A while ago, I heard of an elective that was wildly popular among the students on campus. Being an elective, registration in the class was not compulsory. And yet, semester after semester, students packed it out. Those who took the course must have had a reason for choosing it over the other options. Maybe it was the subject, maybe it was the professor, maybe it was easier or more interesting than other choices. But whatever the reason, the class was providing something the students saw as valuable compared to the alternatives. And as a result, it was always packed while other electives weren’t.
When choosing between alternatives, what counts as “valuable” to you may differ from what others care about. If you’re making a purchase, you may be concerned about the reliability of an item, while someone else may be more interested in how it looks. Or in terms of its cost, you may think about dollars and cents, while someone else is thinking about the number of hours it will save or consume. Which factors you choose is up to you. But everyone wants to feel like they’re getting something worthwhile out of the time and money they spend.
Now, when there are alternatives, each provider has to make sure they’re giving their customers a reason to choose them. That’s one strength of an open market. But when’s there’s no choice—when they have a captive market—things are different. If you have to use them, the quality of what they deliver doesn’t matter as much; you’re stuck with them. And unfortunately, they may not feel the need to improve, because, well, you’re not going anywhere.
Today, there are almost always multiple options to choose between. But sometimes it may not feel that way. A business or service provider can have what feels like a monopoly. Maybe it’s so inconvenient to use a competitor that those nearby rarely do. It’s not technically a monopoly, but it feels like it.
Say you’re the only shop in quite a distance that does the work you do, and so everyone in the immediate area comes to you. Maybe they choose you because they love your attention to quality and your service. That you’re nearby is a bonus. But the question to consider is, If another shop opened up nearby that did the same kind of work, would your customers continue to choose you? Or would they be quick to go elsewhere? The same thing can happen in the labor market. If you’re an employer, are your employees sticking around because they want to? Or is it because they don’t see any other options?
Whether it’s your customers or employees, it’s worth asking, Are they choosing you because of the value you provide? Or because there’s no competition? Is it because they love what you do and how you do it? Or because they don’t see any other viable alternatives? Sometimes there may not be much competition, at least not in the short-term. But if there were—and when there is—how many would continue to stick with you, not because they have to, but because they want to?