Unlocking Growth in Saturated Markets

Businesses operating in mature industries often find themselves grappling with stagnant growth and declining market share. Typically, saturated markets are characterized by intense competition, price pressures, and limited opportunities for organic expansion. Businesses operating in such environments often face the following challenges:

 Commoditization: Products and services become increasingly interchangeable, making it difficult to differentiate based on features or functionality.

 Customer Loyalty Erosion: As consumers become more price-sensitive, loyalty to specific brands can diminish.

 Limited Growth Opportunities: Organic growth becomes increasingly challenging as market saturation limits expansion possibilities.

To overcome these challenges, it is imperative to adopt innovative strategies that differentiate the brand and drive sustainable growth. Three factors can meaningfully transform businesses facing such predicaments – differentiation, customer experience, and the use of innovation and technology. In one of our recent blogs, we’ve covered the use of technology and innovation for business transformation in detail. You can read the full blog here.

In this write-up, we will explore the other two factors in detail.

Differentiation is more than just having a unique product; it is about creating value that is hard to replicate. For instance, in the automotive sector, Tesla has positioned itself not just as a car manufacturer but as a leader in sustainable energy solutions. Its differentiation strategy extends beyond the product itself to the values they promote—sustainability, innovation, and advanced technology. And here lies a lesson for businesses in saturated markets – differentiation requires a holistic approach that integrates products, brand values, and customer experience.

According to a 2023 McKinsey report, over 70% of companies in mature industries see differentiation as their primary growth driver, yet only a fraction manages to implement it successfully.

Here are some key differentiation strategies to consider:

• Value-Added Services (VAS) & Complementary Offerings: Provide additional services that enhance the value proposition of your core products or services. One prominent example is Apple, which differentiates itself through VAS and complementary offerings. Beyond its core products such as iPhones and MacBooks, Apple offers services including iCloud, Apple Music, Apple Care, creating a seamless ecosystem which includes products such as Air Pods, Apple Watch and iPad. Having integrated all services under one user ID and iCloud, this largely enhances customer loyalty and user experience. Another example is Amazon, which provides VAS through Amazon Prime. This membership includes benefits such as free shipping, exclusive deals, and access to streaming services (Music and Video). Also, Amazon Pay gives customers access to payment methods and options, investments, insurance, and other financial services.

• Brand Building and Storytelling: Modern consumers seek brands that align with their values. A 2018, Accenture study ‘To Affinity and Beyond: From Me to We’ highlights that more than 60% of consumers prefer to buy from companies that have a strong brand purpose. In mature sectors like fashion and beauty, companies such as L’Oréal have tapped into this trend by promoting inclusivity and sustainability by featuring models of various ethnicities and ages in advertising, and sourcing material from suppliers who support vulnerable communities. A genuine commitment to these principles attracts new customers and strengthens relationships with existing ones.
• Strategic Partnerships and Alliances: Explore joint ventures or strategic alliances (even Mergers & Acquisitions) opportunities to expand market reach, capabilities, and access to new technologies and customers

Numerous businesses have successfully differentiated themselves in saturated markets through several of these innovative strategies. For example, Apple has maintained its dominance in the smartphone market by consistently introducing differentiated products (Mac, iPhone, iPod etc.).

Another powerful strategy that can help businesses stand out and thrive in saturated markets lies in delivering exceptional customer experiences (CX). Customer experience is more than just good customer service. It encompasses every interaction a customer has with a business—from the initial point of contact to post-sale support. According to a 2023 report from Deloitte, companies that lead in CX delivery outperform competitors by up to 80% in terms of revenue growth. On similar lines, a report by PwC showed 73% of consumers say a good experience is key to influencing their brand loyalty. This demonstrates the direct impact that CX can have on a business’s bottom line, even in highly competitive sectors.

In mature industries, customers have high expectations and are more likely to switch brands if they are dissatisfied. By prioritizing customer experience, businesses can build brand loyalty, increase customer ‘Lifetime Value’, and differentiate from competitors. To unlock growth through exceptional customer experiences businesses can consider these strategic approaches:

• Customer-Centric Culture: Fostering a culture that values customer feedback and actively seeks to understand their needs as well as ensuring that customer experience is a top priority in all business decisions. Actively seek and analyse customer feedback to identify areas for improvement.
• Personalized Experiences: Customers expect personalised experiences that reflect their preferences and needs. With advancements in data analytics and artificial intelligence, businesses can deliver tailored services and products at scale. A prime example comes from Netflix, where personalisation is at the heart of its customer experience strategy. The company uses AI on customer viewing data, search history, rating data, time, date and device type to predict what should be recommended to users next. Further, the company also runs about 250 A/B tests (a method of comparing two or more versions of content to determine which performs better) for landing cards (images and video teasers) on 100,000 users annually to make changes to its platform, in turn keeping users hooked to it.
• Omnichannel Integration: Customers engage with brands through multiple touchpoints—online, in-store, mobile apps, and social media. Ensuring a seamless experience across all channels is crucial. Data collected by ‘Think With Google’ indicated that omnichannel strategies help generate around 80% of the in-store visits by customers. Furthermore, as much as 74% of customers do online research before visiting a physical store. A case in point, Starbucks, has mastered the omnichannel approach by providing a seamless, integrated experience across all channels, from physical stores to mobile apps. This user-friendly approach, which includes features like loyalty rewards, store locators, mobile ordering, and Spotify integration, has contributed to Starbucks’ success in the competitive coffee market.
• Proactive Support: In saturated markets, proactive customer support can turn a neutral experience into a memorable one. By anticipating issues before they arise, businesses can demonstrate care for their customers. Take the example of Tesla, which provides proactive support through remote diagnostics, addressing potential vehicle issues even before customers notice them. This approach not only enhances customer satisfaction by minimising downtime but also differentiates Tesla as an innovative, customer-centric brand in the automotive industry.

Despite the clear advantages, enhancing CX can be challenging. Key obstacles include legacy systems, cultural resistance, and cost of implementation.

In saturated markets, growth is still achievable through strategic approaches such as differentiation, customer experience enhancement and leveraging technology. By understanding customer needs, aligning with market trends, and investing in innovation, businesses can carve out competitive advantages and drive sustainable success. These strategies not only help companies stand out but also open new avenues for expansion, even in the most mature industries.

Author: Shivam Agarwal

Assistant Consultant, Strategy Consulting

Image courtesy: Pixabay