Captive customer

A captive customer is a marketing and regulatory concept, describing a buyer or user that is unable or unwilling to change the provider of goods or services due to high switching costs, provider being a natural monopoly, or some other circumstances that preclude substitution. This leads to a situation where the provider has the pricing power.

In service marketing, the concept extends beyond structural constraints to include the consumer's psychological perception of entrapment, characterized by a "triad": the lack of choice, voice, and power. While firms may view captive customers as a source of stable revenue, research indicates that captivity can lead to negative consumer well-being and retaliatory behaviors such as negative word-of-mouth.

A classic 19th-early 20th century example is a major originator of transit, e.g., a mine or granary located at the end of a railroad spur line, where the carrier could name its own tariffs. Other examples are offered by the suppliers of the natural gas and water (although in the latter case it is possible, at least in theory, drill one's own well). For example, US courts have long held that for the gas industry, a captive customer is the one "who must use gas and can only obtain it from one provider".