The concept describes the influence consumers wield in a market. This influence is often manifested through their ability to drive down prices, demand higher quality products or services, and play competitors against each other. For example, if many individuals can easily switch between multiple suppliers of a similar product, those suppliers have less control over pricing, and consumers exert considerable pressure.
Understanding this dynamic is crucial for businesses as it directly impacts profitability and strategic decision-making. Historically, businesses focused primarily on production efficiency. However, the rise of informed consumers and readily available market information has shifted the balance of power. Businesses that effectively understand and respond to consumer demands are more likely to thrive in competitive environments.
