What is Market Saturation?
When a product is introduced to consumers, the producers hope that consumers will respond positively by buying that product. Market saturation can be considered evidence of a successful sales record. When a market is saturated with a product, that product is prevalent among consumers.
Market saturation can be viewed as a positive because consumers purchased an offered product. Those purchases have occurred on such a large scale that the likelihood of future purchases may be drastically diminished. At a monthly farmer’s market, this is an ideal situation. Almost everyone who comes to the market buys Mrs. Smith’s jam and she dismantles her booth and goes home with her profits.
In general, however, business does not work this way. Companies do not establish themselves to simply sell a product and then dismantle the business. Most businesses are long-term ventures. Therefore, once the market becomes saturated with their products, they are presented with a challenge of how to continue generating revenue.
Market saturation can be overcome by a number of things. Some of them can be influenced by producers but others cannot. One of the factors that producers have no control over, but which can help to alleviate low sales figures due to saturation, is population growth. More people in a society tend to add to the numbers of unsupplied consumers.
It is important to note that market saturation does not mean that every consumer has a product. Instead, the term generally means that a substantial portion of those who are likely to purchase a product have already done so. Families often consist of several individuals. Therefore, if the residential housing market is saturated, that means that not every individual but most families have already purchased homes.
This leads to a saturation factor that producers may be able to manipulate. If producers can influence attitudes about the ownership of multiple purchases, they may create demand in a market that was saturated. An industry that can be observed for an excellent example of this is the cosmetics industry, which leads women to believe that a single shade of lipstick and eye shadow are not enough. The constant desire and the disregard for existing personal stock fuels constant demand and drastically reduces market saturation issues.
Market saturation is not always due to the success of a single producer. In some instances, markets get exhausted because there are too many suppliers of a product. This highlights the role that competition can play in such instances. If Producer 1 is able to obtain access to Producer 2’s consumers, Producer 1’s market share becomes larger and offers the opportunity to sell more products.
With regard to the housing market, because there are so many homes in foreclosure at this time, and it is a buyer's market, what will be the end result when the economy stabilizes? Will there still be too many unsold homes that it will make it hard for one to resale their home?
I am of the opinion that the reason behind the US economic problems is that we have reached market saturation in practically every product. The boom years of the post World War II period were driven by the fact that in 1946 almost nobody owned big ticket items like refrigerators, televisions, dish-washers, clothes washers and dryers, etc. Also starting in 1946, the shift in population from cities to suburbs created a housing boom, a furniture boom and a second boom in automobile manufacturing, highway building and infrastructure. The US economy started slowing down in the late 1960's and early 70's when all these items had reached the saturation point.
Since the late 70's, newer inventions drove a smaller economic growth period - items such as microwaves, VCRs then DVD players, personal computers and other high tech office equipment and more recently, mobile phones. We now have reached the point at which almost every household item is a saturated product.
People still replace old worn out items, and young people eventually set up house keeping themselves, but the demand has peaked for just about every major manufactured item. That's why we are now a post-industrial society in which all we do is go around providing services to each other.
But the service industry does not create wealth, it merely moves wealth from one person to another. Until someone invents a new product that people need, I am afraid we are stuck with this fact.
SurfNTurf-I agree this is why companies have to adapt to the changes in the market in order to continually have their services stand out from its competitors.
For example, the Gymboree play gyms now offer music,art, phonics, and other kindergarten readiness programs so that kids can continue to go to Gymboree even when they outgrown the traditional play classes that had previously reached its limit at three years old.
They also are offering family nights on Fridays in which the parents could drop off their child for a few hours so that they go out on romantic dinner without their children.
Gymboree made these programming changes in order to compete and grow its market share in a market that is oversaturated with children’s programming.
Crispety- Sometimes there is oversaturation in the franchise market. You will notice this when the company offering the franchise actually closes down some of its units.
When this starts to happen it means that the company with its existing model has reached its capacity in terms of earning additional revenue.
This happens a lot in highly competitive industries. For example, years ago there were two Kumon Learning Center franchises that are now defunct.
The market in supplemental education has grown so much with so many more competitors that these two locations could not compete because the market in the area was oversaturated.
This also happens with the franchise companies as well. A franchise company that does not carefully plan its geographic locations will run the risk of offering too many franchises that will not be profitable and will eventually close due to oversaturation of the its major market.
Sometimes market saturation is seen with regards to franchises. Often in effort to grow the companies market or market sector they allow multiple franchises to be bought by the franchisees.
This market saturation strategy allows for a company to make a larger impact when multiple units are in operation at one time.
For example, the Five Guys Burger franchises have to be bought and operated in multiple locations in order for customers to get used to the brand and begin to recognize it.
It also gives people the opportunities in multiple locations to try the burgers and eventually grown the company’s revenue exponentially.
This is exactly what has happened with the Five Guys Burger franchise and the company is remarkable successful as a result.
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