Collective buying power

Collective buying power is when a group of consumers come together and use 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 savings on products.

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.

Example

One example of a business plan which uses collective buying power is found in the dental industry. Discount dental plans negotiate dental discounts on behalf of its members. Quality service isn't compromised because it’s 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.

Similar To

Collective buying power should not be confused with Purchasing power or 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.

Buying power or consumer buying power is distinguished also from collective buying power and is a term (consumer behavior definition) found in economic psychology implying the income available for discretionary spending among segments in the population. It is a measure of the ability and willingness to buy goods or services. 2. (industrial definition) Refers to the relative influence an individual or a job function (engineering, purchasing, production) has in a purchase decision. Power may be based on reward abilities (granting monetary or perceptual benefits), coercion (imposing punishment), legitimacy (formal authority), personality (based on individual characteristics or status), or expertise (special knowledge or expertise).

References

• Marketing Power, Dictionary of Marketing Terms