Market Saturation
Candlefocus EditorA useful analogy for understanding market saturation is a bucket of water. When the bucket is first filled, it seems that it can fit more liquid, but eventually the volume reaches the point of maximum capacity and no more water can fit in the bucket. The same principle applies to market saturation, in that a business can't grow any further once it reaches the limit of the available customers.
When a particular market is saturated, no additional businesses can be started without forcing existing ones out of the market. As a result, competition within the market is cutthroat, as every business competes for the same finite pool of customers. The firms in such markets often turn to creative tactics and strategies such as volume discounts and creative marketing campaigns, in order to attract and retain customers.
The need for businesses to be creative, to offer unique products, or to offer lowering costs can be seen as an advantage to smaller, newer companies entering a saturated market. Due to an already-saturated market, these smaller businesses have the potential to “find a niche” or offer something unique or different in order to gain a foothold in the market.
It's important to note, however, that small businesses may experience a much more difficult time in highly saturated markets than their larger counterparts. This is because would-be customers are likely to have more options and businesses to compare, making it difficult for small businesses to stand out and gain market share.
Overall, market saturation can be a challenge to many businesses and can require creativity to overcome. In general, market saturation will require companies to have effective pricing, attractive products, and clever marketing and advertising strategies to remain competitive. While large companies may find it much easier to stay competitive in a saturated market, there is also potential for small companies to find a unique niche and stand out in the crowd.