This example is intended to point out how success can deceive us into believing that we have found the answer to success, an answer which often eventually leads to failure.
We begin with a marketing effort which interacts
with the addressable market to add to demand. Since the
marketing effort does in fact produce an increase in demand
we make the assumption that it represents a viable marketing
The point of concern here is whether the marketing activity is actually increasing the market size or simply interacting with the addressable market influencing it to purchase sooner than it would have. This is often the case with promotions, and that will be considered to be happening in this example.
As marketing interacts with the addressable market to add to demand the increased demand adds to sales. Sales then adds to revenue which adds to marketing. As such, as marketing appears to increase demand resulting in more sales and more revenue, the tendency is to do even more marketing. This reinforcing loop drives the growth of revenue.
While the reinforcing loop drives the increase in sales sales is subtracting from the addressable market. The addressable market continues to interact with marketing and add to demand, yet to a smaller and smaller extent as the addressable market decreases. At some point the decrease in addressable market will be such that there will no longer be a growth in demand. At this point the addressable market has been addressed, and there's nothing left to address.
Yet, since marketing has continue to increase demand the natural tendency is to increase the marketing effort even more to spur demand. Continued success has fostered a belief that marketing is the answer to generating demand. When this increase in marketing doesn't increase demand the marketing organization is often quite confused. It has been said that you can lead a horse to water but you can't make them drink. Well you can't lead a nonexistent horse anywhere.
There are actually two effective strategies for addressing this situation, one of which probably won't sit too well.