What is Captive Market?

Definition, Benefits and Examples

What is a Captive Market?

A captive market is a market condition where the fulfillment of product needs is controlled by only one or several suppliers. This will create a condition of high product demand with limited product supply.

That way, customers in the environment have no other choice but to buy products in the captive market. The following are some supporting factors for the occurrence of a captive market.

The product market area is experiencing a shortage of supply.

In the market area, there is one seller who has the freedom to sell products.

The products sold have benefits or are superior compared to other products so they are sold at high prices.

What are the Benefits of a Captive Market?

The three supporting factors above can create a profitable captive market. The benefits of a captive market that will be obtained are as follows.

Get Higher Profits

Building a captive market business can allow you to create high selling prices without the fear of losing customers. By determining a high selling price, it will provide higher profits.

Setting a selling price above production costs opens up opportunities for you to seek greater profits. This can be applied to franchise owners who have branches at airports or stations. Having Great Control Over the Market

Implementing a captive market gives you great control over the market. You have full control over supplying products as well as determining market prices to achieve maximum profit.

Focusing on Quality and Innovation

A captive market is a way to improve product quality. Business people do not need to reduce production costs, but can still improve the quality of the products produced.

In addition, business people can also create innovations and new products without worrying about other competitors stealing the idea. This can provide benefits to businesses in creating unique products that are more preferred by customers.

Maintaining Business Stability

There are not as many competitors in the captive market as in other types of markets. That way, you can get business income that tends to be stable and even increases continuously.

Captive market players can plan strategies for the long term and reduce the risk of failure in the business in the future. This market stability must be maintained when there are new entrants in the market.

Increasing Customer Loyalty

Customers who feel tied to one brand of product or a limited number of products. By creating a captive market, customer loyalty increases and even tends to buy products continuously without switching to other products.

The possibility of customers switching to other products is very small because they do not find similar products with the quality and innovation carried out by the captive market owner.

Operational Skills and Efficiency

The next benefit that can be felt in building a captive market business is that it can improve employee skills and expertise. The owner of this special market will have reliable employees in operational activities from producing to marketing products.

Examples of Captive Markets

After knowing what a captive market is, here are some examples of captive markets.

Sales of Stationery at School

Cooperatives at schools are a form of captive market. This cooperative sells various school needs ranging from pencils, books, school badges, sports clothes and so on.

Usually, cooperatives will have the freedom to make rules because they are the only stationery store in the school environment. That way, students are only faced with one seller when buying stationery.

Telecommunication Providers in Rural Areas

The development aspect in rural areas is indeed not as fast as in urban areas. Including in terms of telecommunications development. There are only a few providers who are capable and reach the area.

This condition is an opportunity for a special market to provide these services. The entire population of the area will use the telecommunications provider created by the captive market.

Food and Beverage Sales in Cinemas

Almost all cinemas in Indonesia close access for food and beverage sellers to sell in the area. In addition, there is a prohibition on bringing food and drinks from outside when watching a film in the cinema.

This means that a special market is created in the cinema area. Like it or not, cinema visitors must buy food and drinks in the captive market.

With the success of building a special market, usually the prices offered are higher than the products sold outside the cinema area.

Food Courts and Food Courts in Malls

Another example of the application of a captive market is food courts and food courts. Usually, the owner of the food court or food court will rent out a place to sell food and drinks (booths) to be able to meet supply and demand in the area.

Why choose Mitra IT?

•⁠ ⁠Expert Team: We have a team of experienced and creative technology experts.

•⁠ ⁠Comprehensive Solutions: We not only provide technology but also offer full support to ensure your business success.

•⁠ ⁠Focused on Results: We are committed to helping you achieve your business goals.

Don’t miss the opportunity to maximize your business potential!

Contact us now for a free consultation.