Question
Customer concentration refers to the distribution and number of clients in a market. It plays a significant role in determining market power. If the customer concentration is higher than the suppliers, it indicates that suppliers have more market power. This is because they can dictate terms, prices, and conditions due to the high demand and limited supply. Conversely, if there are more suppliers than customers, the customers gain more market power as they have more options to choose from, leading to competition among suppliers.
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Customer Analysis is used to understand customer segments, their needs, how they make a purchase decision and price sensitivity. Different customers prefer different distribution channels. Customer concentration, on the other hand, helps in understanding how many clients exist and how they are distributed. If the customer concentration is higher than the suppliers, then suppliers have market power or vice versa.
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