Market Saturation

Rafat Abushaban

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Summary:Market Saturation happens when no more products or services in a marketplace can be sold due to lack of demand from customers

Market saturation is a situation that takes place when the volume of products or services in a certain marketplace have been maximized. At this point, no additional selling of the product happens and a business can either introduce new products or change its target market.
Market saturation can happen to a certain company if it faces tough competition, so people turn away from buying its products and services. Another more common case is when the saturation is related to a whole customer base in a given industry.

Understanding Market Saturation by Example

Market Saturation Upon business launch, it ideally keeps gaining traction and market share in an upward curve if everything goes right. After a while, the business hits the ceiling of the market size. Once all customers are served and have received products and services, there is no further demand in the market that brings it to Market Saturation. Here, the only way forward is to take a cut from competitors' market share.

Overcoming Market Saturation

Businesses can combat Market Saturation via employing one or more of the following methods:

  • Introducing new products or services that customers may want to buy: This tactic helps mitigate the risk of market saturation of a certain product or service by entering a new different market.
  • Expanding the target market by selling the same product or service to new geographies or new demographics. This approach requires access to such new markets and resources to enter them.
  • Change existing product features or price, therefore beating the competition to the customer: Following this approach means staying in the same market, but directly competing and challenges competition to take their market share for yourself. This requires not only resources to produce, but a clear edge in the market and a loyal customer base.
    Here it is possible to follow one or more of the following approaches:
    • Price reduction: This can be a good varying strategy by bringing the price of the goods and services down, and thus shrinking their Contribution Margin making them more appealing to customers.
    • Cutting costs: A strategy that can be used together with the price reduction, and is summarized in finding the highest costs of production related to Variable Costs and Fixed Costs.
    • Changing product features: creating an edge over competition by adding new physical\virtual features for the product or service at hand.
  • Avoiding saturation by creating products that wear down over time and need replacing. This can be an unethical practice if done on purpose just to make customers buy repetitively, and can be easily be overcome by competitors producing higher quality products, but is sometimes unavoidable (such as producing printer ink, light bulbs, and other consumable products that get consumed with time) and therefore form a ground for diversification.

How Can a Startup Enter a Saturated Market?

If we shift our focus to earl-stage startups and business ideas, things would be tough to apply in practice in a saturated market. Still, there is a possibility for an innovative startup or even a startup idea to launch and actually compete in a saturated market. Here are a few pointers specifically tailored for ideas that are not yet launched or startups in the inception stage to consider:

  • Innovation reconsidered: Coming up with a new fancy innovative idea sounds appealing, but it is more difficult and rare than you think. The reality is this: The internet and the hyper connected market have made it very hard to come by ideas that weren't tested or utilized one way or another. The way to go is to Minnovate in order to compete in a saturated market. Learn what we mean by minnovation via this article.
  • Identify the point of entry and exit to the market to plan your course well. The point for market entry and exit are critical indicators that every entrepreneur and business owner should identify in order to utilize and expand their target market. Learn more about this in this article.
  • Focus on customer loyalty, not on product features or price. Gaining customer loyalty is important so that they become loyal to the brand itself, not the price of features of your products. This can be done by selling less and focusing on growing your customer based and their loyalty. Learn more on this via this article: why selling less can improve the base-line.

Rafat Abushaban

Founder of Riable and consultant to several international organizations in entrepreneurship education and researcher in innovation systems and seed funding methods with 10+ years of practical experience in the MENA region, Europe, US and S.Korea
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