Gap analysis is a tool that measures variance between current performance and expected performance in a company that uses the Six Sigma Methodology. This analysis relies on statistical data to manage resources by monitoring, benchmarking, and other processes.

Gap analysis allows Six Sigma project managers to predict market conditions which help them come up with strategic or tactical ways to improve output and meet expected targets.  It can be used to measure various gaps in a business. Some of which are;

Usage

This is the difference between potential market usage and actual market usage by customers.  For companies that enjoy a monopoly in the service they render, the usage gap is probably the most influential factor in activity development.

Demand Side

This is the difference in the service delivered by a company compared to the service expected by the customer. Due to customer dissatisfaction, companies may lose their customers to other companies in search of better services. In filling a gap to satisfy the customer, it should be noted that there is a limit to what the customer is willing to pay for a service, there is sometimes no point in filling a gap, and at the end of the day, the company suffers huge losses from the impracticality of the procedure used in unnecessarily filling it. All a customer is interested in is quality service at the lowest possible price; use other methods in the Six Sigma methodology to give them what they need and want.

Product

Also known as the segment or position gap, it represents the part of a market from which an individual organization is excluded due to a product or service characteristic. Product gaps are a result of market segmentation in which the company is disqualified or excluded from certain group of potential customers because better deals have been struck between these groups and the competition. Segmentation may be a deliberate act in order to avoid certain markets and concentrate on those they are better positioned for.

Supply Side

These occur when a service currently being offered to customers becomes too expensive to justify the value it provides. Close this gab by eliminating an intermediary or bypassing a supply chain in order to bring the customer closer to the supplier.

Competitive

This is the amount of business recorded among similar products being distributed in the same market segment. A competitive gap allows marketers to review and improve their marketing techniques.

Each type of gap listed above can be closed, by the reassessment of current strategy being used in a company. Six Sigma is a business management concept that is specifically designed to reduce errors or defects to zero. Gap analysis is an important tool used by Six Sigma teams to measure variance between two processes using statistical data.