Market Saturation Explained: 3 Examples of a Saturated Market

Market saturation happens when an existing product has already reached the entirety of its customer base in the current market. This usually means supply begins to greatly outrun demand. Once a company or group of companies hit the saturation point in any given market, they must begin to find new revenue streams or a way to incentivize buying new versions of the same product. Individual entrepreneurs and businesses each have their own unique ways of addressing this phenomenon.

Market saturation can happen on both a macroeconomic and microeconomic level. In the former case, every potential customer already has access to a given type of product and the saturated market affects all companies that provide such a product. In the latter, a single company in a specific market finds that its own products have reached the saturation point.

All sorts of different industries experience oversaturated markets. Consider these three potential examples:

1. 1. Houses: Real estate markets become saturated when renters or purchasers no longer feel the urge to find residences in an existing market. This leads to a decline in total sales and rentals, meaning home sellers and landlords must work to cut prices, renovate, or otherwise provide new reasons to encourage tenants and home buyers to move into a given housing market.
2. 2. Smartphones: In any given market, businesses must find unique ways to combat market saturation, and the mobile phone industry is no exception. Since so many people already have smartphones, these companies create new demand largely through continually upgrading their products. There may not be much of a market for new smartphone users, but existing users will often purchase the latest version of their current device.
3. 3. Streaming services: Plenty of subscription streaming service providers have already hit the natural limits of their growth potential in their initial markets. Current streaming businesses can overcome this by moving into different markets, whereas new businesses could offer distinctive features (like lower pricing or more perks) to entice customers from more established companies.

Through providing incentives, companies can overcome market saturation. Consider these five marketing strategies:

1. 1. Cut costs: Business owners might look at a saturated market and decide to cut internal costs. This allows them to keep a greater share of their revenue stream without having to do much to overcome the saturation itself. This is more useful as a short-term strategy than a long-term one.
2. 2. Diversification: Creating a new business model and diversifying into new markets can help companies defeat market saturation. By focusing on new product development, they can start increasing market share in new arenas rather than remain fixated on the stagnant growth of their original target market’s saturation.
3. 3. Population growth: More population growth means more potential customers. In general, population growth works a bit like the market saturation phase of the product life cycle itself though—it grows and grows until it reaches a point of stasis or even decline. To artificially simulate this sort of domestic population growth, companies can move into international markets to broaden their customer base. This strategy characterized much of the last few decades’ globalization trends.
4. 4. Price decreases: Setting lower prices helps bring in business after market saturation leads to a stagnation of sales. This encourages customers to replace any older, unusable products with new ones that cost less. This effective pricing strategy is so common that companies routinely engage in price wars—decreasing prices in response to each other’s price decreases—to remain competitive in saturated markets.
5. 5. Upgrades: Once you factor in upgrades into your company’s business plan, you can sustain a market growth trajectory beyond the saturation point. Upgrading your products with new technology means both opening the door to new customers and encouraging current customers to buy new versions of goods and services due to product improvements.

Get the MasterClass Annual Membership for exclusive access to video lessons taught by the world’s best, including Paul Krugman, Doris Kearns Goodwin, Ron Finley, Jane Goodall, and more.