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 and outsourcing examples
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 win‑win 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.
Recently, a new innovative business model has been developed to help engineering contractors reduce the cost of outsourcing by leveraging on group bargaining power.[1] Outsourcing demands from various organizations or outsourcers are aggregated before negotiating with external contractors or potential outsourcees. This potentially presents a win-win situation for both outsourcers and outsorcees. Although the outsourcee offers their services at lower rates to the group of outsourcers, it is still advantageous to the outsourcee because the project volume is increased.
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
- ↑ "Singapore Engineering Contractor". Singapore Engineering Contractor. Retrieved 2016-11-27.