What is Competitive Benchmarking?
Competitive benchmarking, as the name suggests, is the process of using a set of metrics to compare your company against its competitors. It is used to measure the performance of a company against industry standards and its competitors over time.
Competitive benchmarking provides organizations with an understanding of its current state, helping set a benchmark for goals and improvement within the organization. It creates an organizational culture of continuous improvement and can help improve quality and increase cost efficiency.
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How to choose Benchmarks for Competitive Benchmarking?
It is important to choose the right KPIs with which you compare your organization to others. You should start off with the pre-existing KPIs used within the organization and also incorporate metrics that can indicate bigger outcomes.
These KPIs can be chosen by identifying the ways in which your competitors may be outperforming you. For instance, if your competitor seems to be obtaining more growth and engagement on social media, then this can be chosen as a metric to analyse and improve. By benchmarking, organizations understand where they stand before they can take measures to do better and even outperform their competitors.
These are some KPIs that organizations can consider while conducting competitive benchmarking:
- NPS (net promoter score)
A customer satisfaction metric that measures how likely customers are to recommend your products or services to others.
- SOV (share of voice)
This metric defines an organization’s percentage of total media buying in its industry for a specific time period.
- Brand Awareness
The degree of customer recognition of a product by its name.
- Web Traffic
Measures the number of visits to a brand’s website to identify the effectiveness of attracting customers online.
Ways in which Competitive Benchmarking can be used?
These are a few ways in which competitive benchmarking can be used within organizations:
- Performance Benchmarking
This form of benchmarking involves drawing comparisons between outcomes of your company against its competitors. This means comparing outcomes such as revenue growth, or annual earnings/sales etc.
- Process Benchmarking
Process benchmarking involves understanding processes within your organization in comparison to your competitors in order to find areas of improvement to optimise processes. This is used to make the processes in your organization more efficient
- Strategic Benchmarking
By comparing your business models and approaches with your competitors’, you can strengthen your own strategies. If certain business models and strategies employed by your competitors seem to be giving them better results, you can attempt to emulate these strategies/models.
FAQs on Competitive Benchmarking
Answer: Both these concepts serve two different purposes though they are often confused. Competitive analysis takes a deeper dive into gathering information about its competitors. It breaks down every feature, product, strategy and more to understand every aspect of them. Competitive benchmarking, on the other hand, involves using metrics to monitor your competition against and to understand how you are performing in comparison to your competitors over time.
Answer: Benchmarking can help organizations gain a perspective about their performance against their competitors’ and can help identify performance gaps as well as areas for improvement. Additionally, competitive benchmarking sets performance expectations and creates an organizational culture of continuous improvement. Benchmarking can also help organizations be more cost effective as they obtain information with data about latest technologies and processes within their industry. These can help increase productivity while decreasing costs.
Answer: It is important to select competitors whose social presence and target audience closely resemble yours. A small clothing boutique should not create benchmarks against multinational clothing retailers such as Zara or H&M. Competitive analysis can help identify who your closest competitors are and who you should be focusing on.
Answer: These are a few competitive benchmarks to analyse social media performance with:
- Content Performance: A measure of the likes and shares your content gets.
- Engagement Rate: This metric compares follower count against likes, comments, and shares to measure engagement.
- Growth Rate: Tracking growth in followers across your social media platforms.
Answer: Benchmarking encourages organizations to constantly improve the quality of their products/services as they are being constantly compared with their competitors. They can use benchmarking to identify the current standard of services/products they offer and then take measures to surpass it.