What is Benchmarking? Definition, Examples, and Advantages

To stand out from your competitors, you’ll need to research them and compare your company with theirs. So you see, we’re talking about what is benchmarking, not bodybuilding. Forward, feet 👣 forward.

Over the course of this article, we’ll look at:

• 📖 The definition of benchmark.
• 🪄 The different types of benchmark.
• 🖋️ How to benchmark in 6 steps.
• 💗 The advantages.
• ❌ The disadvantages.

What is benchmarking? Definition

Benchmarking, in marketing and data analysis, refers to a process of benchmarking and measuring 📏 the performance of a company, product, service or strategy against those of its competitors or other benchmarks in your industry.

It’s a method of analysis that helps determine an entity’s level of success or effectiveness by comparing its performance with that of other players in the same sector.

This term involves identifying:

• Best practices ✅.
• Key performance indicators.
• Marketing strategies.
• Specific characteristics that enable a company or organization to achieve superior results.

This involves gathering relevant, comparable data to assess the strengths 💪 and weaknesses of the entity under analysis in relation to its competitors (whether direct or indirect).

Benchmark objectives may vary according to context, but they include:

• Performance improvement.
• Innovation and adaptation.
• Competitive alignment.
• Performance evaluation.

There are different types of benchmarking, such as competitive benchmarking (a comparison with your direct competitors), internal benchmarking (a comparison between different divisions or units within the same company), functional benchmarking (a comparison with organizations performing similar functions, even if they don’t belong to the same sector) and generic benchmarking.

Why is benchmarking important?

Benchmarking plays a crucial role in the development and growth marketing of your online business. Benchmarking is essential for:

• Understand your market positioning.

It enables you to understand where you stand in relation to your competitors and market leaders. By comparing your performance with that of other players in your sector, you can assess your positioning and identify your strengths and weaknesses ❌.

• Identify best practices and market trends.

That’s right, you’ll have the opportunity to analyze current practices and emerging trends in your sector. You can discover which strategy works best, what innovative approaches your competitors are adopting. This will give you ideas and insights for improving your business.

• Define realistic and measurable objectives 📏.

Benchmarking helps you set realistic, measurable goals. All based on the performance of key players in your market.

• Evaluate your performance.

Benchmarking enables you to measure the performance of a system, product or company against competitors or established standards.

• Make informed decisions 💡.

By understanding the performance of a product or company with that of competitors or industry benchmarks, benchmarking provides objective data for making the right decisions.

• Innovate.

It can also stimulate innovation by highlighting the gaps between current performance and the best in the market. It can therefore encourage you to push back your limits and look for new solutions and technologies to meet or exceed 📈 benchmark performance.

What types of benchmark are there?

As we mentioned at the start of this article, there are several types of benchmark, and we’re going to dive 🤿 into each of them so that you’ll be unstoppable on the subject.

What is benchmarking: Competitive benchmarking

Competitive benchmarking is a common practice used by companies to assess their position in relation to their direct competitor on the market.

It is an analytical method that measures and compares 🤔 a company’s performance, practices, strategies and results with those of its competitors.

And it offers many advantages! Indeed, it enables you to better understand your competitive position, identify your competitors’ strengths 💪 and weaknesses, spot opportunities for growth and innovation, and make strategic decisions.

When implementing your competitive benchmarking, here are the elements you’ll need to consider:

• ➡️ Competitor selection. You’ll need to identify them. Choose a variety of competitors.
• ➡️ Data collection. Gather relevant data such as their financial performance, market share, product or service offerings, marketing strategies, pricing practices, distribution channels, customer reviews…
• ➡️ Benchmarking. Compare the data collected to assess how your company compares with the competition.
• ➡️ Identify best practices. Here, you’ll identify what works best among your competitors and learn from these best practices.
• ➡️ Action plan: Use the information gained from competitive benchmarking to draw up a strategic action plan.
• ➡️ Follow-up: Yes, this isn’t a one-off exercise – you need to keep monitoring and updating information on your competitors.

Example of competitive benchmarking / Table

There are several methods for setting up a benchmarking exercise. Here, we’ve decided to do it in the form of a table. In this example, we want to set up a streaming site and so we’re going to, compare ourselves to three industry giants: Amazon Prime, Netflix and Disney 👇.

Of course, if you have other criteria to add, you can add as many as you like (provided they remain relevant to your strategy).

Internal benchmarking

Also known as internal corporate benchmarking, this is a method of benchmarking performance and practices within the same organization. It focuses on the different units, departments or teams within your organization 🏢.

Its main objective is to identify best practices and opportunities for improvement. In this way, it promotes organizational learning, encourages collaboration and optimizes overall performance.

To make your internal benchmarking work, here are a few things you shouldn’t leave out:

• Area identification: Determine the key areas 🗝️ that you wish to evaluate and benchmark internally. This may include operational processes, management practices, customer satisfaction indicators…
• Data collection: Like competitive benchmarking, you need to gather relevant data.
• Benchmarking: Compare the data collected to identify performance gaps, best practices and opportunities for improvement.
• Share results: Encourage collaboration and the exchange of best practices between your teams.
• Identify potential 📈 improvements: Develop specific action plans to implement best practices.
• Monitor and improve: Regularly monitor your progress to assess yourself and make any necessary adjustments.

Functional benchmark

If you’ve never heard of this type of benchmarking, we’ll quickly explain what it is. Also known as process benchmarking, this method enables you to evaluate your company’s performance and practices.

It aims to compare the performance of a specific function, such as :

• ➡️ Customer service.
• ➡️ Human resources management.
• ➡️ Supply chain.
• ➡️ Marketing.
• Etc…

It aims to identify best practices (we’re starting to know the song), opportunities for improvement, and to stimulate efficiency and innovation in a specific function.

To carry out a functional benchmark, you’ll need :

• Select the function you want to benchmark.
• Define your comparison criteria (key performance indicators, key processes, allocated resources, etc.).
• Identify references for the benchmark.
• Collect 🏀 your data.
• Analyze them to identify performance gaps, strengths and weaknesses…
• Compare and evaluate your results.
• Draw up an action plan to improve the function’s performance.
• Implement this action ⚡.

What is benchmarking: Generic benchmarking

This type of benchmarking enables you to evaluate a company’s performance, practices, and strategies with other companies operating in different sectors or industries.

Unlike competitive benchmarking, which focuses on direct competitors, generic benchmarking broadens the scope of comparison to include companies that may not be directly linked to a specific industry but may offer practical, innovative ideas.

As with other benchmarks, here’s what you’ll need to put in place:

• 🟢 Identify successful companies.
• 🟢 Define your comparison criteria.
• 🟢 Collect data.
• 🟢 Analyze them to identify emerging trends and innovative ideas.
• 🟢 Adapt practices to find out what you can and can’t take back.
• 🟢 Develop an action plan.
• 🟢 Implement it.

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How to do a benchmark in 6 steps?

You’ve finally reached the part you’ve been waiting for. In this section, we’ll show you how to make a good benchmark. To help you make the best benchmark possible, we’re going to give you a list of steps to follow. Let’s get started.

#1 Define objectives

The first step in the process is to clearly define your objectives. This will enable you to focus on the specific aspects you wish to measure, and steer your efforts in the right direction.

When defining your objectives, you’ll want to think about :

• Identify areas for improvement. Think about the specific areas of your business where you want to improve performance.
• Set measurable objectives: Define concrete targets. These could be, for example, increasing your company’s market share or reducing costs.
• Understand stakeholder expectations: Identify the expectations and needs of your company’s key stakeholders 🔑.
• Communicate objectives: Make sure you clearly communicate benchmarking objectives to everyone involved ⚠️.

That’s the preliminary phase of your goal-setting, let’s move on to the performance indicators.

#2 Identify the key performance indicators to be evaluated

The next step in the process is to identify the Key Performance Indicators (KPIs) you’ll be evaluating to measure and compare with competitors or benchmark companies. These indicators serve as a benchmark against which to evaluate your performance and identify areas for improvement.

Identifying KPIs will depend on the specific objectives you defined in the first step. For example, if your objective is to improve customer satisfaction 🙂 key indicators could include customer satisfaction rate, number of complaints…

When selecting performance indicators, it’s important to consider their relevance, feasibility, and ability to provide a holistic view of your company’s performance.

#3 Select competitors or benchmark companies

To be able to compare, you need to select companies (this makes sense). You’ll need to identify the entities with which you wish to compare your performance and practices. This is to assess your competitive position and identify opportunities.

The key points to consider are

• ⚡ Direct competitors: Identify those operating in the same industry or offering products or services similar to yours.
• 🏢 Reference company: Seek companies that are recognized for their excellence, innovative practices or success in specific fields.
• 🍆 Size and scope: Consider the size of your competitors and the companies you select.
• 📍 Geographical location: Yes, if you operate in a local market, it may be relevant to select competitors in the same area.
• 👓 Data accessibility: Make sure the data you need to compare performance is available. Ideally, you should be able to obtain reliable information on their operating practices, strategies…
• 🧪 Innovation: Choose companies that are recognized for their innovation and leadership.

#4 Collect and analyze data

We move on to an essential step ❗ here, and that’s data collection and analysis. These enable you to gather the necessary information on competitors’ performance and practices, and compare them with your own. To get it right:

• Identify relevant data sources. This could be financial reports, market research, surveys, annual reports or internal data. Please remember that you need to use appropriate methods to collect the data. This could be questionnaires, online research or other means of data collection.
• Once you’ve collected the data, carry out an analysis to draw meaningful conclusions. You can use analyzes such as financial ratio comparisons, SWOT analysis… Identify performance gaps between your company and your competitors.

Of course, there’s one last bit of work you’ll need to do: interpret the results. This will help you make decisions in line with your strategy.

#5 Develop an action plan and implement improvements

Now we come to the phase where you have to develop an action plan 🖋️ and implement the improvements. You’ll need to:

• Prioritize actions: Look for key areas 🔑 where improvements are needed. Prioritize these areas according to their potential impact on your overall performance and on achieving your goals.
• Setting specific objectives: Your objectives must be clear and specific. Make sure they are measurable and achievable within a given timeframe.
• Planning steps and resources: Break down each action into smaller steps and identify the resources needed to implement them.
• Assign responsibilities: Identify the members or departments responsible for each action.
• Monitor and measure progress: Set up a monitoring system to regularly assess progress against targets.

#6 Compare and evaluate

Here, you will measure and analyze your company’s performance against that of competitors. This involves collecting relevant data. The comparison will highlight strengths, weaknesses, and opportunities for improvement.

When you set up your benchmark, everything doesn’t stop overnight: you’ll need to make an ongoing assessment to find out what you can and can’t improve.

What are the benefits of benchmarking?

To convince you of the benefits of benchmarking, what could be better than a short list of advantages? Let’s talk about them right now:

Whatever benchmark you use, you’ll find it useful for:

What are the disadvantages of benchmarking?

Of course, there are a few things to think about when benchmarking. Especially if you want it to be of high quality. So there are a few disadvantages to benchmarking:

Conclusion: What is Benchmarking?

As this article draws to a close (no, don’t be sad), we’re going to take a quick recap of what we’ve seen, and maybe even answer a few more questions you may have.

So, in the course of this article, we got to see: 👇

• The definition of benchmark.
• Types of benchmark.
• How to make a good benchmark.
• The advantages.
• The disadvantages.

Benchmarking will help you monitor the competition and fine-tune your marketing strategy. This is what you need to know about benchmarking.

FAQ: Benchmarks

You know us, we always have a few things to share with you before we say goodbye.

What is SEO benchmarking?

Are you interested in keeping your site competitive online? We’ve got you covered. If you don’t know what an SEO benchmark is, it’s simply comparing your SEO parameters with those of a competitor in your sector.

To do an SEO benchmark, you’ll need:

• Your keywords. 🗝️
• Content analysis: Evaluate the quality, relevance, and optimization of your content in relation to that of your competitors.
• Backlink analysis.
• Domain 👮 authorities.
• Ranking performance analysis.

This benchmark will give you a clear picture of your positioning in relation to your competitors, and identify areas for improvement to strengthen your online presence. It provides valuable information for developing an effective SEO strategy.

Now that you have all this information at your disposal, you know what is benchmarking, and you can try it for yourself!

Mélisande 14/06/2024