Market saturation is the level of saturation of the market, which means the ability of the market - customers on the market - to accept yet another product offer.
What does it mean when the market is saturated?
Each market has the ability to absorb a certain number of products offered for sale. Each market has a certain size (see total addressable market) defining the overall demand for a given product or service. For a brand new product that no one possesses yet, there is zero market saturation. If, on the contrary, every customer has bought the product already, the market has become saturated and the chances of selling more are minimal.
Automotive market can be considered an example of market saturation. Let’s say that the average household is able to own two cars. Then, the market would become saturated if all households in a certain area owned two cars. In this situation, the market potential is equal to the demand of car replacement. Therefore, we have to keep in mind that the lifetime of a market is limited. Because of the market saturation, which is the case for the vast majority of consumer goods, manufacturers are trying to shorten the lifetime (or rather not to prolong it) in order to be able to sell goods despite of the market saturation. For example, in 2010 when Apple introduced its first iPad - the first tablet of its kind, the tablet market was not saturated yet.
A saturated market is the situation when the demand has been fully satisfied. The only ways to sell more on a saturated market are the following:
- substitution or replacement of the existing
- taking over a market share at the expense of other competitors
- innovation of a product in such a way as to move to an unsaturated market or to create an entirely new target market
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