Use a Sales Gap Analysis to do a Market Gap Analysis: Product Management

One of the more impactful sales and project management tools for today’s enterprises is that of the sales gap analysis. Simply put, a gap analysis is an assessment of the company’s current business holdings on a given product line, relative to what volumes remain to be pursued. The difference is therefore the gap – that portion of business and product sales the company doesn’t have. That same strategy can be used to perform the market gap analysis, one where the company assess its current market share and the gap that remains to be pursued. While determining your market gap is a more involved process, it still comes down to determining the amount of existing business relative to what remains to be closed.

One solution is to use multiple sales gap analyses across several different territories in order to outline the company’s market gap on a given product line. To show you how this is done, we'll focus on the customer's gap, the gap within the territory and then use that information for the market. First, we’ll outline how to perform a gap analysis on an individual customer account. Next, we’ll use the same process across multiple customers within a given territory and finally, we’ll use multiple territories to define the company’s market gap analysis.

#1. Gap Analysis on a Customer Account

The following table and pie chart is taken from an earlier post about performing a gap analysis on a sales territory. In this case, the company is selling consumables to an original equipment manufacturer, or otherwise referred to as an OEM.

First, the company has defined the customer’s yearly volumes under the yellow section on the left portion of the table. In this case, the company has determined the number of machine types sold by their customer within their industry, and the number of potential units the company could sell to this OEM customer for each of their machine types.

Second, they’ve defined their current sales volumes in the middle table under “sales & gross profit”. This second table includes all their sales in units and the corresponding gross profit based on units sold. In our example, the company achieves a gross profit of $2.50 for each unit sold.

Third, they’ve defined what remains to be closed at the customer’s account in the last table entitled “volumes & gross profit”. This is done by taking the volumes from the first table, minus the volumes sold from the second table. What remains to be closed is multiplied by the gross profit of $2.50 and is used to define the gap that remains. 

 

#2. The Territory Gap Analysis

Now that we have performed an analysis on an individual customer account, we can take the same process and apply it to a given territory. Again, there are three simple and straightforward steps to performing a gap analysis on a sales territory. First, define the territory’s total volume. This could be based on customer usage, historical data and any future increases in volumes based on customer feedback. Second, define your company’s current sales volumes by units sold. Third, define the overall gap between the total volume and your current sales volume. If you’ve performed individual gap analyses on separate customers, then putting together the territory’s gap should be relatively easy.

 

#3. The Market Gap Analysis

Finally, take all of the territory gap analyses and use them to perform the market gap analysis. The same rules apply. Define the total volumes across all territories, current sales volumes in all territories and the gap that remains. In our example, we have focused on defining a gap analysis on an individual product offering where the gross profit per unit sold was $2.50. We have analyzed the gap at individual customers, the gap across a given territory and then have used the information from multiple territories to define the gap within the market.

Now, the entire process is quite involved and admittedly, I have simplified things with this three step approach. After all, it takes a considerable amount of time to manage individual accounts, manage an entire territory, and then use the information from all territories to define the market gap. However, when you take a step back and think about how you come up with the difference between the business you have, and what remains to be pursued, it really is just a matter of starting at the customer level and moving towards the market level.

 

The above video is from the post: Your Product's Exit Strategy and the Final Stage of Product Life-Cycle Management