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How to find and fill gaps in the market

Last updated

30 April 2024

Author

Dovetail Editorial Team

Reviewed by

Hugh Good

Finding gaps in the market is a powerful strategy for startups and any existing business that wants to expand. Read on to find out what gaps in the market are, how you can identify them, and the challenges you’ll need to bear in mind.

What are gaps in the market?

Customers have demands, needs, and problems to overcome. For success, a business needs to fulfill customer needs. This is a basic marketing principle.

For example, people want or need products such as groceries, electronics, vehicles, furniture, and countless other items. Similarly, consumers need services like insurance, medical care, and electricity. Businesses create these products and services and compete with each other for customers. 

A gap in the market is a little different from typical products and services, as it indicates something customers want that isn’t currently available. This can be a completely new item or a new way to deliver something familiar.

What are the benefits of filling gaps in the market?

Here are a few examples of how filling a gap in the market can provide benefits for businesses:

  • First-mover advantage: being the first to address a market gap allows you to establish brand recognition, capture market share, and build customer loyalty before competitors catch on.

  • Increased revenue potential: by offering a unique solution to unmet needs, you can tap into new revenue streams and potentially set premium pricing, leading to increased profitability and business growth.

  • Enhanced customer satisfaction: meeting previously unaddressed needs can result in higher customer satisfaction and loyalty. Consumers appreciate having their problems solved effectively, which can lead to positive word-of-mouth referrals and repeat business.

  • Competitive differentiation: filling a market gap sets you apart from competitors. You’ll have a unique selling proposition that can attract customers who are seeking innovative solutions or alternatives to existing offerings.

  • Long-term market leadership: establishing yourself as the go-to provider for a newly addressed need positions you as a market leader, providing opportunities for future expansion, partnerships, and continued success in the evolving market landscape.

What are the challenges of filling gaps in the market?

It’s not all plain sailing. You’ll need to keep the following potential challenges and pitfalls in mind when your product or business fills a market gap:

Educating the market

You’ll need to raise awareness, alter consumer behavior, and build trust. This will involve implementing strategic marketing, transparent communication, and reviews and testimonials to prove your product’s efficacy.

Competition from larger businesses

Even if you gain an early advantage, you still need to work to maintain your position. Competitors will be watching and waiting in the wings to capture market share. This can be especially hazardous when a larger, better-funded competitor moves in.

For example, Snapchat was the first social platform to introduce a unique product feature, Stories. However, once the much larger Instagram had copied the feature, Snapchat began to lose users, and its stock price fell.

Unanticipated problems

An innovative product may have problems that are difficult to anticipate before release.

For example, Google put a great deal of money and effort into marketing Google Glass in 2013. It failed for several reasons. Some of them were technical, such as low battery life. However, there were also privacy concerns and the product generated a public backlash.

Companies that found a gap in the market

Businesses of all sizes in all industries have always searched for gaps in the market to exploit. Below, you’ll find examples of high-profile brands that have found market gaps. Keep in mind that the same principles are relevant to startups and small businesses, too.

Amazon

Mail order and home delivery was common long before the internet age. However, Amazon transformed the retail landscape by filling a market gap for online shopping with an extensive selection, competitive pricing, and fast delivery.

Its user-friendly platform and efficient logistics disrupted traditional brick-and-mortar stores, offering unparalleled convenience and accessibility to consumers worldwide.

The company’s expansion into diverse industries, such as cloud computing, entertainment, and smart devices, further solidified its market dominance and reshaped the way people shop and engage with technology.

Netflix

Netflix started out as an online alternative to video stores such as Blockbuster. This filled a market gap for people who were increasingly embracing online shopping.

When its primary business model shifted to streaming in 2007, customers no longer needed to deal with physical video recordings at all.

Airbnb

Airbnb is a platform that connects travelers with unique accommodation options worldwide. The app facilitates easy booking, payment, and communication with the host or guest.

Airbnb revolutionized the hospitality industry by democratizing travel accommodation. It provided travelers with a diverse range of lodging options beyond traditional hotels, enabling unique and personalized experiences. It also empowered people to monetize their unused spaces.

Uber

Launched in 2011, Uber is a multinational ride-hailing and food-delivery technology company that connects users with transportation or meal-delivery services through its mobile app platform.

Uber freed customers from having to phone and wait for a taxi service or flag down a car on the street. The platform offers convenient, quick, cashless transportation options, increasing safety and mobility, especially in areas with limited public transit.

Grubhub

Grubhub disrupted the food industry by introducing a convenient platform for ordering takeout from a vast array of restaurants. It provided consumers with greater choice and flexibility while enabling restaurants to expand their reach and boost sales, transforming the way Americans dine.

Spotify

Spotify, which launched in 2008, revolutionized the music industry by filling a market gap for convenient, legal streaming services.

It offered users instant access to a vast library of songs for free or through premium subscriptions, disrupting traditional music consumption models.

By providing a seamless listening experience across devices, personalized playlists, and curated content, Spotify transformed how people discover, consume, and share music globally.

How to validate your ideas

When considering market gaps, you need to do research to make sure there’s genuine demand for your business. The following are some methods you can use to validate your idea:

Conduct market research

Several types of market research can help you determine if your business idea is viable. These include areas such as:

  • Identifying your target audience: understand the demographics of your target audience. Use market segmentation to identify different types of customers.

  • Market analysis: this involves measuring the size of your target market, identifying your competition, and deciding how much you can charge for your product or service.

  • SWOT analysis: use a SWOT analysis to identify strengths, weaknesses, opportunities, and threats.

  • Gap analysis: a market gap analysis, or a product gap analysis, is a study of potential unmet needs in your niche or industry. You might conduct this internally, or it may be done by a consultant who specializes in this area.

Create a prototype

Conduct tests on a smaller scale before investing in large production or marketing campaigns.

Prototyping is how you would typically do this with tangible products. Creating prototypes lets you confirm your product is viable and has working features. You can then conduct user tests to gauge public reaction and receive valuable feedback.

Release an MVP

A minimum viable product (MVP) is a low-budget version of your product that contains only the most essential features. It allows you to test how the market reacts to your new product while minimizing costs. You can correct errors and make improvements based on results and feedback.

Do gaps in the market always get filled?

Not every market gap gets filled, and some remain unfilled for a long time. In some cases, a product may be introduced to fill a gap, but ultimately, it fails. Here are some possible reasons:

  • The product is too expensive. Customers must be willing to pay the price to solve a problem.

  • The market is too small. The gap may only be there for a small fraction of consumers.

  • The features are not user-friendly.

An example of a product that checks all of these boxes is AT&T’s Picturephone, a video-calling device introduced in 1970. This phone enabled users to make video calls using television signals. However, it was expensive and complicated to use, so only a few hundred were sold. This gap was not filled on a large scale until Apple introduced the smartphone in 2007.

How to find gaps in the market

Here are six tips for identifying market gaps you may be able to profit from:

1. Look for innovations to improve current products

Filling a market gap often means coming up with a new angle that improves an existing product rather than introducing something completely original. Look for consumer pain points and create a solution.

Customer reviews and social media posts can be a fruitful source of information. Study complaints about your business as well as those about competitors.

2. Look for micro niches

A micro niche, a level below sub-niche, is an extremely specialized offering within a larger market. You may be able to identify a particular subset of customers who are not yet being served.

For example, travel is a large niche with many sub-niches, such as budget travel, backpacking, cruises, hotels, and many others. An example of a micro niche might be identifying demand for archeological volunteer programs or food tours in Southeast Asia.

Pets are a huge niche, while cats and dogs are sub-niches. Micro niches include raw food diets for dogs or care for more exotic pets, such as reptiles or saltwater fish.

3. Get feedback from your customers

Customer feedback can be a powerful source of information for finding market gaps.

You can use polls and surveys to identify problems that are important to your customers. You can also ask open-ended questions in emails and on social media. Questions such as, “What’s one feature you would like to see with our product/app/service?” or “What service would you like to see us introduce in the future?”

4. Monitor social media and customer reviews

People are not shy about sharing their opinions on social media. Aside from your own social media pages, follow your competitors’ pages. It can also be helpful to follow trends and hashtags related to your industry.

Paying attention to customer reviews for your competition (as well as your own) is also worthwhile. In particular, look for complaints that could suggest a creative solution. For example, customers of a restaurant or another food-based business such as catering might suggest a new menu item or variation of a familiar item.

Tracking new trends and technologies enables you to identify market gaps. By staying ahead, embracing change, and anticipating consumer preferences, you can seize opportunities and thrive in dynamic market environments.

A recent example is the widespread use of artificial intelligence (AI) in areas such as content creation, graphics, videos, and even more technical tasks like coding. Beyond high-profile AI tools such as ChatGPT and Google Gemini, new consumer and business applications for AI are coming out every week. For some examples, see eWeek’s list of the 20 best AI apps for Android and iOS in categories including health, entertainment, education, and transportation.

6. Study global businesses

Just because a product or business model hasn’t been implemented locally doesn’t mean it’s not working in another country.

A famous example of this tactic in practice is the German company Alando. Inspired by eBay, Alando’s founders launched the new platform to serve the German market in 1999. It was only a couple of months before eBay itself purchased Alando.

This idea can also be used on a smaller scale, such as by studying retail stores, services, types of entertainment, fashion, and other business offerings around the world and replicating them locally where there is more limited competition.

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