With advanced and accessible technology, starting a business is easier than ever. However, many people are attracted to the same ideas and start companies in the same sector, creating a saturated market. Market saturation requires business owners to adapt to the changing needs of their customers. In this article, we'll discuss how you can make your product or service stand out in a saturated market.
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What is a saturated market?
A saturated market is a situation where businesses meet all demand for a service or product. As a result, room for growth of existing businesses can become extremely limited. When there is more of a product than there are people to buy it, businesses must compete for customers. Market saturation often happens when multiple businesses in the same area serve a similar purpose.
Types of market saturation
Understanding the scope of your market is an important step to overcoming market saturation. Determining what kind of market saturation you are experiencing can help uncover the causes and solutions to your decreased demand. There are two types of market saturation:
- Microeconomic market saturation: This situation happens when demand for a particular business disappears. For example, if customers stop coming to your bakery because a new one opened up across the street, you would be in a saturated market on a micro scale.
- Macroeconomic market saturation: Market saturation on a macro scale occurs when an entire industry experiences a drop in demand. This can occur due to new technology making a product or business obsolete. For example, the proliferation of cell phones decreased demand for pagers. Macroeconomic market saturation can also happen when all possible customers have already had their needs met.
Causes of a saturated market
Market saturation can cause companies to struggle financially, so it is important to understand the possible causes. There are many different ways a saturated market can occur. Below are some common reasons a market can become saturated:
- New technology: Technological innovation can decrease the demand for older products. For example, the invention of the car eliminated the market for horse-drawn carriages as transportation. Although some people might still rent a carriage for fun, only a small number of carriage businesses could survive the decreased demand.
- Increased competition: On both a macro and micro scale, new businesses opening up in the same industry can cause a saturated market. For example, many different companies are competing to be the main streaming service used for watching movies and TV shows online. Once everyone has access to a streaming service, it becomes difficult for the companies to get new customers.
- Changing customer base: Changes in the population can also cause market saturation. If people lose interest in a trend, companies are left without a demand for their product. Businesses within the fashion industry and other markets that rely on trends are often prepared to leave a saturated market for a new one.
How to overcome market saturation
Although market saturation can be challenging to a business, there are many techniques you can use to maintain success. Entrepreneurs and companies can adapt to the needs of the customer and continue making a profit. Here are six steps to help you promote your business within a saturated market:
- Research competitors.
- Create a niche.
- Price effectively.
- Market your product.
- Provide customer service.
- Add value.
1. Research competitors
Understanding the methods your competitors are using to promote their business can give you an advantage when your customer base is limited. By paying attention to the strategies others use in your sector, you can determine what would work best for your company. Research may also give you an idea of a completely new business plan that will set your product or service apart.
2. Create a niche
One of the most important steps to growing your business in a saturated market is emphasizing the unique aspects of your product or service. Creating a niche for your business automatically gives customers a reason to choose your product over similar ones. People choose products that fit their specific needs and will look for what makes your company different. In order to impress potential customers, you must find out what makes your business special.
3. Price effectively
When business owners realize that their market has become saturated, they often begin lowering their prices to attract customers. This method can be effective but can also cause companies to lose money by trying to have the lowest prices. Another option is to raise prices and aim your services at people who are willing to pay more for a premium product. You will need to carefully decide on a price point that works for your business model.
4. Market your product
Creative marketing can help a company appear more attractive than competitors. Effective advertising can make your product more familiar to your existing and potential customers. The goal of your marketing plan should be to make your product memorable to people who have lots of options. By associating your business with an engaging marketing campaign, you can spread interest in your product and reach new markets.
5. Provide customer service
The quality of your company's customer service can be the reason a customer chooses your product over another. A customer who has a pleasant experience with you, your employees, your website or your store will likely continue to support your business. Good customer service can earn positive reviews and bring in additional revenue. Your customer service will help you build relationships with clients and business contacts, which could also benefit your company in the long run.
6. Add value
Another tactic for overcoming a saturated market is creating additional products or services to offer. By increasing the value of your product, you give customers another reason to choose your business. Offering incentives like free upgrades or access to special services can make your product more appealing to a buyer.
Examples of market saturation and solutions
Because market saturation can occur on a large scale or a small scale in almost any industry, each business's response to a saturated market will be different. You can study the market to decide which methods will work best for your product. Below are several scenarios that a business might face within a saturated market and possible ways the business could stay viable:
- Meal delivery subscription boxes have become extremely popular. Your meal delivery business suddenly has dozens of similar businesses competing for your customers. You decide to create a niche by adding a vegan and vegetarian option. This can appeal to customers who have dietary restrictions and create a devoted base of customers.
- Your home goods store is losing customers to a large warehouse. You can't afford to lower prices, so you provide free consultations and delivery to your customers. By building relationships with your current customers through good customer service, your business has a better chance at thriving.
- Your research shows that none of your competitors is advertising on a new social media website. You begin a marketing campaign that creates engaging posts on that site to draw in a new set of customers.
- E-books have caused a decrease in profits for your publishing company. In response, your business begins posting content on a website that can earn money through advertisers. You release your publications as e-books and offer special edition print copies at an increased price. By combining these tactics, you can expand your audience within the industry.