Mature Markets and Competition

Mature markets are characterized in part by perfect competition. That implies a certain replaceable element at it’s base, which never actually materializes, because the management of the company invariably tries to differentiate itself using

1. Pricing
2. Value Added

Keep in mind- these are not pure mature market conditions which involve zero barriers to entry, is characterized by high turnover, and requires little to no specialized skill.

The effort put toward services differentiation will bear little fruit unless customers can be convinced this will add value for their purchase. A message needs to be delivered that the value you offer will achieve benefits above other offerings.

Implementation of this message is easier said than done. You have to cover everything from the company letterhead, advertising materials, and elevator pitches down to the customer experience on your premises or the quality of your product and even the packaging to reflect this differentiation.

Remember part of the customer experience includes human interface. Make sure you’re properly training the right people for not only sales, but also customer support roles and they understand the message they have to convey to the client for the differentiation to work properly.

Pricing
While commoditization of a product or service allows for a decrease in unit cost for production and employs economies of scale- (lower unit cost for the same quality) companies hesitate to drop the price to compete solely on pricing alone because that starts a pricing war and it becomes a race to the bottom which makes neither you, nor your substitutors happy.

Value Added
What companies often do instead of competing on price alone is change their product or offering, so it’s not a perfect substitution anymore. Whether it’s adding new features or support, companies have found that tapping their R&D department to churn out new offerings provides a more sustainable and commercially healthy endeavor, while still keeping with the ethos of competition.

In conclusion- remember another characteristic of Mature markets; razor thin profit margins. If you find yourself in a mature market game, best approach is to change the rules through innovation, or using your current operating revenues to move into a less crowded space.

With special thanks to John Murray.