5 Steps of the Market Gap Analysis Process

A market gap analysis is a method that evaluates the success of a company (or a department) in terms of meeting the business objectives set and, if not, what measures should be taken to turn that situation around. This type of analysis is also called GAP analysis, needs assessment, needs assessment, or needs gap analysis. And its objective is to improve, above all, the results.

In this context, “gap” indicates the distance between the current situation of the business and the future situation to which it aspires in terms of performance. For example, if a business invoices 100 million Euros, but its goal is to invoice 500, the gap would be 400 million Euros. However, there are also qualitative gaps, which are not numerically measurable.

Applications of Market Gap Analysis

Project managers and idea validation teams use pre-performing market gap analysis reports as a starting point for designing specific action plans that result in operational improvements. Which makes a lot of sense, because the option of improving a process or a performance does not seem viable if the difference between the current reality and the objective to be achieved is not known.

Performance gaps, the differences between what is obtained and what is desired, can be measured for an organization globally or for each of its areas. Examples include supply chain cost, productivity, revenue generation, or customer satisfaction.

Examples of Market Gap Analysis

Small companies immersed in a process of resource allocation can benefit a priori from this type of analysis, which will indicate from the beginning what is the way forward.

In software development, this type of evaluation fulfills the function of explaining which functionalities can be dispensed with, which are essential and which need improvement. It also helps to understand how decisions have been made throughout the process.

In compliance initiatives, gap analyses (although not strictly market gaps) analyze the requirements of current legislation or internal regulation and the level of actual compliance with them. They also return an itinerary to reach the ideal goal of fulfillment.

In the area of human resources, a gap analysis can be performed to examine the skills that employees accumulate. In this way, the hiring or reassignment of personnel can be oriented according to the most necessary and most represented skills. It is common sense to think that there is a cause-and-effect relationship between the ability of the workforce and the achievement of objectives.

How to perform a GAP analysis

The first step in running this type of analysis is to set specific goals. For this, it is necessary to take as a basis the objectives of improvement of the company, its commercial goals and its mission. Of course, all of this must be aligned in a coherent manner.

The next step is to analyze current processes by collecting relevant data on performance levels and how resources are allocated at the present time. This data can be collected from different sources depending on the object or gap to be analyzed.

Thirdly, the market gap report is written.

After a company compares its short- or medium-term goals with its current state, it is processed to the elaboration of a comprehensive plan to fill the gap between the current situation and the desired one. This is what is known as strategic planning.

The fifth step is to implement the different actions that make up that plan.

There are different models of market gap analysis, including the following:

What does a gap analysis report show?

While gap analysis methodologies may respond to different methodologies, the resulting reports often contain the following essential aspects:

(01) Current situation

Through specific objectives and using a specific terminology, the section dedicated to the present situation describes in detail the characteristics, workflows and processes that the company wants to improve.

Focus areas can refer to the entire business or focus on a specific business process. The choice depends on the objectives of the company.

This analysis can be quantitative, for example, if the number of downloads of an application or a free resource is checked. And it can also be qualitative, such as when measuring customer satisfaction or parity between men and women hired in the workplace.

(02) Desired future situation

The market gap analysis report should also state in a detailed manner objective that the company intends to achieve.

Like the current state, this section can be written in concrete and quantifiable terms, such as the goal of increasing the number of downloads for a given period of time. Or it can be worded in general terms, such as working to get better customer reviews or implementing parity policies in hiring.

(03) Description of the GAP or gap

This section will determine whether it is true that there is a gap between the present situation and the desired future of the organization. If so, you must specify what exactly the breach consists of and the causes why it has occurred.

Again, the terms to appear in the report must be specific, clear and objective. Like the present and future situation sections, the elements that make up the gap can be measured numerically or qualitatively.

(04) Proposals and next steps

It is the last section of the market gap report and it also closes it. As the aim of this analysis is practical, the content of the proposals section must also be practical. In fact, it must contain all the actions that are considered relevant to close the gap described.

Proposals must be concrete and based on the content of the description of the gap. As the business trend is conservative, the wording must be done in active terms and in a persuasive manner.

If you are considering conducting a market gap analysis in your business and you are not sure where to start, contact us.