I just paid a whopping $8.10 for two piddly snack bars instead of $2.11. Doh!!!
Why? I’m a “captive” in this hotel. It’s over a mile in either direction to the nearest grocery store. Of course, they have a “convenient” little shop in the lobby that’s right on the way to the conference session I’m hustling to attend. Cha-ching!
This is a classic example of a vendor leveraging the powerful combo of captivity and convenience to raise prices and profits.
If consumers have nowhere else to conveniently go for an alternative, vendors know they can command super premium prices. Common captive venues include airports, sporting events, and movie theaters.
Next time you’re out with the kids, see if you can find some classic price gouges driven by the captivity and convenience combo. Work out the math together to see what the items would have cost in a non-captive venue. What kind of markups do you find?
In my case, if I had remembered to purchase snack bars in advance and in bulk at the grocery store, the math would have been:
- Nature Valley Oats ’n Honey bars: $4.79 for 12 with 2 in each pack = $0.20 per bar. (Yes, the hotel convenience shop sold “special” packs with only one skinny bar inside instead of the typical two.)
- Clif Oatmeal Raisin Walnut bars: $22.90 for 12 = $1.91 per bar.
- $0.20 + $1.91 = $2.11
The $8.10 I paid is almost four times what I could have paid!
People often underestimate the size of the “captive audience tax.” In my case it was an astounding 284%. Yikes!
The money message for kids: Don’t let your wallet be abducted by the “captive audience tax.” Anticipating a captive venue and buying in advance can liberate big bucks.
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