What’s the best way to measure how well you’re performing? In today’s saturated market, competitive benchmarking is a crucial process for understanding whether your company, brand, product or service has the power to beat off your competitors, stand out in the market. A key part of the market research process, competitive benchmarking, can be used to measure your performance over time—crucial in understanding whether the tools you’re employing to market your products, to grow your brand and market share, and drive sales are effective. In this guide, we’ll introduce you to the concept of benchmarking, and guide you as to how you can use benchmarking surveys to track your performance, and stay ahead of the pack.
What do we mean when we talk about competitive benchmarking? Competitive benchmarking is the process of comparing your business against a number of pre-identified competitors using a set collection of metrics and key performance indicators (KPIs). By tracking changes in these measures over time, you can assess your performance against industry standards, against those you admire and wish to emulate, and even against your own historic performance.
Not only can it help you to evaluate your own performance, but competitive benchmarking will help you identify best industry practices, which you can then put into place to help you achieve an edge over your rivals.
It is important to note that competitive benchmarking is not the same as competitive analysis, although you may have seen both terms used interchangeably. Before we get into the weeds of competitive benchmarking, and how to use it effectively, let’s break down the difference between competitive benchmarking and competitive analysis.
Competitive benchmarking is not designed to perform in-depth analysis of each individual competitor. Rather, it gives you a high-level view of the competitive landscape, and allows you to aggregate information about competitors’ strategies, industry trends and best practices, and to track competitors’ performance over time against yours.
Competitive analysis is also sometimes described as competitor research. The purpose of this type of research is to identify each of your competitors, and to perform an in-depth assessment of their strengths and weaknesses. You can get an understanding of their strategies and tactics in order to obtain insight into their day-to-day operations.
Use competitive benchmarking to answer questions such as:
There are a number of different approaches to competitive benchmarking. You may consider using one, several, or all of the following approaches:
Process benchmarking is used to compare your processes against those of your competitors. This might mean comparing your manufacturing processes, your methods of obtaining supplies, or your distribution strategy. By benchmarking your internal processes against industry standards, and especially against those who are doing well on internal efficiency, you’ll be in a good position to be able to increase your own efficacy, cost effectiveness and competitiveness. For example, you might learn how to optimize production processes in order to reduce waste, lower costs, and pass on the benefits to customers in the form of lower prices.
Strategic benchmarking is focused on comparing business models and strategic orientations in order to improve business strategies. What’s interesting about strategic benchmarking is that it often involves looking at how businesses outside of your industry work for inspiration and strategy models. For example, in recent years, many businesses in many different industries have emulated the peer to peer business model pioneered by companies such as Uber and Airbnb.
Process benchmarking and strategic benchmarking both involve looking at the internal processes and business models of competitors and other businesses. In contrast, performance benchmarking is focused on outputs and outcomes. It involves looking at competitors’ performance in areas of interest and using that performance as a standard or goal for future achievement. For example, you might use performance benchmarking to measure your performance in areas such as:
Performance benchmarking is typically used over the long-term, because industries change, and so too does the performance of industry incumbents. That means regularly assessing who the dominant players are, as well as tracking key metrics against your own historical performance.
Let’s take a look at some of the advantages of competitive benchmarking.
Goal setting is relatively easy, but setting relevant, realistic and achievable goals can be quite tricky. Competitive benchmarking can take the guesswork out of the goal setting process, and give you an idea of the types of goals that are reasonable and possible. That means you spend less time trying to figure out your objectives, and more time on the actionable tasks to help you achieve your goals. For instance, if you know that a similar sized competitor manages X number of sales calls per week, you know that it is reasonable to expect the same of your own employees, and you can spend time working out a plan to support them to achieve this standard.
Competitive benchmarking allows you to get an organized overview of your company and how it performs on different levels. This can support effective decision making and distribution of resources. This is especially the case if you capture a number of different KPIs and metrics. For instance, if you find that one department is ahead of the competition on the metrics you’ve deemed to be important, while another department is underperforming, you can devote strategic resources to raising the game of the lower performing department.
Competitive benchmarking helps you to spot when a competitor is doing well or beginning to struggle—both key times to evaluate your own strategy. This also makes it easier to spot whether, when and how competitors are responding to new trends and innovations, and can help you to develop effective marketing campaigns to set yourself apart from the competition.
Sometimes, businesses that undertake competitive benchmarking for the first time, are pleasantly surprised at their performance compared to competitors, giving them confidence that their strategies are working. These ‘wins’ can then be communicated to customers and other stakeholders in highly effective marketing campaigns, such as when businesses describe their products as the “#1 best seller” in the industry.
So now you know what competitive benchmarking is, and the benefits it can offer. Let’s take a look at how to use competitive benchmarking for market research.
Choose your competitive benchmarks
In the first instance, you’ll need to choose a set of competitive benchmarks. These are the standards or metrics you’ll be using as the basis for your comparisons and research. The potential number of benchmarks you could use is probably limitless. It’s a good idea to consult with all parts of the business to see what it would be useful to include, and what to exclude. Depending on the size of your business, metrics can be determined at a higher level, addressing all parts of the business, or determined on a departmental basis.
Most businesses will have a pre-existing set of Key Performance Indicators, or KPIs that will be the foundation of the competitive benchmarking process. However, if you rely on these alone, you might miss some other important indicators of success and performance. It's a good idea to think about what metrics could be early indicators for bigger outcomes and include those in your bundle of benchmarks too.
The next stage of the process is to choose competitors to benchmark yourself against. There are a number of different options.
The next stage of the process is to measure your competitive benchmark metrics. The types of competitive benchmark metrics you should consider will of course depend on the competitive benchmarking approach you’ve chosen, but may include these 4 things:
Once you’ve implemented competitive benchmarking, the real work begins. It's important not to ignore or overlook the results of the benchmarking process. If the results of the competitive benchmarking analysis suggest you’re doing well compared to competitors: that’s great. Now it's time to identify the factors that are driving success and to double down on those efforts. Maybe you’ve optimized your production processes or managed to create the most appealing and powerful marketing campaigns. Keep up the good work, but also keep an eye on your competitors, because they’ll soon figure out the source of your success through their own competitive benchmarking efforts. If, on the other hand, you seem to be underperforming, you’ll need to analyze the results carefully and think about the most appropriate strategies to boost performance. In that case, it will be necessary to regularly perform competitive benchmarking so that you can track the impact of your initiatives.
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