What Is Benchmarking and Why Is It Important for Your Business?

Benchmarking can be a great way to identify areas of improvement within your business. Learn more about benchmarking and how to get started here.

How do you know if your business is performing well? One way to find out is by conducting regular performance benchmarks. While benchmarking requires some practice, knowing how your business is doing compared to other companies in your industry is vital.

There are different forms of strategic benchmarking in business, and you need to figure out how to put your company in a position to succeed. With benchmarking, you can determine what's working well, what's not, and what you need to do to overcome the competition.

By learning more about the different types of benchmarking, you can maximize the benefits of this process. Take a look at some helpful information regarding strategic benchmarking below, and make sure you invest in the right tools to maximize the benefits of performance benchmarks.

What is benchmarking?

Benchmarking is a strategic process that allows you to measure your company's success against other companies in your industry. When you first start a business, you're probably looking at the biggest competitors in your field, trying to figure out what you have to do to emulate their success. Even though you might have a general feel for what they're doing best, you need to figure out what sets them apart from others in your industry.

By looking at specific key performance indicators, you can establish benchmarks for different portions of your business. You can review industry statistics for the best companies in your field to determine where you're performing well and falling behind. By studying other companies, you can highlight what it takes for your business to gain a competitive edge and capture more market share to help you boost your revenue.

Types of benchmarking

There are several different types of benchmarking in business. They include:

Technical benchmarking

Technical benchmarking is a particular type of benchmarking you may use at your business. This type of benchmarking allows you to review the individual capabilities of your products and services, comparing them to those of leading competitors.

For example, if you provide wi-fi to various home and business owners. You might compare the maximum speed of the internet service you deliver to the maximum speed of internet services offered by your competitors. Technical benchmarking lets you see precisely how your products compare.

Competitive benchmarking

Competitive benchmarking is a one-on-one process that compares your business to your biggest competitors. This process aims to determine why your competitors are successful. Furthermore, it can help you figure out why certain areas of your business are doing well while those of your competitors are doing poorly. By identifying what your competitors are doing better, you can develop a strategic plan for superior performance.

Strategic benchmarking

Strategic benchmarking is another type of external benchmarking involving comparing your business to your competitors. You need to figure out why certain companies are thriving. You can do so by looking at their business strategies and marketing campaigns.

For example, if your email success rate is low, you can evaluate what your competition is doing differently with their email marketing campaigns. As a result, you can identify areas of improvement and customize email strategies to match your competitors.

Performance benchmarking

You need to maximize the benefits of your analytics and reporting capabilities, and you can do so through performance benchmarking. Performance benchmarking involves taking a look at your key performance indicators, and you can do so for individual employees, teams, and departments.

You may want to compare these metrics to prior outcomes to figure out how you can improve your business performance. The goal is to use this process to help you improve specific areas of your company over time. As your organization grows, you may raise the bar, helping you expand your business.

Internal benchmarking

Internal benchmarking is a relatively straightforward process. With internal benchmarking, you will compare one workflow in one area of the company to the same process in another area. The goal is for the metrics to be identical. That way, you can assess and compare the performance of different business aspects. This is important because they can help you set standards across the company, creating a more consistent, cohesive framework. That way, you maximize the efficiency of each department.

All of these benchmarking processes can be useful, but you must figure out how to maximize their benefits. That means employing different types of benchmarking at the right time.

Benefits of benchmarking

There are several benefits that benchmarking can provide. They include:

  • Find opportunities. Benchmarking can help you identify areas of opportunity within your business and your industry. For example, you might notice that your competitors are falling behind in a certain area, and you might be able to exploit that for your benefit. You might also pinpoint items within your own company that you can improve.
  • Identify performance gaps. You can identify performance gaps in your business by tracking specific KPIs. For example, if you notice that one department is taking too long to finish certain tasks, you can compare them to other departments to determine the measures to take.
  • Lower expenses. Benchmarking can also help you reduce your overhead expenses. You might realize that inevitable redundancies are slowing down your workflows. By removing redundancies, you can slash overhead costs.
  • Understand the competition. If you want your business to be successful, you must understand the competition. With external benchmarking, you can figure out what your competitors are doing well.
  • Set business goals. You can also use benchmarking to set specific SMART goals for your business. For example, if your company has consistently met its objectives for the past few years, it might be time to reassess your metrics and increase your expectations.
  • Increase sales. You can even use benchmarking to increase your sales. You might use technical benchmarking to determine where your products lag behind. Then, by targeting those areas, you can better meet the expectations of your customers and boost your sales.
  • Reduce workflow inefficiencies. Finally, you can also use benchmarking to reduce inefficiencies in your workplace. You can eliminate and consolidate your workflow by identifying repeated, redundant, or mundane steps in your business process.

If you understand the benefits of benchmarking, you can put yourself in the best position possible to take advantage of this process.

Benchmarking examples

There are a few examples that can demonstrate how benchmarking can be effective. They include:

  • A grocery store chain may realize that customer satisfaction rates are low because the checkout process is too long. Through benchmarking, they determine they can cut costs and increase customer satisfaction by installing self-checkout lines.
  • One company may learn that its employee turnover rate is much higher than its competitors. With benchmarking, it may also discover that competitors are allowing their employees to work from home, thus increasing the retention rate.
  • One sports team isn't generating as much ad revenue as the other companies in the league. Using external benchmarking, they may realize that their ad placement is different, which is why other teams are generating more ad revenue.

How the benchmarking process works

There are several steps you can follow to take full advantage of this process. They include:

  1. Determine what to benchmark. What are you going to benchmark? You can look at specific products and services, your internal processes, or your employees.
  2. Evaluate competitors. Take a look at those same issues and compare them with your competitors. What products and services does the competition offer? What are their internal processes like?
  3. Identify your metrics. Figure out what metrics are most important. For example, your open and click rates may be critical if you have an email marketing campaign. Or, you might want to measure the time your employees take to finish a certain task.
  4. Create a plan. How will you improve your key performance metrics? What will you define as success?
  5. Monitor results. Track the results over time. Use modern analytics to identify insights that could be beneficial quickly.
  6. Make any changes. Finally, make any changes that are required to improve your processes. Figure out how you can better meet the goals you have set for yourself.

You can repeat this process several times for various aspects of your business and continuous improvement.

Start benchmarking your business today

Benchmarking can be a great way to figure out how your company is doing compared to the competition. To get the most out of this process, you need the right tools.

With Mailchimp, you'll have easy access to all your campaign and website metrics in one convenient dashboard. This way, you can see where your business stands. You can also perform campaign benchmarking, which is free to all Mailchimp users who opt in to our data analytics projects.

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