The best place to start is to understand what market saturation means. It is effectively when the market for your product or service already owns (or has been introduced to) this product or service. And so possible future sales would only be generated from obsolescence, replacement or population growth.
Some examples; household white goods, tv’s and other modern conveniences. Almost everyone (with space & fixtures) has a washing machine, so future sales will come from replacement of old models and a growth in population, such as first time property buyers. The same could be said for cars; replacement of old vehicles, and individuals having recently passed their test being regarded as the population growth element.
One well-known example from modern times is mobile phones. In 1990 almost nobody had a mobile phone. But during the early 1990’s they became affordable to most consumers. So from 1990 to 1999 the Western World’s population grew from less than 5% ownership to more than 90%. But before the new Millennium had been reached, as almost everyone had a mobile phone, the market had become saturated. In economic terms, the Nineties were the golden age for mobile phones; the sales growth was astronomical. Whereas today most sales are made from upgrading old mobile phones, replacing lost, stolen and damaged phones, as well as the population growth element. i.e., kids getting their first phone.
From a business perspective, the level of sales your company will make relies to some degree on the level of market saturation of your product or service. In essence, supply and demand. New products and services to the market will have a low saturation level.
A good recent example of market saturation is business coaching. Although business coaches have been around for many years, there was surge in the UK marketplace from 2003. As a relatively new concept to the small business owner, their offering focuses on three main objectives; to coach the business owner on their team development, spend less time in the business (and more time working on the business from a strategic capacity) and to grow company profit. The market saturation levels can be well documented by the success rate of the telemarketing services in support of business coaches. From 2003 – 2008 Responsiva supplied nearly one million appointment-setting telephone marketing calls for business coaches across the UK. Working to similar scripts and prospect data lists throughout, the results changed over this five year period. The average number of appointments generated per day between 2003 and 2005 was three to four. Of course there were some variances between the talents of the telemarketers, but three or four appointments was a typical day’s work from an experienced operator. On a good day it could be as high as ten, and some days it could be zero; telephone marketing can go this way. Between 2006 and 2007 these averages dipped to about two per day, and by 2008 it had dropped to one. Could it be the telemarketers just not performing? Or the b2b data list they were calling from? Or even the script itself? Not really; all these elements had a reasonable level of consistency about them throughout the five year period.
What had changed over this five year period was the marketplace itself. By 2008 there were many hundreds of business coaches, so the supply had increased massively. Furthermore, if Responsiva had made one million calls, what about all the other telemarketing activity being made across the UK? If those one million calls represented as much as ten per cent of the calls being made then ten million calls would be a reasonable estimate to the UK market over that time period.
The next thing to consider is what the market truly is; how many viable businesses are out there? From the three million or so business entities out there, an estimated 500,000 are viable targets. So ten million telemarketing calls to 500,000 prospects gives a typical ratio of twenty calls per business. And that was by 2008. So it follows that by 2008 most viable prospects would have heard of business coaching. Many took advantage of the appointment with a local business coach, and some went on to employ one. Without doubt this is a good example of market saturation, which ultimately yields a lower return on investment, because the success of the telemarketing calls dropped. No matter how good the prospect data list, and no matter how talented the telemarketer, if you phone a business who has already been called twenty times (offering an appointment with their local business coach) then the simple fact is that the chances of the call being a successful one is quite low. And over the course of a week’s calling (say 600 dials) that telemarketer will generate less appointments than they would if they were calling into virgin territory; i.e., a region which has never previously been serviced by a business coach..
Today’s market for business coaching is still buoyant of course. Business owners still need (and many still desire) coaching. But few have to wait long before they are approached by one, and often they are approached by several in the same week.
As per the start of this article, new customers will generally be found from obsolescence, replacement or population growth. i.e., they wish to change coaches (so find a new one) or the new businesses (and their business owners) which come into the market. And there will still be a few out there who, after perhaps several months or years of consideration, now feel they are in a position where a business coach would be right for them.
Responsiva has supplied marketing data for business coaches for more than ten years, and during this time has developed a unique set of screening filters. This ensures that the business coach is targeting the right kind of business owner based on their tailored service. So if you are a business coach looking to increase your market share within your catchment area then please speak with us to ensure you are working with well-targeted marketing data for your telemarketing or direct mail initiatives.