Apr 162017

Following the period of growth, a market will reach the maturity stage of its product life cycle. This means that there is limited growth – usually in line with the economy – left in the market. Sales have maximized and are unlikely, generally, to change significantly in the foreseeable future. In other words, the market has stabilized in terms of its sales volume.

Reduced proportion of first-time customers

The reason that sales are unlikely to change significantly (and continue strong growth) is that we have the absence of significant numbers of first-time consumers. First-time consumers – typically consumers switching from an older product offering to the new product offering – are the main reason that markets grow. Once we have a situation where “virtually every consumer” who is likely to buy the product, it is buying the product, then we have no “natural” growth left in the market.

Mature markets provide firms with significant stability and generally provide the greatest level of profitability to the firm. In the Boston Consulting Group matrix, market leaders in a mature market are classified as “cash cows”. In other words, they are products that produce ongoing streams of income without too many challenges.

Increased customer loyalty

In the mature phase of the product life cycle (PLC), the aggressive period of the growth stage is behind the market. One of the key characteristics of a mature market is that virtually all consumers have direct product experience – having previously purchased one or more products/brands. This direct buying experience provides them with a good understanding of the various offerings, leading to stronger attitudes and more consistent loyalty and repeat purchase behavior.

While this consumer’s loyalty may be deliberate or just habitual, it does provide a certain degree of stability. While there are still a significant proportion of consumers that will switch between brands, there is also a high proportion of consumers that are relatively brand loyal (perhaps to two or three different brands) on a regular basis.

For example, when considering brand loyalty, think about how people purchase fast foods. They are likely to have two or three fast food chains that they visit on a regular basis. This provides these brands with a solid underlying customer base.

Market shares will stabilize

As a result, a key market condition of a mature stage market is the stability of market shares. While there are some historical exceptions (primarily due to innovation), this principle generally holds in most markets. Therefore, existing competitors tend to develop “a holding pattern” of competitive behavior in order to protect their profitability, customer base, and market shares.

This is because there is limited incentive to overly invest in a “market share grab” because it is generally quite difficult and expensive to deliver on in a large scale. For example, in the 1980s, there were the “Cola Wars” between Coca-Cola and Pepsi-Cola. During this period of very aggressive promotions, product innovation, and retailer relationships battles – there was limited change in overall market share (some slight shift to Pepsi), resulting in an overall reduced profitability for both firms.

Most established firms realize that profitability is the key goal, in most cases, rather than a constant battle for market share. Therefore, in mature stage markets, there is a willingness to be less aggressive in terms of competitive rivalry.

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