The term benchmarking may be familiar to you. Even if you don’t know it, chances are you’ve already come across this process in your day-to-day work. If not, don’t worry. In this article, we’ll tell you what benchmarking is, the different types that exist, and how this generalized method of competitive analysis can help your business. Keep reading!
What is benchmarking?
So, benchmarking is a process by which a company measures its success against other similar companies. The objective of benchmarking is to analyze the competition to discover possible gaps in our company and, once detected, improve efficiency and become an increasingly important player in the sector.
More technically, benchmarking is defined as the action of measuring products, services, and processes, comparing the results with other companies recognized as leaders in one or more aspects of their operations. Typically, the criteria generally analyzed are:
In addition, benchmarking provides the information you need to help you understand how your organization ranks against similar companies, even if they are in a different industry or have a diverse audience. It can also help you identify areas, systems, or processes for improvement. You should use these details to build a competitive advantage and get closer to industry leaders.
Why is it important?
Benchmarking is an essential tool that companies use to track trends in their industry. That said, here are several reasons why benchmarking is necessary:
- Improve the sales process: Not having the correct information to understand sales performance can create a barrier for the company. In this sense, benchmarking allows you to assess some aspects of successful organizations, such as how much they are selling, the number of people that make up the sales team, the equipment or tools they have.
- Motivate Employees: When setting employee goals, it is essential to ensure they are achievable and realistic. Therefore, we provide that everyone understands their expectations and knows the goals they are working towards. In addition, recognition programs must be implemented to ensure workers are recognized for their efforts and motivated.
- Increase effectiveness: Regular benchmarking helps to improve the effectiveness and efficiency of a company, as it helps to identify areas and areas for improvement. Its various components can help an organization improve sales and marketing, customer service, or advertising.
- New Opportunities: Another reason is that it offers a way to discover new opportunities for further growth and success. This is important, above all, for companies that are stagnant or not moving forward as desired or planned.
- Set Clear Business Objectives: Understanding why your competition is succeeding will provide us with the necessary information that will allow us to create measurable objectives and develop innovative strategies and effectively monitor progress toward meeting goals.
What are the goals?
Benchmarking is part of a quality management process and includes the following key elements:
- Focuses on processes rather than results
- Better understand customer needs
- It implies a willingness to change and a desire to implement best practices
- Encourages the exchange of information
- Evaluates operational efficiency
- Drives improvements in the company
- Determine the best methods of action
- It helps you gain a competitive advantage
What types of benchmarking are there?
Not all benchmarks have the same objective or cover the same areas of study. Therefore, we explain below the different types of benchmarking that exist:
First, performance benchmarking involves collecting and comparing quantitative data. That is measures or key performance indicators (KPIs). It is often the first step organizations take to identify performance gaps.
Thanks to this, we obtain information that helps us in making decisions.
Practice benchmarking involves collecting and comparing quantitative information about performing an activity across people, processes, and technologies. With this benchmarking, you can get information about where and how performance gaps occur and the good practices that the company applies in different areas.
The primary purpose of internal benchmarking is to compare metrics and practices from different units, product lines, departments, or programs within the organization. Moreover, it’s a good starting point for understanding the current state of business performance. A benchmarking Sustained internal is primarily applied in large organizations where certain business areas are more efficient than others.
External benchmarking compares another organization’s metrics and practices. You need one or more companies to agree to participate and a third party to facilitate data collection. This approach can be precious, but it takes a lot of effort and time. On the other hand, it gives you an objective understanding of the organization’s current state and allows you to establish baselines and improvement goals.
How to benchmark?
Now that we know what benchmarking is, its importance, and the different types that exist. Let’s see the steps we should take to get started:
1 – Determine what you will compare
In this first step, you should create specific, targeted questions to explore, using qualitative and quantitative research efforts and aligning them with your business strategy.
In short, it consists of doing market research. First, determine whether you will compare processes within your own company or whether you will do so with a competitor or a company outside your industry.
2 – Identify your competitors
Write a list of competitors. Most companies benchmark in the same industry. In this second step, you will need to identify the most effective tactics used in your company and the areas where the others work best.
It can be challenging to collect all the data you want when comparing yourself to a direct competitor. Therefore, you will have to select several different organizations to get the data you need. Gather information from multiple sources for more detailed data.
3 – Collect data
Review your latest statistics to be aware of current industry trends, including how quickly it’s evolving. Then, consider these trends and how you can plan to keep your business in tune with customer needs.
This step can be difficult if you are trying to collect data from a competitor. This is because much of this information can be confidential. Therefore, gather information through surveys, interviews, casual conversations with contacts from other companies, and formal interviews or questionnaires.
4 – Set goals
After interpreting the analysis results and communicating them to the right people, you must define your business goals. Should be:
Aligned with the company’s strategy
Analyze the data you’ve collected along with the metrics you’ve discovered in analyzing your processes. You may want to overlay your KPIs on the process diagrams or map your competitor’s processes to more easily see where you are lagging.
When analyzing and comparing, try to identify what is causing gaps in your processes. For example, it could be a lack of staff or training to carry out the tasks.
5 – Develop an action plan
Define the specific and concrete actions needed to achieve your goals. Make sure each step includes the tasks involved and the people responsible for each job, and the dates by which it must be completed.
That is, create a plan to implement the changes you’ve identified as optimal to minimize performance gaps. Implementation requires full acceptance. The plan should include goals and write with the company’s culture in mind.
6 – Monitor the results
Monitor the results of benchmarking efforts and ensure that actions are applied consistently. If the new processes are not working as expected, identify areas that need to be modified. Ensure all employees understand their work, are well trained, and have enough experience to complete their assigned tasks.
Let’s look at some examples of where benchmarking is frequently used:
Ecommerce: An eCommerce uses benchmarking to establish the average cost per conversation across different product categories. It does this by measuring and predicting seasonal trends in sales and identifying key customers and target markets using analytics and customer records.
Customer service: A customer service center can compare customer satisfaction by asking you to rate services based on your experience. You can also collect data on-hold time, call duration, etc. These numbers can be used to increase performance thanks to process and system improvement.
New technologies: a company can monitor the specifications of its competitors’ products and compare them with its own. You can also measure the lifecycle of products against industry averages to ensure they remain competitive.
Health sector: sector organizations usually retrieve benchmarking data from their patients. This includes assessing wait times, service quality, turnaround times, and customer satisfaction.
HORECA Channel: benchmarking is the key to maintaining the competitiveness of the hotel industry, where everything is registered and compared. Bars, cafes, restaurants, and hotels also use satisfaction surveys for benchmarking purposes to ensure adequate staff training.