Wikipedia - version of the Monday, January 04, 2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.