What does the term 'market saturation' refer to?

Market saturation occurs when a product has reached the maximum level of market penetration, meaning that the company can no longer increase sales significantly because the majority of potential customers already possess the product, or the market has little room for new customers. This situation often arises in mature markets where the demand for the product has stabilized. Consequently, extensive distribution alone does not contribute to further sales growth since nearly everyone who could potentially buy the product already has.

Understanding market saturation is crucial for businesses as it requires them to adapt their strategies, possibly by seeking new markets or innovating existing products to reignite growth. The other options describe different scenarios related to marketing and competition but do not accurately capture the essence of market saturation, which is the stagnation of sales growth due to a fully served market.