Using market leakage analysis to rapidly identify opportunities for business growth

Market leakage analysis can be applied in a variety of ways to help foster innovation or determine the credibility of an investment proposal. 

This is a simple framework to help focus minds on specific opportunities to defend existing and win a bigger share of the total potential market.

Example

Potential market

The difference between 'penetrated market' and 'total potential market' has been explored and given plenty of definitions elsewhere. In this framework, the difference comprises: the latent market; the ignored market and the lost market, which are each explored below.

Latent market

• The latent market comprises customers who would buy your offer, if only it matched their more exacting need
• Arises from changing culture, demographics, geography & oversight
• Requires  a little bit more product or service innovation to win
• Past examples include: vegetarian fast food restaurants and smoothie bars; urban 4x4s, people-movers and mobile phone ring tone purchase plans
• Use innovation development techniques, such as the extended marketing mix framework, to explore new, profitable opportunities

Ignored market

• The ignored market comprises willing customers that are simply not served by existing suppliers. 
• They are the forgotten part of the 'total addressable market' or 'available market', in that their needs can be directly addressed, if only a vendor bothered to do this. 
• One specific example that comes to mind is the market development opportunity open to banks to open branches in residential areas where there are currently no other banks offering a physical presence. 
• These type of customers are often ignored because they are seen as non-profitable or inaccessible – REEVALUATE REGULARLY!
• These customers have the potential to become highly lucrative and fiercely loyal
• Check out channel or process innovations, such as marketing over the web and e-commerce, revised contract terms or shops in shops with a view to exploiting such opportunities.
• This group also includes customers who have never been made aware of your market’s product or service
• Check to see if your sales and marketing effort can efficiently address these potentially lucrative customers. It could even be that the way in which a business chooses to segment a wider market and position itself has been based on incorrect or outmoded assumptions. (Think of how long Saga has had to exploit various leisure and financial services opportunities in the over 50s sector)

Lost market

• Mainstream market share is lost through a combination of price, differentiation (what set's the business's offer apart) and focus (understanding and serving the specific needs of targeted customers in depth)
• Conduct a market competitiveness study, such as Gap Analysis, to identify how you can quickly strengthen your positioning
• Combine this with a sales audit and various other analyses to generate an in-depth appraisal of your market growth and defence options
• For more rapid but basic results, compare your performance relative to your competitors against a framework such as the ‘Extended Marketing Mix’ to establish a series of useful benchmarks
• Root out the ‘Quick Wins’, set targets and go after them

Tips on using market leakage analysis

• Try to think innovatively but realistically about your potential market, by reviewing the many different ways it could be ‘segmented’
• Markets and the means to serve them profitably never stand still, for you or your competitors. Do not get locked into a fixed way of thinking about these issues
• Seek to work with your suppliers and complimentary service or product suppliers as a means to jointly strive to win greater market share
• This tool can also be used to help identify threats to existing market share
• This tool should not be used in isolation, but as part of a wider market study

Summary

• Market Leakage Analysis helps rapidly identify business growth opportunities
• It helps identify ‘Quick Wins’ through simple innovation in the marketplace
• As part of a wider review this tool can also help identify urgent market defence issues

Click here to get back to the main innovation page

Click here to get back to the 'more' page