In general terms, evolution means the different stages in any phenomenon’s life how it starts and then goes through different stages from smaller to higher-level complexities. Similarly, when we define market evolution, it is the development of a marketplace from early to advanced stages.
Just like any other phenomenon, a market also evolves while going through different stages. In this article, we will discuss all the stages in market evolution with respect to a product or a business. That said, how a business enters a market and then goes through different phases. Let’s get started!
following are the four Stages of Market Evolution
Emergence of Market
The concept behind any business is to introduce something that will serve a particular audience/group of people. That said, a business creates something that may be existing already but in a different form. If businesses do not address a particular need/market, that segment remains in a latent form.
A latent market means a group of people who share similar needs or interests that are yet to be identified. Now, the latent market concept does not say that there is no opportunity for new entrants because a need is yet to be discovered. In fact, it is an opportunity for marketers or entrepreneurs to make something different.
Let’s solve this confusion with an example. Transportation is a very common and earliest need of mankind. People kept inventing new modes of faster and safe transportation/traveling. To be honest, mankind has come a long way in this particular category. Yet, the need for even faster transportation still exists.
Ceasing An Opportunity
So, there is room for further advancement, and the entrepreneurs see it as an opportunity. The next thing that a marketer thinks about is how to create something faster and safer to satisfy this particular need. It is important to understand that an idea is useless if you cannot put it into practicality.
At this stage, a marketer should know what should be the attributes of a product and how and what type of people will it serve? Another thing a marketer should keep in mind that the market keeps evolving. That means a marketer should make a product that has the ability to adapt to developments in the future.
Moreover, a marketer must know that people’s preferences change with time. Therefore, it is imperative to make a product that can have modifications according to the peoples’ demands. Once a marketer decides the product, the next step in a marketing strategy is to select a market where it will launch its product/service.
Here are three options a marketer can have:
A single niche strategy involves launching a product or service just to satisfy a particular corner/segment of the market. However, the potential for growth is not that high in this strategy.
This strategy includes launching multiple products to satisfy multiple segments of the market. The potential for growth is a lot better, but it also requires greater capital.
This strategy suits those marketers who have massive capital. The mass-market strategy targets the central or heavily competed area of the market. It covers almost all segments of a market. The potential for growth is always huge, and businesses generate massive revenues with this market strategy.
But the question is, can anyone opt for any strategy? The answer is No.
Adopting a strategy is not difficult but getting success out of it is the real objective. A single niche strategy is highly suitable for small businesses having limited capital. Small investors cannot compete with the pioneers or giants of the industry if they go for a face-to-face battle upfront. However, if a firm has better resources, then going for a mass or multiple niche strategy is a feasible option.
Market Growth/Growth Stage
A business has now launched its product, and to be honest, that wasn’t the toughest part in this whole process. Entering the market is not that difficult, but competing and growing is the real challenge.
This era is probably the toughest in terms of market competition. As soon as a firm enters the market, it has to compete with different competitors immediately. So the question is how and where a new firm should enter the market. To answer this question, a firm must choose from the abovementioned market strategies.
- A firm can start with targeting a specific niche/segment of the market to avoid stronger competition and then establish itself.
- A firm can go for multiple niches if it has better resources. The competition will be stronger, but with better resources, the chances of success also go up.
- Go with a mass-market strategy if you have enough resources to compete against the pioneers upfront.
As a marketer, it is your responsibility to evaluate where do you stand and how much competition you can bear. Smaller firms always prefer a single niche to avoid direct competition with the industry pioneers. As you grow bigger, you can try different things. However, if you have huge capital and other resources, you can go for mass or multiple niches. But, proper implementation of any strategy is extremely important.
There is a peak point for everything, and the same goes for the markets. This is the stage we call the maturity stage of the market. The concept is simple as different firms compete in the market, but there is room for new entrants in specific segments (niches).
Once a new entrant starts operating in a specific niche, it covers the uncovered areas of the market as well. Then, after penetrating the specific area of a market, a firm moves to other segments of the market. This is where the competition starts, as all firms try to penetrate almost all segments of the market.
This stage is called market fragmentation, where no firm is influential enough in any segment. When more and more firms compete, the chances of growth start reducing. Moreover, the profits also start reducing as well.
Then, some innovative firms bring something new for their customers, which attracts the customers again. This process may push some firms to the corner, and the competition reduces. This stage is termed market consolidation. But, this doesn’t last long as the competitors strike back with innovations.
These things again lead to market fragmentation, and the cycle continues until the market hits the decline stage.
Market Decline Stage
Every rise has a fall, and the same goes for the markets. The fragmentation-consolidation cycle continues for a while, but at some point, the customer demand starts reducing.
As soon as the market hits its peak or maximum limit, the decline stage begins. Normally, there are two common reasons for a downfall in a product’s demand.
- The need for a specific product reaches its maximum point, and customers start thinking about something new or different.
- A new product emerges in the market with similar but more advanced attributes.
It is human nature that if you give them something new and more advanced, they will definitely switch to the new product. Right now, continuous improvement and innovation is the only way to survive in the market competition.
There are some famous examples of market evolution where industry giants simply refused to adapt to the changing environment and saw their downfalls. The two most common examples include:
- Blockbuster Inc.
- Nokia corporation
Both of the declined innovation, and in the end, both of them suffered.