By Helena Alcoverro, on 28 January 2022
A benchmark is an essential tool in any marketer's arsenal because it accurately assesses a company's position in the industry and identifies ideas for improvement.
Every marketing plan should start with a competitive benchmarking process. Do you know what types of benchmarks there are and how to apply them step-by-step? If not, keep reading; we've got you covered!
What Is Benchmarking?
Benchmarking is a marketing technique consisting of a systematic and in-depth analysis of a company in relation to its competitors. The objective is to compare different elements in order to find opportunities for improvement.
The main characteristics of good benchmarking are as follows:
- Objectivity: The benchmark must be planned and executed according to objective measurements. You must very clearly define the criteria and metrics you are going to use.
- Trend analysis: In order to get the most out of it, benchmarking should not only analyze your company's current situation but also monitor where market benchmarks and consumer habits are heading.
- Focus on best practices: One of the main objectives of competitive benchmarking is to improve a company. Therefore, the analysis should draw conclusions that can be turned into best practices.
4 Main Types of Benchmarks
External benchmarking: This type is the most common. It consists of an analysis of your direct competitors. With this type of benchmarking, it is very common to use the SWOT technique to analyze strengths, weaknesses, opportunities, and threats. Note that the strengths and weaknesses are internal, for your company, whereas the opportunities and threats are about external factors that affect your company–the economy, your competition, etc. You may also be interested in analyzing a specific aspect of your competitors, for example, their presence on social networks or how their SEO positioning stacks up.
Internal benchmarking: Here, you compare different areas of your company with each other. For example, you may be interested in comparing the performance of different product lines or geographic locations. This allows you to detect possible areas of improvement and find solutions within the company.
Functional benchmarking: This goes beyond a company's performance in its own sector and focuses on analyzing successful examples of benchmarking in other areas. It allows companies to extract best practices and new ways of doing things. For example, Starbucks optimized its beverage preparation system based on Toyota's assembly lines.
Comprehensive benchmark: Finally, if you really want to take full advantage of performing a benchmark analysis, you can perform all three of the aspects mentioned above.
Advantages of Benchmarking for Companies
- Provides an objective view: All companies have an idea of what their market positioning is, but this needs to be backed up by data. Regular benchmarking makes it possible to stay on top of industry developments and allows you to adapt your marketing strategy accordingly.
- Improves productivity: Benchmarking helps identify possible weaknesses in your internal processes, which you can use as a starting point to improve performance.
- Promotes a culture of change: Often, companies become stuck in their processes and ways of doing things, preventing them from moving forward. Benchmarking makes it possible to question all aspects of a company by comparing it against its competition or industry. It is a good practice to implement so that a company never stops evolving.
- Improves strategic branding: By analyzing the competition, you can see how other brands are positioned and identify gaps that need to be filled. This way, you can see if your company addresses the gap and strategically brand it accordingly. Of course, you must always be clear about your brand values and identity.
- Reduce business risk: By analyzing the market, you become more aware of any possible risks and can develop contingency plans that allow you to mitigate them.
- Improves performance: With benchmarking, you can learn from the leaders in your sector and gather best practices from them. This information will help you craft a strategy to stand out amongst your competitors.
- It is a low-cost strategy: While it is true that performing a complete benchmark analysis requires time and resources, it is well within the reach of SMEs and entrepreneurs.
Performing a Competitive Benchmark Analysis in 5 Steps
It's now time to put what you have learned into action!
There are many possibilities when it comes to developing a benchmark. For example, an SME that wants to analyze its competition before launching a YouTube channel isn't the same as a large corporation that needs to compare the practices of sales departments in different countries. Therefore, instead of focusing on a predefined template, we've outlined a step-by-step method for developing benchmarks that you can adapt to your company.
1. Define the Objectives
The objectives will help you focus your analysis and establish which metrics to use.
At this planning stage, you should think in terms of KPIs, or key performance indicators, which are metrics that determine the success or failure of a campaign. These indicators should be easily quantifiable and linked to your key business objectives at a global level.
2. Define the Competition
If you are doing an external benchmark analysis, you will have to compare your company against your competition. In general, focus on 5-10 competitors. When selecting them, you have two main criteria:
- Direct competitors: companies that are very similar to yours in terms of size, location, and products or services.
- Aspirational competitors: more established companies that you can learn from.
3. Collect Data
There are different ways to collect data on your competitors.
Direct: data obtained from former employees, suppliers, and customers.
Indirect: social listening, analysis of their presence on digital marketing channels, and more.
Cooperative: a mutual exchange of information between companies.
4. Analyze the Information
Once you have all the data you need, you need to analyze it!
Compare your own metrics with those of the other companies or departments, examine the similarities and differences, and come up with a list of areas for improvement. The analysis should always be focused on drawing practical conclusions that you can apply to improve your own results.
5. Apply Benchmarking Conclusions
If you have correctly followed the previous steps, you should have a series of practical recommendations to apply in your company that can be achieved in the short-or-medium term.
The last step (and arguably the most important), is to start a process of continual improvement within your company. Think about conducting some type of benchmarking analysis at the start of each year, for example.