Saturation Point

Posted in Marketing and Strategy Terms, Total Reads: 350
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Definition: Saturation Point

Saturation point is a situation in which the product has reached all the potential customers and the demand of the products is now less than the supply of the products. There is very less scope for further sales and growth. Various factors that are responsible for the saturation point are consumer purchasing power, market demand, competition, prices and technology.


When suppliers flood the market by supplying large quantities of goods for sale, it leads to the saturation in the market. There are many disadvantages when a company reaches the saturation point. When a marketplace becomes very attractive to the companies, they all try to target the same customer base adding to the severe competition and hence there is a very less scope of profitability. No new customers are added, the only little profits are earned from the current customer base. A lot of money is then spent to stand out of the competition and to try attracting the customers.


When a company reaches a saturation point, it should look for further opportunities to expand the business by introducing new products or services. This would attract a new set of customers but would require a significant investment. Sometimes the company also has to reduce the prices to clear out the inventory it is stuck with at the point of saturation. This would further add to the losses and can even cause heavy debts to the company.


For example:

The diffusion rate in refrigerators is 97% that means more than 97% of the households own refrigerators and hence the market is highly saturated. The further growth in refrigerators industry will be basically due to the population growth.

 

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