Bargaining power of customers

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 1. Bargaining power of customers.
The force looks at the power of the customers to affect pricing and quality. It is
therefore important to understand the customer’s behavior when it comes to
purchasing of goods or services. As (Katrina Burger, Forbes May 7 1997) puts it
“Understanding customer behavior makes religion relevant to churchgoers. The
following factors play a part in influencing customers’ bargaining power:

i) Customer has a higher bargaining power when there aren’t many of them but lots of
sellers (high supply but low demand). It is low when there is higher demand of a
particular product or service than there is supply.
ii) When it is easy to switch from buying from a seller to another easily.
iii) Bargaining power of customers is low when customers purchase products in small
quantities. Just as in suppliers, sellers prioritize consumers if they purchase in large
volumes. The consumer will therefore yield a higher bargaining power.

iv) Customers also have higher bargaining power if they face a few switching costs, (not
locked to a single seller) and they earn low profits. When customers face many
switching costs, the reverse is true.

The following should be considered as far as customer’s bargaining power is concerned.

The marketing concept by Philip Kotler
The selling concept- Focuses on finding a buyer for its products.
The marketing concept- Focuses on making what the customer wants.
Dayka should create a balance between the two concepts.
Cost efficiencies from repeat customers. According to estimates, it may cost
five times more to attract a new customer than it will to retain an existing
one. It is important that Dayka strategizes on cost efficiency by having an
appropriate balance of customer retention measures and attracting new
customers.
Price premiums for established customers. Those that are already satisfied
with the product are unlikely to switch to another seller. This can be made
possible by the use of price premiums for such consumers.
Customer loyalty in corporate crisis. Loyal customers will always react when
there is a deviation from quality of the products. For example in case of
tampering or when another company disguises itself as your company and
then supplies products similar to yours, it is the consumer who will first
notice the difference.
In light of that, Dayka should adopt a mechanism of communication with its
consumers.

Increased Word Of Mouth referrals. The best and easiest way of advertising is
through WOM. Dayka should therefore ensure that they maintain and
possibly improve their customer’s satisfaction by meeting their customer’s
needs.

One-stop-shopping. Increase in the number of products a satisfied customer

buys from the same company. For this to be effective a company may
consider giving value discounts.

New products innovations and improvement. Dayka should constantly be

improving their products and adding new products. However, customer input
in the early stages of new product development is one of the reasons for the
success of an innovation.