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 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.
Snapple
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.
