As companies continue to move forward, they are consistently challenged with making investment decisions on which new geography markets to expand into, what new business verticals to compete in and what type of development staff they should hire.
The correct answers to these questions help their businesses grow.
Incorrect decisions can waste investment funding and delay time to market, or worse, create corporate chaos that affects the very foundation of the firm's financial stability.
One way to minimize incorrect business decisions is through the use of Market Gap Analysis as a decision tool to help executive teams identify and validate the potential for new market opportunities, current market penetration success capabilities and investment criteria for new product or service options.
What Is Market Gap Analysis?
Market Gap Analysis focuses on using a systematic research approach to discover and uncover sales opportunities where market demand is greater than supply. Used extensively in the business to consumer market space (B2C), it can help your firm identify, quantify and select business market segments that are currently under-serviced.
Through the deployment of Market Gap Analysis, your firm can make logical strategic and tactical decisions based on market facts, not subjective opinion.
Market Gap Analysis is a proactive approach to meet identified market demand.
How Is Market Gap Analysis Different From Market Research?
Market Research focuses on the investigation and analysis of known business model characteristics including sales, marketing, distribution and deployment techniques.
Market Research does not identify new markets where demand is greater than supply. Market Research is a reactive approach to help understand how you position, sell and distribute products and services into an existing market where demand is already determined (or perceived to be determined).
Why Should A Firm Use Market Gap Analysis?
The key to successful top line revenue growth is to identify a demand that is unfulfilled and then create (or acquire) products or services that you can sell to fill this unserviced gap.
Many firms have NEVER done market gap analysis and in fact, they are currently failing to sell their programs and services successfully due to this fact.
Traditionally, firms use the following three methods to forecast demand:
- Most firms use the percentage rule of market research method INSTEAD of market gap analysis to determine sales opportunities. (Take the national market statistics of an industry and assume that you will sell a percentage of the total market - 2% of CRM). Overconfident perceptions of market demand are generated through this method ultimately leading to flattened sales, decreased gross operating margins and incorrect sales forecasts.
- Alternatively, firms assume there is a market gap based on their own personal experiences.
- Lastly, senior management teams believe the product or service they sell (and have invested in) is so great, it will have buyers. This method is oftentimes associated with author's pride or developer's pride.
In all of these examples, a firm may actually achieve some increase (a false positive gap) in corporate revenues in a launch mode that ultimately misguides management even further to increase their investment based on their early success.
Yet, ultimately as they try to expand their business, they fail and do not understand why.
When Should A Firm Use Market Gap Analysis?
A Market Gap Analysis should be used when the firm is:
- looking to forecast and confirm demand for an existing product or service;
- seeking to enter a new business vertical or industry;
- trying to decide on the investment needed to expand a department;
- seeking to merge or acquire another firm; or
- deciding to launch a new product or service department or business.
How Does Value Forward Network Implement
Their Market Gap Analysis Program?
Through a step-by-step systematic approach, we help you investigate the business and market objectives for your current or perceived industry opportunities.
As an objective third party, we can help your senior management team uncover new market gaps where supply may be larger than demand or to confirm if your existing has enough market demand to warrant additional reinvestment or expansion.
Through detailed research of local and national market demand curves, we can help identify market gap opportunities that align with your strategic and tactical business growth objectives.
It Is Not What You Sell That Determines Your Success
It Is What Prospects Will Buy!