What is Captive Customer? Definition of Captive Customer, Captive Customer Meaning and Concept
A captive customer is the one who does not want to change the product, service or supplier for another substitute, due to the cost that it represents, whether expressed in money, effort or the discomfort that it causes.
This customer regularly has few alternatives to buy a good or service, because the number of suppliers is limited, this forces him to buy where the product is available or he simply cannot buy anything. This situation also applies when there is not enough competition in the market and situations of monopoly or oligopoly arise .
Companies can use this advantage as a barrier or impediment so that new competitors cannot enter the market. Therefore, you should strive for full customer satisfaction. For this, it must deliver innovative and differentiated products so that the client is happy with the delivery.
It is not the same to speak of a captive customer and a regular customer. The regular customer is characterized because his action is limited to the purchase and frequent consumption of our products. The captive customer, for his part, not only regularly buys the product, but also manifests loyalty to the company, the brand and its products.
They are very loyal customers to the company, because they are not even thinking about trying other products, because they are fascinated with ours, which ensures their buy-back and a long-term relationship for the company.
Captive Client Classes
We can mention three classes of captive clients:
1. Customers who buy out of habit
A captive customer who buys out of habit is one who purchases the products out of habit always in the same distribution center, they never change location. They buy automatically, because they no longer think or rationalize their decision, they consume as they have always done all their lives, therefore, it becomes a repetitive habit.
The company that has this type of customer must strengthen the buying habit, working with some promotional stimulus that serves as an incentive to maintain this relationship. You can also provide them with a positive service experience, to continue maintaining their loyalty and that the company can reinforce this competitive advantage with this type of customer.
These customers are lost with generational differences, because the new generations present other different buying habits and cannot be captivated, they simply go on to purchase their items from any other competitor; because they have no affection or sympathy for the brand or the product.
2. Customers with high costs due to change of supplier
When changing supplier is costly for the customer, this customer remains captive because if he changes supplier it would be very expensive, this condition could occur when the products required have characteristics that are very complex or are made in a personalized way.
In these cases, clients increase their expenses when they want to change a supplier that sells them a certain product or service. These expenses increase because a commercial or industrial relationship has been structured that determines the way a company or business works. If this relationship changes, the whole way of working must be restructured.
3. Clients with high search costs
In this case, the cost occurs when it is difficult to find information to find a good product or a good service. When it is difficult to obtain data or it is costly, the client remains tied to the company that currently offers said product.
Currently this barrier has lost a certain level of importance, because the use of the internet has helped the customer to be informed easily and cheaply. The information available in these media allows anyone to have access to reliable information that was previously only available to specialists, giving consumers power over companies.
Expenses for change of supplier
We can talk about three main types of expenses when a captive client is given. Thus, the costs that a captive customer could incur in changing providers are:
- Direct costs: When the relationship requires permits, regulations, deliveries at specific points, technical requirements, among others. This implies that investment has to be made in administrative and operational processes for the proper functioning of the process. If there is a change in supplier, it implies that the company has to make higher expenses or the production and efficient marketing process is jeopardized.
- Indirect costs: To produce or use a product you have to have a prior learning process and that learning is evolving and improving. If we change providers, we must start learning from scratch.
- Intangible costs: these are expenses that result from maintaining relationships between people, customs and the way of working. For this reason, it discourages companies from making modifications or changes, since if they do, they must incur costs to achieve it.
Some of these new processes require new technology, so the change and start learning again can be very expensive for the company. For these reasons it is very difficult for a captive customer to want to change providers.
To incentivize and motivate these customers, it is necessary to continually update them on the good or service offered. The purpose is to give them variables that make them different from the competition, and the more differentiated their products are, the better for the company, because differentiation can be used as a barrier to entry to competitors.
When the captive customer is not a company, but a consumer, it also represents costs for them to change the product. When changing the product, the consumer has to learn the operating mechanism and how to use the new acquisition; as well as becoming familiar with a new brand.
In these cases, incentives such as programs to accumulate points, discounts or any other type of benefit that allow to continue maintaining the nexus between the consumer and the company can also be used.
In conclusion, if a company wants to keep captive clients it is always necessary to maintain a constant innovation process; thus adding value and differentiation to the products, so that your customers remain satisfied and continue to be loyal.
The loyalty of these customers with the company is produced by the benefits that the customer or consumer finds in the products such as quality, price and the convenience of acquiring them.