What Is Market Saturation?

Market saturation refers to the ratio of a product's current market sales to market potential.

Market saturation

Market saturation = total sales of a product / market potential ^[1]

By investigating and analyzing the market share and the number of competing stores, the market saturation can be initially determined. The analysis of market saturation is related to many aspects of market development. High-saturation market development costs are high and profits are low; low-saturation market costs are low, but customers are unstable. Market saturation will also affect the level and difficulty of store prices. Therefore, in the case of competitors with high market share and high market saturation, the cost of opening a store will be increased, and the operation and management after opening a store will be difficult. If possible, try to avoid opening stores in such markets. However, there is a difference between the overall market saturation and the saturation of specific regional markets. Sometimes the overall market is already in a high saturation state, but a specific regional market has not yet reached saturation, and there is still a lot of room for development. Sometimes the situation is just the opposite. In a particular regional market, it has reached a high saturation state, but the entire market is still not saturated. At this time, you need to consider choosing another regional market to have room for development.