How to benchmark performance

Looking for a way to improve your business’ performance on online marketplaces? Well, you’ve certainly come to the right place. In this article, we’ll be talking about benchmarking. Benchmarking is one of the best and most effective ways to learn from industry leaders. It’s more than just competitor research. By regularly benchmarking you’ll be able to match and exceed your competitor’s results.

What is benchmarking? 

Benchmarking is the process of comparing your business model (methods, policies, etc.) with your competitors. Benchmarking is not exactly the same thing as competitor research, however. This is a common misconception. We will differentiate the two processes in more detail in just a moment but, as a general rule, you can think of benchmarking as a way to compare your industry practices against those of your competitors. The idea? To improve the overall performance of your business and gain a competitive advantage.

Benchmarking can help you find the best route to success based on actionable steps. What is the best way to achieve peak performance? What are the gaps in our current business process? How can we gain a competitive advantage? These are all questions that you’ll be able to answer when you start benchmarking against other companies in your market.

In short, benchmarking is the process of measuring products, services, and processes against market leaders and provide you with the insights you need to grow your business. As such, benchmarking can help you target any existing systems or processes in need of either imminent or incremental development and improvement [1].

Part of your benchmarking process might include finding out which tools your competitors and other industry leaders are using to support their management processes. Sellers using online marketplaces, for example, might be using product information management systems to support the everyday running and efficiency of their online retail platforms. If the central management of your business has been a trouble spot, then investing in an intelligent marketplace management tool of your own would be the next step.

Benchmarking versus competitor research: what’s the difference?

We already mentioned that benchmarking and competitor research are commonly misconstrued. Many people think that they are one and the same but, in reality, these are two distinct processes in their own right. It often helps to think of it this way: benchmarking thinks long-term and competitor research thinks short-term.

Benchmarking is about finding long-term strategies that are going to consistently help your business grow. Competitor research, on the other hand, takes a more immediate approach and encourages organizations to observe and mimic each other. Benchmarking encourages you to look beyond your direct competitors and reach out to other industry leaders who are achieving the kind of results that you want for yourself. [2]

Types of benchmarking

There are many benchmarking methods to choose from. The right method for you will depend heavily on the nature of the changes you’re looking to see in your business.

The three principal benchmarking methodologies are (a) internal benchmarking, (b) competitive benchmarking, and (c) strategic benchmarking.

Let’s take a look.

Internal benchmarking

Internal benchmarking offers businesses a way to share any best practices that they have already successfully implemented. Companies may conduct internal benchmarking in order to share their performance processes company-wide or, in some cases if there are not yet any suitably comparable industries to benchmark against. [3]

Competitive benchmarking

Competitive benchmarking helps businesses evaluate their positioning in an industry. By engaging in competitive benchmarking, you’ll be able to better identify key industry performance targets that will help drive growth and increase your market positioning. [3]

Strategic benchmarking

Finally, strategic benchmarking is the broadest approach of the three. Strategic benchmarking is about establishing goals based on the benchmarks set by world-leading organizations (these may or may not be from your particular industry). [3]

In reality, you’ll probably want to combine all three benchmarking methodologies as you scale your business. When just starting out, internal benchmarking is an opportunity to set a clear organizational standard based on internal business processes.

As your business grows, competitive benchmarking will help you evaluate your position in your industry. Finally, when it comes time to make big-picture plans, strategic benchmarking is essential and will help your business learn from the very best.

Why is benchmarking important? 

Benchmarking is a highly valuable resource for business owners and managers looking to gain that competitive edge. Benchmarking is important because it allows you to see beyond your own business. Even if you already know your business inside out and top-to-bottom, it’s important to also understand how other businesses work and operate. Why? Because that’s the best way to identify how you can improve and compete. [4]

It’s true, benchmarking can help your business grow and improve in so many ways. So, without further ado, let’s take a look at some more benchmarking benefits.

1. Raise standards

Benchmarking can help you raise your company standards by using other top performers as your – that’s right- benchmark! You can apply this concept to just about anything from equipment, software, and management tools to production and operational practices. [5]

For example, benchmarking can help you improve the quality of the products you sell. By studying your competitor’s products you’ll see why they might be outperforming you and be able to step up to the mark.

Benchmarking is also really helpful when it comes to optimizing operational efficiency. Think about where your company is overstretched or lagging behind and look to other industry leaders for effective solutions. That could be a revised marketing plan, sales approach, or even adopting a particular management tool [6].

2. Discover new opportunities

Benchmarking could also help you discover new business opportunities that you might not have considered before. If your company isn’t growing as much or as rapidly as you would like, then benchmarking is the best first course of action. Instead of looking inward, look out. What are other successful businesses doing to support scalability? Once you’ve figured that out, it’s time to develop a new strategy based on your research that will help you match and surpass them. [6]

3. Track your progress

Use benchmarking alongside performance tracking. Not just qualitatively, but quantitively. Measure your progress and hold those metrics up against both your internal and industry benchmarks.

Regular performance tracking is one of the best ways to ensure you keep moving towards your long-term goals and objectives.

Finding a platform that makes it easy to analyze and track your data will make this much simpler and save time in the process. Luckily, today there are platforms that can help you analyze your data centrally with machine learning algorithms. These platforms will help you maximize your sales, analyze your products and advertisements, and gain unique insights into your market and competitors. Besides that, you should always try to analyze data gaps and close them.

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How to benchmark successfully

We know what benchmarking is and why it’s so very useful. But how can we actually start benchmarking successfully? Benchmarking involves (a) selecting a product, service, or process to target, (b) identifying the key performance metrics associated with that product, service, or process, (c) choosing appropriate companies to benchmark against, (d) collecting and analyzing the data, and (e) identifying and implementing those opportunities for improvement. [7]

Here’s a basic outline of the entire process.

Step 1: Analyze your internal processes and select a product, service, or process to target

In order to know exactly which products, processes, or services need targeting, you’ll need to analyze your internal processes first. So, have a spring clean. What needs some work? Perhaps you think your sales support could do some work or need help standing out from other sellers on Amazon or other online marketplaces? Or possibly your product flow?

Step 2: Identify the key performance metrics associated with that product, service, or process (this is how you’ll measure success)

Once you’ve identified what needs some work, think about how you will measure success. How will you express your progress in data-led terms? For example, if your aim is to increase sales then the best key performance indicator might be web traffic. If you want to improve customer retention then take a hard-cold look at your bounce rate.

Step 3: Choose appropriate companies to benchmark against

Start researching your direct and indirect competitors and pick a few that are achieving what you want to be achieving. These are the companies that you’ll be wanting to benchmark against. Remember, they don’t necessarily have to be from your industry – particularly if you’re benchmarking for process-related improvements.

Step 4: Collect and analyze the data (this is your evidence)

It’s research time. Focus on your chosen companies and gather as much evidential data as you can. You’re looking for evidence that supports your projections. For example, if the company you’re benchmarking is killing it with super-efficient back-end management and you also want some of that, then gather all the necessary data to prove that their management system will help you replicate (or even supersede) those results.

Step 5: Identify and implement any opportunities for improvement (a.k.a apply what you’ve learned)

Last, but not least, identify your action. What is the process you are going to adopt from the other company? Once you’ve got this clear all that’s left is to implement it in your own business and apply what you’ve learned from your benchmarking research.

Once you’ve completed these five steps, don’t forget to test and regroup. It’s important to monitor the changes you make to ensure that they are generating positive results.

Remember, just because something worked for one company doesn’t necessarily mean it will work for yours too. And that’s okay.

If you don’t see the results you expected, then regroup and make some adjustments to your research. Benchmarking is a process and not always a quick fix.

Benchmark away

So, there we have it. We hope this has made benchmarking a little bit clearer. Benchmarking is an extremely beneficial process that can be applied both internally and externally to help your business grow and improve. If you’re about to embark on a benchmarking journey of your own, why not support your efforts with an intuitive product information management tool. e-tailize will help you analyze and track your data for easy benchmarking against the competition on marketplaces.

Sources

[1] Understanding the Purpose and Use of Benchmarking (2010). Available at: https://www.isixsigma.com/methodology/benchmarking/understanding-purpose-and-use-benchmarking/ (Accessed: 6 July 2021).

[2] What is Benchmarking & How to Do an Effective Competitive Analysis (2021). Available at: https://kajabi.com/blog/what-is-benchmarking-how-to-do-an-effective-competitive-analysis (Accessed: 6 July 2021).

[3] Understanding the Purpose and Use of Benchmarking (2010). Available at: https://www.isixsigma.com/methodology/benchmarking/understanding-purpose-and-use-benchmarking/ (Accessed: 6 July 2021).

[4] Downs, B. (2019) The Purpose of Benchmarking In Business – Business Benefits Group, Business Benefits Group. Available at: https://www.bbgbroker.com/the-purpose-of-benchmarking-in-business/ (Accessed: 6 July 2021).

[5] Benchmarking: Types, Features, Purpose & Limitations – WiseStep (2016). Available at: https://content.wisestep.com/benchmarking-types-features-purpose-limitations/ (Accessed: 6 July 2021).

[6] Downs, B. (2019) The Purpose of Benchmarking In Business – Business Benefits Group, Business Benefits Group. Available at: https://www.bbgbroker.com/the-purpose-of-benchmarking-in-business/ (Accessed: 6 July 2021)

[7] Benchmarking (2018). Available at: https://www.bain.com/insights/management-tools-benchmarking/ (Accessed: 6 July 2021).