Last Updated 27 Jul 2020

Market Maturity

Category economics, Market
Essay type Research
Words 2047 (8 pages)
Views 511

Market Maturity occurs when industry sales level off. Competition gets tougher as aggressive competitors have entered the race for profits. Industry profits continue to go down during maturity because promotion costs rise and competitors continue to cut prices to attract more business. New firms may still enter the market during this stage. These late entries skip the early life cycle stages, including the profitable growth stage. They must try to take market share from established firms, which is difficult and expensive in a saturated, flat market.

Customers who are satisfied with their current relationship won't be interested in switching to an unknown brand. In the United States, the markets for most cars, boats, television sets, and most household appliances are in market maturity. This stage may continue for many years -- until a new product idea comes along that makes the old product concept obsolete -- even though individual brands or models come and go. During the maturity phase, less efficient firms can't compete with the increasing pressure on prices and drop out of the market. During the Sales Decline stage, new products replace the old.

Price competition from dying products becomes more vigorous, but firms with strong brands may make profits until the end because they successfully differentiated their products. They may also keep some sales by appealing to the most loyal customers or those who are slow to try new ideas. These buyers might switch later, smoothing the sales decline. Although the life of different products varies, in general product life cycles are getting shorter. This is partly due to rapidly changing technology -- one new invention may make possible many new products that replace old ones.

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Tiny electronic microchips led to hundreds of new products, from calculators and digital watches in the early days, to today's microchip-controlled valves in artificial hearts. Patents for a new invention may not be much protection in slowing down competitors, who can often find ways to copy a product idea without violating a specific patent. Worse, some firms find out than an unethical competitor simply disregarded the patent protection. Patent violations by foreign competitors are very common, and sometimes a product's life can be over before a case can get through Patent Court bottlenecks.

Shorter life cycles mean that firms must constantly develop new products in order to stay in business. Further, they must offer marketing mixes that make the most of the Market Growth stage, when profits are highest. People always need to travel but trends are constantly changing, we need to make sure we can always provide what the customers want; this is mainly the best service. The company with the first entry in a product market sometimes referred to as the "Pioneer" or "Innovator," usually has an advantage, because they have the opportunity to establish their brand name in the minds of consumers before competitors enter the market.

However, during the Market Growth stage, competitors are likely to introduce product improvements. Fast changes in marketing strategy may be necessary, because profits don't automatically go to the innovator. The Boston Matrix is a method of analysing the product portfolio of a business (the number and range of products a business produces at a particular point in time). This model was developed by a group of management consultants called the Boston Consulting Group. It divides the products that are produced by a business into four categories, according to their market share and the level of market growth.

The categories are: Problem child - This is a product that has a low market share in a high growth industry - often newly launched products. They will require a significant amount of money to be spent on their promotion in order to achieve a healthy market share. These products are at the 'introduction' stage of the product life cycle. Stars - These products have high market share in a high growth market. They are very successful products that create a large amount of revenue for the business.

They still require money to be spent on their promotion in order to keep ahead of rival products in the marketplace. These products are at the 'growth' stage of the product life cycle. An example of Stars in the travel business would be net fares. Airlines give agencies that sell a lot of their flights consolidated fares that can be much cheaper than normal published fares. We can then sell them on to clients adding between 10 and 50% profit onto the fares, depending on the fare and the client, and still save the client money off the normal published fare.

As a large independent agency, we have consolidated fares with most airlines so we try to push these types of tickets as much as possible as they make us much more money than the normal published fares, which give us 4% commission plus the service fee for that particular ticket. Cash Cows - High market share in a stable market (i. e. market growth is low), at the maturity / saturation stages of their product life cycle and produce a large amount of revenue for the business. Dogs - These products have a very low market share in a low growth market.

They produce very little revenue for the business and are at the decline stage of the product life cycle. The business has to decide whether to try and extend the life cycle and boost sales revenues, or whether to delete the product from the portfolio. The Far East would come under this category at the moment. The Product Life Cycle and the Boston Matrix are just two tools that can help understand what is happening to the business and help to develop an appropriate business strategy for product positioning to ensure that the business optimises the ROI over the life of the product and can support investment for future business survival.

TD Travel Group is a great example of Perfect Competition with all the cost cutting that goes on in the travel industry. This exists when there are so many people in the market and other conditions are such, that no one can influence the price, all other things being equal. Any business charging more than the market price will lose all its customers to rivals, and any business charging less than the market price will be swamped with customers whom it cannot satisfy. In a free market economy the allocation of most scarce resources is determined by the price mechanism. Price is determined by the interaction of supply and demand.

Demand is the amount of a good that consumers are willing and able to buy at a given price. Supply is how much of a given product the sellers are prepared to supply to the market at any given price. Supply and demand is only effective if backed up with the ability to pay. Given the current situation and lack of demand for flights at this time TD Travel Group have to continue to supply a professional service to keep existing customers. They also have to gain new customers both through the demise of the weaker less professional business travel organisations and through the professionalism and marketing of our organisation.

TD Travel Group has to supply what the customer needs i. e. the best travel options at the best possible price. If they continue to supply this then clients will be happy with their service and demand more. If they fail to supply this then demand from customers will reduce, as they will get a better service from elsewhere. A perfect example of a factor affecting demand for TD Travel Groups products and services is the terrorist attacks of September 11th. This has caused less demand for people traveling especially to America, which is a large percentage of our business.

This coupled with suggested worldwide recession has instigated a major upheaval in the whole travel industry. As a result of this airlines and aircraft manufacturers have announced whole scale job losses, business travel industry leaders have predicted huge cuts in travel spend and closer to home initial feedback from TD Travel Groups own customers points to a general review of travel patterns and budgets. Just as the travel industry had almost recovered from the terrorist attacks, there has been the Iraqi War, limiting flights to the Middle East by airlines due to lack of demand for them and putting off both business and leisure travelers.

The most current issue is SARS; nobody wants to travel to the Far East or to Canada with the situation as it is at the moment. TD has had to tighten its belt to try and minimise costs as much as possible. Other factors that affect the demand for TD Travel Groups services are: The time of year - With being a business travel organisation there is much less demand for travel in the holiday seasons such as July and August, or Christmas and Easter. This is due to the fact that most business travelers would rather be spending that time at home or on personal holidays with their families.

Clients winning or tendering for new contracts - If an existing client gains a new contract in Dubai then it will mean a lot more travel by them to that destination, therefore increasing demand. If this be the case TD Travel Group would strive to get a corporate deal with an airline to that destination to lower costs considerably for their client. Major sporting events / Conferences worldwide - This obviously increases demand to a certain area, TD would try to block off airline seats or hotel rooms etc to guarantee their customer a place.

Client's travel budgets - if these budgets rise or fall then demand for our services will also rise or fall. For most companies, corporate travel is their second largest expenditure. TD Travel makes sure that whether demand is high or low we always offer the best service to our clients. TD Travel Group has identified customers' objectives and managed them by employing the best travel consultants in the business that provide fast efficient response times and professional, unbiased consultancy.

TD Travel group also provides 24-hour service, efficient ticket deliveries or dispatch, fast refund processing, account management, management information reports and centralised accounts control. On top of all this we provide unlimited fare saving opportunities guaranteeing overall better value for money and cost saving. The marketing manager is constantly meeting with clients, both new and old, to research the clients needs and to discuss the service we provide and make sure there are no problems.

Our job is no longer to sell flights / hotels / car hire etc, it is to provide a service. Companies can book most of their travel needs on the Internet now; it is the service we give that they are paying for. All our clients agree that the services we provide are worth paying service fees for. The Marketing manager will also discuss our service fees and come to an agreement with new or existing clients on their specific tailor made fees and services. This process is only used for companies with a high usage / spend with us.

For smaller usage companies or individuals who get our number from yellow pages etc or new clients, we have a set service fee band (band B), which we use. Most companies understand the service fees and are happy paying them, for the smaller companies, the service fees will only get changed to tailor made service fees if they are unhappy about any aspect of the normal Band B fees. The service fees then become Band T (tailor made), for these fees we have to check in the company profiles every time we make a booking to see what fee to charge.

It may be that a high usage / spend client may be happy with the band B fees and they will stay on that level, or it may be that an individual who only travels four times a year may get put on band T service fee, it depends on all the above factors, and most importantly in the service industry - what the customer wants. TD is a firm believer of customer care. This emphasises the importance of an organisations attitude to, and covers every aspect of its relationship with, its customers. It aims to close the gap between customers' expectations and their experience.

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Market Maturity. (2018, Jun 14). Retrieved from https://phdessay.com/market-maturity/

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