David Cummings on Startups

A Gap in the Market Doesn’t Imply an Absence of Competition

Written by

David Cummings

in

,

I love when entrepreneurs come in saying that there isn’t any competition for their idea. No competition? No way. There’s always competition. And, competition is a good thing. If there wasn’t competition, there wouldn’t be other people that believe in the opportunity as well.

Now, just because there’s competition, it doesn’t mean that there aren’t gaps in the market. Look at the marketing automation market six years ago. Strong companies like Eloqua were doing well addressing the mid-to-high end segment of the market, but when it came to the small-and-mid sized segment of the market, there wasn’t much activity. Yes, you could buy Eloqua Team Express Light (that’s really what they called it at the time) and get a product for $1,500/month, but it wasn’t feature rich since it wasn’t the market they really cared about. Pardot filled a gap in the market for SMB companies that wanted a complete solution in the $500 – $1,000/month range.

A gap in the market doesn’t imply an absence of competition. Rather, competitors exist and are focused on a different segment that they find more appealing. With time, many large, meaningful markets actually have several winners that carve out their own segment and dominate.

What else? What are your thoughts on gaps in the market and competitive dynamics?

Comments

6 responses to “A Gap in the Market Doesn’t Imply an Absence of Competition”

  1. Bill Scott Avatar
    Bill Scott

    Some entrepreneurs would differ, but my experience is that a lot of competition is good. It means that the size of the market is likely there. In fact, the size of the market is everything! I like my chances much more to get a 1% share of a 5 billion dollar market against a bevy of competitors than try to get a 50% share of a 100 million dollar market with only a handful of competitors.

    Reply
    1. stakmr Avatar
      stakmr

      majority market share would allow for your company to really lead rather than focus on “playing defense”. In most emerging industries there has to be a rapid product improvement cycle. As a consequence, companies that with stale innovation practices will not exist if market expands (say from $100M to $5 B)

      Reply
  2. adrian ashton Avatar
    adrian ashton

    you’re right – there’s always competition, if only from the threat of substitution, and understanding this makes it easier to present the new product/service to the marketplace;

    I always remember the example from my marketing lecturer in college who illustrated this by talking about JCB diggers and how their competitors included the local hardware store who sold shovels: both allow you to dig holes, but one’s a lot faster and more fun that the other!

    Reply
  3. Steve Avatar
    Steve

    David Ogilivy responded when a client said there is a gap in the market “is there a market in the gap?-often there is a reason why there is a gap – there is no market

    Reply
  4. jonnysq Avatar
    jonnysq

    Competition is vital. Competition acts as a catalyst for innovation, originality, and efficiency!

    Reply
  5. Ryan Davison Avatar
    Ryan Davison

    That is a very important distinction between competition and a gap in the market place. The point is simple and direct, however, I bet many others have not considered it this simply. Keep up the great work!

    Reply

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

More posts