A spike in health expenditure will increase the number of people with health insurance and add to the number of employees who use EAPs, in turn allowing suppliers to raise prices over the next three years.
Los Angeles, CA (PRWEB) January 31, 2015
Employee assistance programs (EAPs) have a buyer power score of 3.6 out of 5. The above-average score suggests that buyers have more power over suppliers during the negotiation process. The negative stigma associated with mental health services has slowly declined, making EAPs more widely accepted and demanded. The increasing number of businesses and employees in the workforce has also boosted the need for these services. “When procuring services, buyers benefit from low market share concentration among suppliers and from a moderate level of substitutes,” says IBISWorld procurement analyst Jordan Weinstein. “However, moderate product specialization and switching costs may negatively impact the purchasing process.”
Low market share concentration allows buyers to pit more vendors against one another and compare prices. Some suppliers will attempt to increase their share of revenue by merging or acquiring firms; other suppliers will enhance their service offerings to attract a wider range of buyers. The moderate level of substitute goods also helps buyer power. “Buyers have other service options to select from if they find employee assistance programs unsatisfactory,” adds Weinstein. “Before choosing a substitute, though, buyers should ensure that it is a practical alternative.”
The moderate level of product specialization may hinder buyer power. Not all suppliers offer highly specialized services, while others charge a premium for unique service offerings. Some services require highly skilled and experienced workers, causing suppliers to charge more. A moderate level of switching costs also proves difficult, especially if the buyer's employees are invested in the EAP. The buyer should carefully consider whether it is worthwhile to switch suppliers if employees are invested and comfortable with the current supplier because employees often must be persuaded and reminded to use services otherwise.
Before making a purchase, buyers should ensure that they reduce the stigma of seeking help in the workplace so employees feel comfortable to use these programs and so money is well spent on the EAP. To lock in lower prices, buyers should sign long-term contracts to avoid future price spikes. For more information, visit IBISWorld’s Employee Assistance Programs procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of employee assistance programs (EAPs). EAPs help employees and their family members handle personal problems that may adversely impact their work performance, health and well-being. Such programs focus on substance abuse, workplace issues, mental health, personal problems and traumatic events. EAPs generally include short-term counseling and referral services for employees and their household members. These programs are also called member assistance programs (MAPs) or employee and family assistance programs (EFAPs). This report excludes other healthcare services and healthcare insurance.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
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