Market saturation is when sales of a product or service has reached the point that customer needs have been met. The term implies a situation in which sales growth is unlikely. The following are illustrative examples.
BrandsA brand with 70% market share in snowboard gear is unlikely to be able to expand much further. In fact, it may be difficult to defend such a high market share from smaller competitors with new ideas.
CapacityIf airlines purchase a large number of aircraft their capacity may exceed demand resulting in a supply saturated market.
NeedsA product with a high adoption rate reaches a point where needs have been satisfied and sales growth is difficult to achieve. When everyone has a refrigerator in their home, it can be difficult to convince them that a new model is worth the effort and expense.
InnovationInnovation can make new models of products more attractive encouraging customers to replace them frequently. This impact tends to decline with time as needs are met. You can make smart phones better and better but eventually people lose interest if their phone satisfies their needs.
Target MarketA niche product may reach a high penetration rate amongst its target market. Such a product may be fully saturated despite a low market share. If you sell unusually expensive performance bicycle seats you might reach saturation at less than 1% of the total market.
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