How to spot a business opportunity or product gap in your industry

You're a good business owner. You are proud of your product, you believe in it, and you enjoy helping others who benefit from it. But some customers have let you know that your product is lacking in some ways that would help them.

Should you be offended? Defensive? Should you ignore your customers? Or should you see this product gap as a business opportunity?

What is a product gap?

A product gap, simply put, is a market segment that existing businesses are not yet serving. For business owners, product gaps are a business opportunity.

When her company Prana Brush began, CEO Rebecca White says they were able to identify and fill a product gap, specifically for antibacterial dry brushes.

"We discovered this demand through market research and by studying Google Trends to see what customers were increasingly searching for," she says. "While the demand was there, it was still in early stages with the result that large businesses had not yet taken much notice. We entered the market focused on that gap and have since had success catering to that specific niche."

Bill Joseph, owner of Frontier Blades, suggests that product gaps are also discrepancies between a business' expectation of the product and a customer's response to the product.

"These incongruities can be related to the product's characteristics—including its qualities, purpose, value, capabilities, etc.," he says. "Additionally, it may be attributed to an insufficient understanding of the product's attributes and features. Furthermore, product gaps can be induced by attempting to sell your product to the wrong market segment."

How do you find product gaps?

Product-gap analysis can be conducted in a number of ways, but finding the gap in your product will help you improve your business as well as show your existing customers that you value their input.

When Joseph started his business selling survival tools, he marketed the merchandise as high quality. But, after listening to customer feedback, he realized he needed to alter the marketing strategy.

"Customer feedback indicated our products were subpar relative to other, higher-quality survival equipment within our market, due to utilization of less expensive materials in constructing our merchandise," he says. "Encountering this product gap enabled us to apprehend our products' value and recognize a less competitive niche selling cost-effective survival equipment."

Different types of businesses may consider various ways to identify product gaps. Heidi Pozzo of Pozzo Consulting suggests that, for B2B businesses, going to customer locations and witnessing product use firsthand is important.

"Get feedback from the people using it on what works well and what doesn't," she says. "You need the feedback of the people who are using it every day." And for B2C businesses, Pozzo says, "test groups and surveys can give you insight on how the product or service is being used and how well it is working."

How product gaps become business opportunities

Once you identify a product gap, now what? Pozzo says you have a choice between refining your existing product or service, or creating completely new products or services to replace what you currently provide. She cautions business owners, however, in order for a new product or service to be worth it for the customer, it must be both better and cost-effective.

"The new product or service will only gain traction if it is better/easier to use and the cost is reasonable for what is being provided," she says.

Sometimes, a business opportunity exists in stripping back the "bells and whistles" of a product. Your product or service may offer too many unnecessary services, and you need to reevaluate why your customers need your product.

When Dan Bailey, president of WikiLawn, started his company to help consumers find professional lawn care, he noticed his competitors' websites offered many options but without the ability to search in an effective way.

"My ideal customer and the person I'm creating my service for, then, is someone who just wants to hire the person who's most highly rated, maybe with a quick comparison between that person and two more to get the best price," he says. "They have a job they need done, and our service helps them get it done. These are the things you should strive for when nurturing business opportunities. Consider the pain points in your market, create a product that alleviates those pain points, and then market it to your ideal customers."

Listening to your customers, staying aware of your competitors and their offerings, and willingness to refine your product will help you turn product gaps into business opportunities and better serve current customers while attracting new ones.