Gap analysis models help a company determine the difference or distance between what they do currently and the maximum potential. Different analysis models include usage, market potential, and product gaps. Companies often look at this process in terms of efficiency or where the business fails to meet its maximum opportunity levels. Owners and executives tend to be the individuals responsible for gap analysis models, though outside help may be necessary. The different model types may dictate how the company completes the process.
A usage gap is discoverable with a basic formula: market potential less existing usage equals usage gap. For example, the potential widget demand in the current market is 40,000 units. The leading widget manufacturer, however, only produces 35,000 units; therefore, the usage gap is 5,000 units. Gap analysis models can help a company define why a gap exists and what the biggest factors are in terms of correcting this gap. Price, quality, or regional consumer demand may all be reasons for the usage gap issue.
Market potential represents the maximum number of consumers available in a specific market. Wildly successful companies in a small region often find their sales topped out. Gap analysis models may help confirm the fact that the business is lacking new consumers, which limits or drives down sales. When this occurs, a company needs to start looking elsewhere in order to increase their sales and potential profits. Domestic companies may find this problematic, with the only solution to be selling goods in international markets.
Product gap analysis models tend to look at the company’s segment or positioning gap in a market. Segments represent individual points where the company chooses to sell its goods or services. Fewer market segments means lower opportunities to maximize sales and profits. In some cases, a company may not even be selling products in the most profitable market segment. Gap analysis models can help define which of these problems are of most concern.
Position gaps in terms of products occur when accompany fails to place products at the right position in a market. For example, a company may choose to be the low-price leader for a certain type of good or service. The result, however, is low profits and high sales that may outstrip production. The opposite can also be true; high-quality goods sold at high prices may not drive demand. The company must then look to change its product positioning in order to succeed.