economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...

, market saturation is a situation in which a product has become

diffused Molecular diffusion, often simply called diffusion, is the thermal motion of all (liquid or gas) particles at temperatures above absolute zero. The rate of this movement is a function of temperature, viscosity of the fluid and the size (mass) of ...

(distributed) within a market; the actual level of saturation can depend on

consumer A consumer is a person or a group who intends to order, or uses purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...

purchasing power; as well as

competition Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, ind ...

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

s, and

technology Technology is the application of knowledge to reach practical goals in a specifiable and reproducible way. The word ''technology'' may also mean the product of such an endeavor. The use of technology is widely prevalent in medicine, scien ...

Theory of natural limits

The ''theory of natural limits'' states: "Every product or service has a natural consumption level. We just don't know what it is until we launch it, distribute it, and promote it for a generation's time (20 years or more) after which further investment to expand the universe beyond normal limits can be a futile exercise." — Thomas G. Osenton, economist Osenton introduced the theory in his 2004 book, ''The Death of Demand: Finding Growth in a Saturated Global Economy''; it states that every product or service has a natural consumption level that is determined after a number of years of sales- and marketing-investment (usually around 20 to 25 years). In effect, a relative universe of regular users is naturally established over time, after which any significant expansion of that universe becomes extraordinarily difficult. The point at which these natural limits are reached is known as "innovation saturation".

Example

For example, Time Inc. launched the American weekly consumer-magazine ''

Sports Illustrated ''Sports Illustrated'' (''SI'') is an American sports magazine first published in August 1954. Founded by Stuart Scheftel, it was the first magazine with circulation over one million to win the National Magazine Award for General Excellence tw ...

'' in 1954 with 400,000 subscribers and the numbers of purchasers grew through the 1960s, 1970s, and 1980s until it reached 3.5 million subscribers in the late 1980s, where it has remained ever since. With some estimates of up to 100 million sports-fans in the United States, many at Time Inc. believed that the ''Sports Illustrated'' subscription-base could have increased much more. However, after many years of investment, the sports weekly reached its natural (and most profitable) consumption-level – where it has remained for more than 20 years.

"Flooding the market"

When suppliers abruptly offer large quantities for sale and saturate the market, this is known as '' flooding the market''. For example, in advanced economies, more than 97% of households own refrigerators. Hence, the diffusion rate is more than 97%, and the market is said to be saturated; i.e. further growth of sales of refrigerators will occur basically only as a result of population growth and in cases where one manufacturer is able to gain

market share Market share is the percentage of the total revenue or sales in a market that a company's business makes up. For example, if there are 50,000 units sold per year in a given industry, a company whose sales were 5,000 of those units would have a ...

at the expense of others. To give another example, in advanced western households (and depending on the economy), the number of automobiles per family is greater than 1. To the extent that further market growth (i.e. growth of the demand for automobiles) is constrained (the main buyers already own the product), the market is said to be basically saturated. Future sales depend on several factors including the rate of obsolescence (at what age cars are replaced), population growth, societal changes such as the spread of multi-car families, and the creation of new niche markets such as sports cars or camper vans.

References

{{reflist, 35em Financial markets Anti-competitive practices

Theory of natural limits

Example

"Flooding the market"

See also

References