There are four important questions a business should ask itself on a regular basis. These are:
Where are we now?
Where do we want to be?
How will we get there?
When will we get there?
The point between where you are NOW and where you want to BE is known as the gap. Calculating the "gap" is known as gap analysis and is demonstrated in the diagram below.
Gap Analysis - Identifying the reasons behind the performance gap
Once a business has identified a performance gap, the first challenge in closing the gap is to identify the causes behind the gap. There could be any number of reasons within the marketing environment including poor sales strategy, strong competition, or a struggling national economy. The cause could be obvious or the company may need to carry out research to find out exactly what the problem is. Once an accurate cause (or causes) have been discovered the firm can write a specific action plan to deal with the causes behind the performance gap. There are a number of remedial strategies available to firms, the correct remedy will depend on the cause of the gap and the firm's resources.
Gap Analysis - Closing the Performance gap through Corporate Strategy
If the cause of the gap is the manner in which the firm carries out its business operations a change in corporate strategy is required. A good starting point for a change in strategy is Ansoff's Growth Matrix. Ansoff's growth strategy provides the firm with one of four options and involves a firm's products and the markets it operates in. Under Ansoff's matrix a firm can employ a market penetration strategy, product development strategy, market development strategy or a diversification strategy to help close the gap. Each of these decisions will involve the firm as a whole, so they are known as strategic level decisions.
Gap Analysis - Performance Gap closure through Tactics (Actions)
Whereas strategy is about how the firm will close the gap, tactics are about the action (what) they will undertake. Tactics are specific actions with a specific aim and they are often implemented over a short term. For the purposes of this discussion the aim of the tactics is to close the performance gap between how the business is performing and how it would like to perform.
Tactics should remedy the cause behind the gap. For example it could be that sales are falling because of a lack of promotion.
A simple advertisement targeted in the right medium could help raise those sales, such actions are tactical decisions.
A good starting point for tactics is to pick out the relevant elements from the 7Ps. The 7Ps are the traditional marketing mix of price, place, promotion, product plus people, process, and physical evidence. The three additional elements (people, process and physical evidence) allow firms to deal with issues connected with providing a service.
The diagram below shows an example gap analysis using tactics from the 7Ps to remedy the gap.
Effective gap analysis requires accurate performance information about the firm and the market. Before writing plans to deal with the "gap", firms should ensure that their targets (where they would like to be) are realistic. Otherwise it may seem like there is a problem when the real issue is that the firm has set targets that can not be achieved. If targets are realistic the next step is identification of the cause followed by an appropriate action plan to close the gap.
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