Business & Technology Nexus

Dave Stephens on technology and business trends

On Artificial, Captive Markets

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Competition drives efficiency – we all seem to know and believe that. But what is the corollary?

I’ll bet it has something to do with Trade Shows.

Captive markets are funny things. Suddenly you’ll pay $5 for $1 popcorn (movie theater), $80 for a $40 bottle of wine (restaurant), or $4.50 for a hot dog (baseball game).

I thought I had seen all there was to see about captive markets – until I started learning about Trade Shows.

I understood the expense of the Trade Show booth itself – you pay for having a place from which to showcase your products and reach an audience. But when you dig into the details and learn you have to “buy” things like power and internet access, and rent anything from upgraded carpet to 4′ long desks, that you start to understand the breadth of this captive and artificial market.

Imagine calling PG&E (the power company here in the San Francisco Bay Area) and asking for service. The PG&E salesperson responds with “would you like our hourly rate or our 24-hour rate?”

“How much is it for power?” you ask, voice straining with concern.

“Well, it’s $90 per hour but only $270 for a 24-hour period.”

Wow! And of course all the other examples are likewise pricey. These are good markets to be in if you’re the supplier – after all, you have a mini-monopoly. A prospect either buys your power / internet / etc or does without.

If any of you have used the power of effective procurement against a captive market and lived to tell the tale, drop me a line at dave at coupa dot com.

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Written by Dave Stephens

04/22/07 10:47 PM at 10:47 pm

Posted in Opinion

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