A saturated market is often bad news for any business. After all, too much competition is a problem when you’re trying to maximize profitability, right?
BUT GOOD NEWS!
There are ways to get ahead of your competitors, especially if you’re aware of your growth potential.
As long as you create and stick to a smart strategy for your company, you’ll definitely find a way to make the most out of the situation.
If you want more information on how to do this, keep on reading!
About Market Saturation
Before you respond to the problem, you have to understand what market saturation is first.
In a saturated market, total consumer demand for a product or service is already being met.
Supply is equal to—or often, much higher than—demand, and there is no interest in a higher volume of these goods.
And that’s bad news for you because…
Market growth trajectory of the product declines.
Usually, market saturation occurs when there are too many businesses offering the same product or service in a particular area.
Combine this with low population growth and you get:
- Companies have fewer customers to service
- Companies can no longer grow without taking market share from competitors at this point.
Market saturation can be segmented further into two types: Microeconomic and macroeconomic.
Microeconomic Market Saturation
From a microeconomic perspective, a saturated market occurs when demand for your specific business drops significantly or disappears.
Let’s say you run one small grocery store.
And then, a large supermarket chain with multiple branches pops up in your area.
You will suddenly experience being in a saturated market.
Your target market is still the same size, but a new company is now taking some of your customers.
Macroeconomic Market Saturation
On the other hand, macroeconomic market saturation is when demand for an entire industry falls, usually due to a big change in technology or market trends.
Because of the invention of ebooks, the bookselling industry—physical bookstores, in particular—are experiencing market saturation on a macroeconomic level.
In this example, many consumers no longer see the need to purchase the physical product.
What Is Your Market Share?
Now, how do you know if a certain industry is experiencing market saturation or approaching that point?
When starting a business, you should be aware of the current market state and your competition, after all.
This is where market share comes in.
If you notice a huge demand for your goods and services and your competition is not dominating the marketplace, then it’s a good opportunity to launch your company into the mix.
To compute for your (or other companies’) market share, simply divide the total sales of your company by the total sales of the industry.
This data will help you figure out if you:
- Need to expand
- Shift direction, or
- Leave the market entirely
However, getting a bad number doesn’t mean your business doesn’t stand a chance against the competition.
Sometimes, it just means you need a better business plan or strategy to succeed. If you follow one or more of the steps below, you may find a way to achieve growth in saturated markets.
How to Deal With Market Saturation
If you’re considering altering your business model to respond to market saturation, take note of the following tips:
#1 – Cut Product/Service Costs
One solution is to lower your internal spending. If you cut non-essential costs, your company will still be able to profit.
However, because it doesn’t solve the issue of decreased demand and revenue, this strategy will just buy you extra time while you think of your next step.
#2 – Price Your Product/Service Effectively
Another option is to adjust the prices of your products and services to cater to a specific category of customers.
To distinguish yourself from other companies, you can lower the price of your products and present them as budget-friendly finds.
Alternatively, you can increase prices so you’re identified as a premium or high-end choice.
Keep in mind that by doing this, you run the risk of starting price wars with other companies. This could lead to a dangerous race to the bottom that will harm your business.
#3 – Create an Innovative Product/Service
If you’re experiencing saturation, market differentiation is key.
- Create new products and services
- Improve on an existing one
- Apply an effective diversification strategy
This way, you’ll break out of the current market limits and increase revenue streams for your business.
Remember, because market saturation is always a possibility, it’s best to make an investment in research and development now.
- Reading articles on other companies
- Searching for content on product development opportunities
- Staying up to date on current market trends and data
With these tips, you can expand out of your small universe, reach new customers, and get ahead of other companies right away.
#4 – Add Value to Your Product/Service
By attaching additional value to your products, you can supply something extra to customers that other companies can’t.
How can one do this?
By creating niche products, providing customer incentives, and having a product rewards program, among others.
#5 – Prioritize Customer Service
Consumers love quality service, so make sure they’re more than content with yours!
Building strong and long-lasting relationships with customers is definitely vital for any business, especially when its product offerings are similar to other companies.
These loyal customers who appreciate you will bring in a lot of revenue for your brand.
#6 – Uniquely Market Your Product/Service
Having an issue with saturation? Market creatively, and you may win over new customers!
Oftentimes, good advertising is the secret to get people interested in your product.
Creating a unique marketing campaign will draw in potential consumers—even those who may be patronizing a different brand!
Although market saturation can be a scary thing for your business, there are definitely ways to get out of that slump.
In any case, just remember to work smart, put in your best effort, and never lose sight of your goal. With these in mind, you’ll certainly be several steps closer to success in your business endeavors!