Gap analysis as a tool for improving performance

This article aims to propose a tool for analyzing the gaps existing among the sales potential of an organization when considering one of its offers and its actual sales or performance. Different then moving on the traditional planning process, this tool allows to come from the missing points, from the errors, or from the gaps towards projects of what need to be done.

The potential sales of an organization is represented by the upper limit of the demand in a given period of time, in a situation where most the following aspects reach its full potential: maximum number of possible users; maximum usage per time (utilization rate); maximum proportion of consumers using and maximum frequency of purchase among other situations that takes us to the limit of the market of a given offer (product).

Achieving the sales potential of an organization becomes a difficult task once the current market is very dynamic, competition is intense and there is great difficulty in forecasting future scenarios with the fast changing environment and modifying consumer behavior.

The difference (gaps) between the total sales potential of a market for a given product, the total sales potential of an organization and its actual sales indicates the rate of development or underdevelopment of the organization and of their markets.

It is important to remember that the larger the existing gaps, means markets are less developed and therefore there are greater opportunities for growth.

There are two major types of gaps. Gaps that are internal in a company (related to the offer of the company) and gaps that are external, related more to market conditions, competitors and others. I will start describing possible internal gaps.

1 - Product, packaging, brands and service gap: seeks to reevaluate aspects such as size, style, shape, packaging, and others in order to reduce possible errors of alignment between the product or service and their target market positioning. The question is: what are we missing in the product?

2 - Communication gap: seeks to identify and reduce errors in communication actions of the product or service, such as an advertisement in an inaccessible local to the target market and others. The question is: what are we missing in communications?

3 - Marketing Channels gap: seeks to identify existing problems in marketing channels of product or service, for example, if the shelf space for a specific product is in line to the goal of product sales, or even geographical distribution issues. The question is: what are we missing in channels?

4 - Sales force gap: seeks to identify factors related to inadequacies in sales force as people, training, sales structures, among others. The question is: what are we missing in sales force?

5 - Pricing gap: This analysis searches to inefficiencies in the system of pricing of products and services. Analyzes if the pricing strategies adopted are consistent with target markets, competitors, production costs, among others. The question is: what are we missing in pricing?

After these five possible areas of gaps that occur internally in a company, we should look for what is happening outside the company that is removing sales or making it more difficult for a company to reach the potential market.

6 - Current competitors offers: seeks to analyze the organization in comparison to its competitors, aiming at solving the inefficiencies and increase its competitiveness. Actions such as product differentiation are widely used as a movement to show the company or the offer different from the competitors. The question is: what are we missing when compared with our competitors?

7 - Substitute products gaps: this makes possible to see gaps caused by substitute products, the organization should reevaluate their positioning and search for tools that allow comparisons to identify potential advantages and explore these. The question is: what are we missing in relation to substitute products?

8 - Market potential gaps: seeks to identify and overcome obstacles that are hindering the growth potential of the given market. For both it becomes necessary to search for new customers, encouraging the use and increasing consumption, for example. This is even and action that can be done collectively, by the industry association, in order to improve consumption. This was done already be several industries, like the milk industry in the USA, with the famous Got Milk campaign, and others. It is a win-win situation to try to increase the overall size of the market so all companies will gain. The question is: what are we missing to increase the overall market?

This Gap analysis tool can be useful to do a backward process. From the mistakes done towards the strategic projects needed.

The author is professor of strategic planning and food chains at the School of Economics and Business, University of Sao Paulo, Brazil (www.favaneves.org) and international speaker. Author of 25 books published in 8 countries and in China, “The World on the Tongue”.