There's a gap in the market, but is there a Market in the Gap?

IN CONTEXT FOCUS Positioning strategy KEY DATES 1950s and 60s Markets are dominated by large companies offering mass-produced items, such as Coca-Cola. Choice is limited, but the scope for products targeted at new sectors of the market is high. 1970s and 80s Markets become more segmented as companys generate new products and market them toward narrower groups. 1990s and 2000s Companies and brands position themselves ever-more aggressively and distinctively in the overcrowded marketplace. 2010s Finding and sustaining market niches is assisted by the promotional capabilities of the Internet, which allow “one-to-one” marketing and customization of products.

Finding a space in the market that is unchallenged by competition is the Holy Grail of positioning strategy. Unfortunately these spaces— known as market gaps—are often illusive, and the benefits of finding one are often equally illusory. Although competition is a fact of life, it makes business difficult, contributing to an ever-downward pressure on prices, ever-rising costs (such as the funding of new product development and marketing), and an incessant need to outmaneuver and outsmart rivals. In contrast, the benefits of finding a market gap—a small niche segment of a market that is unfettered by competition—are obvious: greater control over prices, lower costs, and improved profits. The identification of a market gap, combined with a dose of entrepreneurial spirit, is often all that is needed to launch a new business. In 2006, Twitter founder Jack Dorsey combined short-form communication with social media, providing a service that no one else had spotted. Free to most users, revenue comes from companies who pay for promotional tweets and profiles: Twitter earned advertising revenues of $582 million in 2013.

Not all gaps are lucrative, however. The Amphicar, for instance, was an amphibious car produced in the 1960s for US consumers who wanted to drive on roads and rivers. It was a quirky novelty, but the market was too small to be profitable. This was also true for bottled water for pets— launched in the US in 1994, Thirsty Cat! and Thirsty Dog! failed to entice pet owners. A sustainable niche Snapple, the manufacturer of healthy tea and juice drinks, is a company that has successfully found a sustainable and profitable niche. A glance at the beverage counter of any supermarket reveals that dozens of brands compete for sales. Many companies have failed in this ultracompetitive market: for example, Pepsi tried to capture a nonexistent market for morning cola with its short-lived, high-caffeine drink, AM. Success for Snapple came from positioning the product as a unique brand—Snapple was one of the first companies to manufacture juices and drinks made completely from Snapple’s positioning in the crowded US beverage marketplace was the key to its success. By focusing on a niche healthy product and marketing itself as a quirky company, Snapple was able to wrestle a large market share (indicated here by circle size) from its rivals.

natural ingredients. Its founders ran a health store in Manhattan, and the company used the slogan: “100% Natural.” Snapple targeted students, commuters, and lunch-time office workers with a new healthy “snack” drink, combining its Unique Selling Proposition (USP) with irreverent marketing and small bottles that were designed to be consumed in one sitting. Distribution was through small, inner-city stores where customers could “grab-and-go.” These tactics helped to secure a profitable and sustainable niche, distinguishing Snapple from its rivals in the 1980s and 1990s. In 1994 sales peaked at $674 million. Unoccupied market territory can present major opportunities for companies, but the challenge lies in identifying which gaps are profitable and which are traps. During the 1990s, many companies became excited about the potential of the “green” market, across a whole range of goods. But this market has failed to materialize in any profitable way. This marks one of the potential pitfalls in identifying market gaps based on market research: sometimes consumers have strong attitudes or opinions on trends or issues—such as ecology—that they are disinclined to consider when purchasing products, especially if they affect cost. Many market gaps, it seems, are tempting, but illusory. ■

A contraction of the words “snappy” and “apple,” Snapple was launched in 1978 by Unadulterated Food Products Inc. The company was founded in 1972 by Arnold Greenberg, Leonard Marsh, and Hyman Golden in New York, US. Such was the popularity of Snapple that the company has been subject to numerous buyouts. Unadulterated was purchased by Quaker Oats for $1.7 billion in 1994 but, following differences in strategic vision that led to falling sales, was sold to Triarc in 1997 for $300 million. Triarc then sold the Snapple brand to Cadbury Schweppes for $1.45 billion in September 2000, with a further deal in May 2008 seeing Snapple become part of what is now the Dr Pepper Snapple Group. Marketed as “Made From the Best Stuff on Earth,” Snapple’s unusual blends of ready-to-drink teas, juice drinks, and waters are sold in more than 80 countries around the world.

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