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What is competitive benchmarking? competitive benchmarking

What is competitive benchmarking?

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Table of Contents

Companies are constantly engaged in improvement of every business aspect in order to make the customer experience smooth and enjoyable. This involves an understanding of where the company lacks and finding out the best practices followed by competitors to work on upgrading business models.

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What is competitive benchmarking ?

Competitive benchmarking is a method of researching competitors and industry leaders for strategies, practices and services that help in establishing comparison and benchmark for performance. This is a method of adapting to industry processes as well as prevent losing out on market share.

In simple terms, competitive benchmarking is a process set out to find out the “best ” of any business related aspect and use it as the highest standard that the company should strive to achieve.
For example :a company might be performing poorly when it comes to customer engagement while their competitors might be projecting positive results. This can be a major threat to customer retention. In order to identify gaps in performance, the said company can conduct competitive benchmarking to find answers to questions such as : 

  • Which companies are performing the best when it comes to customer interaction and generating maximum engagement?
  • What is the company’s position as against their customers?
  • What different practices have the competitors adopted that enhances their customer experience?
  • Is there any unexplored touch point Of the company that the competitor is using?
  • Where do customers rank the company and its competitors on metrics such as ease of use, customer service , visual appeal among others?

Competitive benchmarking is a good way of maintaining competitive edge. By observing how your company and competitors are performing, you stay up to date with the best market practices.

What is competitive benchmarking? competitive benchmarking
Customer experience

Benefits of competitive benchmarking

Competitive benchmarking is a great performance analysis technique. As a company, you get to see what are your strong and weak points along with knowing whether your competitors are outperforming you in those points or not. If yes, what are they key practices that have lead them to move ahead of you and caught the customers attention. These practices act as industry standards or the highest bar which the company needs to achieve or go beyond in order to establish themselves as a market leader.

This further prevents companies from putting their money in the wrong basket. Companies may identify problems with their current methods but finding the optimal improvements that will certainly deliver with their target audience is a shot in the dark without thorough market knowledge. 

Competitive benchmarking simply shows the strategies that your close competitors and other big names in the industry have adopted. 

It categorizes a technique as a “hit”or a “miss” and directs the company in the right direction.

Moreover, there is no need to evaluate everything. Identifying KPI (Key performance indicators) which have the highest degree of impact in your functioning is enough to narrow down the benchmarking process.

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Types of competitive benchmarking

Process benchmarking: Process benchmarking analyses the efficiency of the current processes that your company uses. This puts your processes and shows how your competitors are completing performing with respect to the same. This internal and external perspective makes a cohesive case for the company to identify differences and see what their competitors are doing better. Companies can use key takeaways from the comparison to advance their processes towards greater efficiency and effectiveness.

Strategic benchmarking: This method studies the strategies and business ideas that are designed with an ulterior motive to achieve. It puts the company’s own planning structure under the scope and explains how industry leaders have achieve the same objectives using an alternative approach. Motive, planning, framing and execution are all imperative parts of a properly formulated strategy. These steps can be individually studied to pin point the precise distinction between what is being done and what is the highest bar.

Performance benchmarking: This is a outcome based method. It sees how well your processes and strategies have been able to deliver in terms of quantitative and qualitative results. These results are then compared to your competitor’s performance to contrast the efficacy of business practices in delivering desired results.

Let’s get an overview as to how this can be done:

What is competitive benchmarking? competitive benchmarking
Customer experience

What to benchmark?

Decide your key performance indicators. What are the areas that drive your growth?

It is a prudent approach to keep these indicators listed. Companies may be able to observe a downfall in performance but these KPIs will nudge the company in the right direction and narrow the research spectrum. 

For example: You feel that your company has become stagnant in terms of not being able to acquire new customers. This means that your company needs to identify and benchmark brand awareness practices that hep you increase your reach among new prospective audience. 

Your KPIs in this case become:

  • Brand recall and recognition
  • Customer touchpoints and engagement 
  • Brand equity 
  • Promotional and advertising techniques
  • SEO practices
  • Customer profiling
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Deciding your competitors

Deciding your competitors can be a complex activity. It’s better to divide the market into 3 segments. Once you have decided the aspect and KPI to study, divide your market into : Industry leaders, close competitors and upcoming entities on the basis of how the multiple companies are performing in that particular area. 

Your close competitors are the ones that share the same level as you. Assessing your close competition is a strategy that can be used to put yourself at a stronger footing by outranking the methods and practices used by them. This is a short term plan that works well on taking inspiration from the areas where your competition is good at and pointing towards the activities where your company is a better choice. 

There are certain other entities that are at the top of their game and have a knack for whatever they do. These companies are equipped with better skills and experience that serves them well in terms of commanding the market. Studying the top leaders in your industry gives the company a nuanced understanding of how the high rankers do it. Keep in mind that all these practices and methodologies may not feasible as your company may lack the resources, time or skill for the same but it certainly can be used as an end objective that the company can strive for. These objectives will change over time given the dynamics of the market and how these leaders choose to adapt to better practices.

Lastly the upcoming market segment. These comprise of small firms who are developing and need to be looked out for. Underestimating their size can be a big mistake, one that companies should not make. Keep a check on the entities and how they have done their market research in order to penetrate the existing market. This helps the company in identifying companies that could be a future threat and be ready with their own plan by avoiding any uncertainty.

Customer experience

How is competitive benchmarking done?

The main body of any research process is the data collection. For you, your company is an open book with every detail at the tip of your finger. Your competitors, however, aren’t exactly lining up to serve you with their private information.

Public data is easy to gather with the standard research and SEO techniques. Experts recommend Ahrefs as the pillar optimization tool, the only drawback being that its paid. Mozbar becomes a great alternative for Ahrefs and is unpaid which makes it a great substitute. They allow for a deep understanding of websites and domain authority. This makes content monitoring easy and hassle free.

But this is just the data that is available for any person having the patience to study company metrics. 

Private information, on the other hand, is not easy to get hold of. This ironically is the insight that makes all the difference. Companies need to get their hands on any piece of information that let’s them explore their rivals more deeply. News, press releases, sales reports, financial statements and any other relevant document that makes a value addition to the benchmarking process is an important source for the company. It’s not how tiny the piece of information is, it’s what you can make of it that’ll make a difference. 

The goal of any competitive benchmarking research is establishing trend. If you see that a company has stuck to a plan, model or strategy for a period of time and is excelling with it, it is the way to go for. 

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