In this fast-moving world, businesses that use benchmarking comparisons to continuously improve their products, services, and processes will ultimately win. And we have several types to consider.
What is Benchmarking?
Benchmarking is one of the best tools to keep businesses up to date and focused on continuous improvement. It helps them adopt best practices of companies in the same industry – or oof those around the globe. And it’s how leading brands identify gaps, find new trends in the market, and identify potential areas of improvement.
The benefits of benchmarking include:
- improved performance
- increased efficiencies
- improved quality
- increased competitiveness
There are six types of benchmarking we’ll discuss. Here’s a quick benchmarking comparison of each type, along with their unique benefits and insights.
- Internal benchmarking: Compare current performance to its past performance to reveal areas where a company is improving or deteriorating.
- External benchmarking: Compares performance to other companies in the industry or sometimes outside of its own industry, revealing what others are doing and how a business can improve
- Practice benchmarking: Gather and measure qualitative data around activities performed by people, processes, and technologies within the company to identify gaps, improve performance and develop strategies processes and technology.
- Performance benchmarking: Where performance is measured against set metrics and KPIs to improve key business functions over time.
- Strategic benchmarking: Benchmarking comparison around what has worked for other companies in the past and how to use that to develop new strategies. It often reveals best practices that companies may not have previously considered.
- Competitive benchmarking: Similar to strategic, but is more granularly focused on competitors’ products and services, revealing how a company’s own products and services stack up when compared to those of its competitors.
Let’s dig into each more specifically . . .
Internal benchmarking compares a company’s performance to its own past performance. This type of benchmarking can reveal areas where a company is improving or deteriorating. It’s often employed by businesses having operations in multiple locations, where a top location can be set as standard and compare other branches’ performance with that. Or it can track various brands in a company’s portfolio:
It can also help to foster a sense of cooperation and collaboration within a company, as employees work together to improve performance. This benchmarking comparison can help break down communication barriers by encouraging employees to share information and ideas freely.
When used effectively, internal benchmarking can be a valuable tool for promoting teamwork and driving mutually beneficial organizational improvements.
External benchmarking is when a company compares its performance and strategies to other companies in the industry – or sometimes to those outside of its own industry.
There are several benefits to external benchmarking. First, it can help you to identify your company’s strengths and weaknesses relative to your competitors. This information can then be used to develop strategies for improvement. Additionally, external benchmarking can help you to stay up to date on industry trends and may even reveal new opportunities for growth. Finally, it can help to build confidence in your operations by demonstrating that you are performing at a high level, comparatively.
Understanding trending conversations and how they shift, grow and blend into each other – and how these conversations shift with time, is one way in a myriad of options, to inform external benchmarking:
No one method in external benchmarking comparisons is necessarily better than the others. Some of the most common approaches include surveys and focus groups, but it should all feed into a larger data analysis to ensure real-time, accurate results.
As compared to internal benchmarking, it’s more difficult as it requires additional planning and efforts plus access to data related to the industry or other companies – and then the ability to aggregate and analyze it all!
This type of benchmarking gathers and measure the qualitative data on how the activity is performed by people, processes, and technologies within the company. And to identify gaps to improve the overall performance of people and develop strategies for efficient processes and technologies.
Process mapping is the best way to analyze qualitative data.
The best example of practice benchmarking is call center, where from customer rating, waiting time, call duration, occupancy, and other data factors can be used to identify these gaps to improve performance. It reveals a need for less waiting time, less call duration via quick services, resolving known issues, etc. And when combined with other data sources, via an Intelligence Connector, it also reveals unknown issues that your company wasn’t looking for, but are entirely relevant to your business.
This is key, as retaining customers is much more cost efficient than winning new customers. Selling to existing customers happens 60-70% of the time, whereas the conversion rate for selling to new customers is 5-20%. A strong practice benchmarking comparison can play a vital role in continuously improving people, processes, and technologies – and in retaining customers, by ensuring you’re providing better services every time.
This type of benchmarking uses past performance measured against set metrics and KPIs (key performance indicators). These metrics and KPIs are regularly updated for continuous improvement.
For example, for sales department sales growth, sales target, customer acquisition cost (CAS), customer lifetime value, and other KPIs will be set as benchmarks, and performance will be measured against that.
Similarly, performance benchmarking can be checked with how your customers are talking about you in the online space. Are they happy with the performance of the features you are offering? Are your products are up to industry standards? This is where understanding the nuance of language is a huge differentiator in analytics tools. Having a single point of truth is crucial – preferably one where word token identification and accuracy is a priority.
Strategic benchmarking is the process of comparing one’s own business practices and strategies to those of other businesses, to learn from their successes and mistakes. There are several ways to go about conducting a strategic benchmarking analysis. One common approach is to compare the company’s performance against industry leaders, to see where they rank across a number of indicators. And to monitor conversations happening online:
Another approach is to look at companies that are successful in specific areas and figure out what tactics they are using that the company can adopt for its own purposes.
There are many benefits to be gained from strategic benchmarking. Some of the most notable include:
- improved efficiency and competitiveness
- greater understanding of industry trends and best practices
- identification of new opportunities and strategies
- development of innovative solutions to problems
- enhancement of organizational culture and morale
This is mostly helpful for startups and new businesses to set standards that are tried and tested.
Competitive benchmarking compares a company’s products and services to those of its direct competitors.
The first step in competitive benchmarking is identifying your top competitors and measuring them across a range of relevant themes. To do this, you’ll wwant to assess your business in terms of its size, products and services offered, target market, and reach. Once you have a good understanding of your company’s place in the market, you can start studying your top three competitors in more detail.
Overall, benchmarking comparisons are a great way for businesses to capture a more complete picture of their performance and their place in the market, and in the hearts of consumers that love them. And it can help find new consumers hidden from view too! Reach out for a demo and we can show you have quickly this intel can all come together and how valuable it can be for any business!