Computer science is saturated

Market saturation

What does it mean when a market is said to be saturated? It is less about nutrition than about satisfying demand. In addition to market saturation, the following article explains the calculation of the degree of saturation in general and using an example.

You can also watch the explanatory video on market saturation for this article.

Market saturation simply explained

A market is considered saturated when all potential demand for a product has been satisfied by previous consumption. In addition, approaches to suggest further paragraphs no longer have any effect. Reasons for market saturation can be a decline in purchasing power on the demand side or changes in consumption habits.

Once a market is saturated, a zero-sum game begins for the providers. Customers can no longer be won through market growth. Additional shares of a saturated market are gained exclusively at the expense of competing market participants. So it is extremely important to keep your own customers and take customers away from competitors. Viewed as a whole, the pressure of competition increases as the saturation of a market increases. There are several ways for companies to evade competitive pressure:

  • Market exit
  • Geographical market expansion
  • Stimulation of the need for replacement (e.g. by artificially shortening the usage time)
  • Product innovation

In mathematical terms, market saturation is expressed by the degree of saturation.

Saturation level

The degree of market saturation describes the percentage share of the market volume in relation to the potentially possible market size. In order to be able to calculate the key figure, the market volume and market potential must be determined in advance.

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If the degree of saturation is 100%, the market under consideration is completely saturated. The untapped potential of an examined market can therefore be between 0 and 100%. The problem here is that degrees of saturation of over 100% are achieved for some perspectives. For example, it is conceivable that several TV sets are bought per household. When determining the market potential, however, it was wrongly assumed that the possible number of devices sold corresponds to the number of households.

Example: Calculating the degree of saturation

Let's take a look at the calculation of the degree of saturation using the example of a Munich delivery service. The market potential has already been determined to be € 38.48 million. So far, only two competitors are active in the food supplier market. Their jointly achieved sales are € 7.68 million and thus represent the entire market volume. The degree of market saturation is now calculated from the market volume divided by the market potential.

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The degree of market saturation is around 20 percent. If the assumptions made about the possible buyers and their buying behavior are correct, there will be sufficient demand that we can reach after entering the market.