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Porter's Five Forces Analysis: Power of Buyers

Strategies and resources for creating a Five Forces Analysis

What is Buyer Power?

Buyers have the power to influence price and the quantity of products sold. Powerful buyers can bargain on volume or switching costs or they can find substitute products. Price sensitivity also impacts the buyer/seller relationship.

Questions to ask include:

  • Who buys the product? Are there many buyers or few? Are buyers concentrated?
  • What are the demographics of the consumer?
  • Are buyers price sensitive? What is the relationship of price to consumption?
  • What is the product? How does it differentiate itself from others (brand/quality/cost)? Can buyers substitute? Are customers brand loyal?
  • How does the product get to market? What are common distribution channels? Can buyers vertically integrate?

Brands & Buyer Power Research

Newspapers and trade journals may be searched for articles about company products or brands. In databases like Business Source Complete and ABI/Inform Complete, use the "All Text" field when searching by brand name.

When researching buyer power, search by company name or product combined with words like "customer," "consumer," or "distribution channel." Also try searching by company name and the terms "brand loyalty," "brand choice," or "consumer attitudes."

Try these techniques in the following databases:

Brand Value & Rankings

Consumer Demographic & Lifestyle Research

Demographic data provides information about basic human characteristics of a market or population. Demographic segmentation divides consumers into groups based on variables such as age, gender, income, occupation, stage in lifecycle, generation, nationality, race or ethnicity, religion, and social class.

Psychographics, also known as the IAO variable (interest, activities, and opinions), is not quantitative and does not use simple numbers and figures. It classifies the target market's feeling toward consumer goods (e.g., what they want & why, how they carry on their everyday lives, what they value, how they make choices when it comes to what they purchase, etc.) by groups of people based on attitudes or beliefs and is sometimes referred to as "lifestyles." This category builds on demographics which look at groups based on quantifiable things like race, age, income, etc.

DEMOGRAPHICS

CONSUMER SEGMENTATION SYSTEMS

Claritas MyBestSegments

  • Claritas lifestyle segmentation systems define every household in the U.S. by distinct lifestyle types, called "segments," to provide a comprehensive picture of who lives where and what they are like. Information on Claritas PRIZM Premier (shopping), Claritas P$YCLE (financial and technology preferences), and Claritas ConneXions (media habits). Case studies on using segmentations. FAQs. ZIP Code Look-up tool.

ESRI Tapestry Segmentation

  • Divides all U.S. residential neighborhoods into segments based upon socioeconomic & demographic characteristics which are then grouped in LifeMode Summary Groups describing lifestyle & lifestage, and Urbanization Summary Groups describing affluence & population density. An ESRI ZIP Code Look-up tool is available.

CONSUMER TRENDS

Trendwatching

  • Reports on global innovations

Springwise

  • Source for global innovation intelligence

Consumer Attitudes & Spending