Understanding Customer Bargaining Power: Strategies for Businesses

One of the essential requirements in today’s business scenario is to realize and evaluate the bargaining power of customers. The word bargaining here does not only mean price negotiation, it is a much differentiated and broader term. Bargaining can be encompassed throughout the process of deal. The following are some these areas where a customer can bargain:

• Obviously on the product price or any package of products what they buy.
• On provision of services whether it is pre deal service or post deal.
• On performance and efficiency.
• On technical aspects of process, products and system.
• On completion of schedule. This may include time of delivery of support and processes or time required to deliver of products and brands.
• On product modification according to the changing technological trends.
• On quality Checks.

Buyers or customers always bargain or negotiate on the above given aspects. It always depends on the present requirement of customers on which they basically bargain. At times a customer could bargain on price but not on quick delivery of that product but some other times for fulfilling company’s needs or for bonus and premium; the customers could also negotiate on quicker delivery and not the price.

Some of the customers who are new in the competitive business will always want that the right products are timely available and in reliable form so as to have good returns for the investments made by them in their projects for which they need these products. Hence, irrespective of the cost and time to deliver the products, they rather focus on the benefits and positive features that these products would have that would help accomplishing the projects, the failure cost of which is much higher than the buying cost.

There are customers who totally concentrate on performance and efficiency of the products they have bought to control and minimize the repeating operating expenses. This is because they are so dependent on product performance that even a minimal down time of these products could cost them huge business loss. So they do not usually bargain on initial cost of the product and concentrate more on the operating cost and keep focus on the product performance and efficiency.

It is very important aspect for customers to have an intense bargaining power to sustain and remold their business strategies effectively and remain in the competition. For this the customers need knowledge empowerment and need to collect all the related information regarding the project they have invested in. This knowledge and information could help them to become project specific and experienced enough to deal with suppliers and bargain strategically. But acquiring this knowledge and experience is very difficult unless and until all the minute technical and calculative aspects are not explored. Poorly experienced and informed customers fall in the category of being un-subjective and loose the ability to mould the suppliers according to their needs.

Bargaining power of customers also depends on the flexibility of bargaining approach. For example a customer wants to buy a product only when the supplier would give discount but the supplier has a fixed price tag for that product and is not ready to provide any sort of discounts. The supplier is always ready for selling the products and only gives discounts in some sort of technical emergencies in the competitive environment. If the supplier is not ready to provide any discount and is ready to close the deal by exiting, then the customer should understand that the product is actually worth and if possible then intelligently he can further negotiate of other factors to keep the deal intact and profitable.

Finally, a customer can show the best bargaining power if they possess a good image in the market and this is only possible when they have healthy relations with suppliers.