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Have you ever read Sun Tzu’s “Art of War”?
There’s one interesting section in the book where Sun Tzu talks about sending his people to gain intelligence on the enemy’s army, and they come back with granular insights into their strengths and weaknesses.
This helped him improve the weakest links in his own army and gain a competitive advantage.
Sounds awfully familiar, huh?
Although we aren’t really examining each other’s armies per se, we do look at what our business competitors are doing and analyze their performance.
In other words, we look for insights (through) benchmarks that can help us assess our own company’s performance, identify room for growth, set smarter goals, and pinpoint useful industry practices, among other things.
Nowadays, benchmarking is considered one of the best ways to ensure proper business growth.
But how should you get started? What tools should you use? How can you make sure the data you have is reliable?
Here’s everything you need to know.
Benchmarking is the process of comparing your company’s performance against companies that operate in the same niche, are of similar size, and have a similar target audience, using benchmarks.
Benchmarks are simply the reference points that will be used for comparison.
Depending on what you’re looking to measure, there are a variety of benchmarking methods available. Systems, processes, industry standards, and performance metrics can all serve as benchmarks.
However, the goal is always pretty much the same – identify which areas can be improved and use the information to set strategic goals and optimize the overall company performance.
You can look at it as a school report card. It shows you whether you’re keeping up with the rest of the class or you’re falling behind and have to put in more work.
You can benchmark your performance against drastically bigger or smaller organizations as well, but that won’t provide you with as many actionable insights as you get from studying similar-sized competitors.
But it shouldn’t be completely overlooked either. Knowing how the industry leaders are performing is also valuable information.
Nowadays, each industry has some specific set of reference points that are used for benchmarking, which leads us to industry benchmarks.
Industry benchmarks are the metrics or standards most commonly measured in a particular industry.
For example, there’s also business benchmarking, which refers to comparing your business’ performance to competitors in the same industry.
Business benchmarks help you stay on top of the latest market or industry trends by comparing metrics such as revenue, growth rate, ROI, market share, etc.
If we go a bit further down this rabbit hole, we can segment business benchmarks by different departments.
Here’s a visual representation of a benchmark where a company outperforms its cohort (the median values are above the group standard).
Here’s another example, one in which the company’s median value is below the standard.
Benchmark data is simply the data set that companies use for comparison.
You can extract benchmark data from a variety of sources, including industry standards, similar systems and processes, or predetermined sets of performance metrics and KPIs.
It’s a point of comparison (aka “the reference point”) that companies use to see whether there’s anything they need to improve.
Benchmarking metrics are the data points that companies measure to evaluate current performances, i.e. the specific evaluation indicators.
If you have the proper data set, you can benchmark pretty much any metric you want since all data points can be recorded.
Here are a few basic benchmark metric examples divided by department:
Benchmarking is used to make sure that all business areas are optimized, identify room for improvement, and check out how we stack up against competitors in our industry.
The primary purpose of benchmarking is to establish a clear understanding of current performances and see which aspects we should focus more attention on.
Furthermore, benchmarking helps a company set realistic and achievable goals, measure progress toward those goals, and make data-driven decisions that can lead to increased efficiency, effectiveness, and profitability.
It’s essentially a business compass that helps you orient yourself and see which way you should go.
Benchmarking can be segmented into two broad categories – internal and external benchmarking.
Internal benchmarking is the process of comparing performances among teams and departments within the same company, whereas external benchmarking refers to the same process but applied to outside companies.
Within these two categories, we can further divide benchmarking into these types
Process benchmarking involves comparing processes across internal company departments or across different companies in the industry. The goal is to make your processes more cost-effective and efficient. If you’re analyzing your competitors, you might even find some new types of processes that you can start implementing.
Comparing your overall organization’s performance against other companies in the industry is called performance benchmarking (also known as competitive benchmarking). The goal is to identify areas for improvement and pinpoint any performance gaps that currently exist. This type of benchmarking is typically the most complex because you need to have granular insight into the performance metrics of your competitors. If you can’t access competitor data, you can get some useful information by comparing products and services.
Performance benchmarking is the most common among B2B businesses.
Comparing the overall strategy and direction in which your company is heading against other companies in the industry is called strategic benchmarking. By analyzing your competitors’ strategies, you can identify some new practices that might be useful to implement in your own organization.
Comparing your company’s financial performance against industry standards or competitors is called financial benchmarking. This type involves a thorough financial data analysis (revenue, expenses, profitability, etc.), and the goal is to make sure financial decisions are data-driven. Financial benchmarks play a huge role in assessing your business’s financial health.
Refers to the comparison of investment to set industry standards, from an investor perspective. The goal is to get actionable insights that will help you decide whether to hold the investment, sell it, or invest even more money. For example, this can involve checking how the performance of a specific stock benchmark compares to others on the market, in the same niche.
Public administration organizations use industry standards to identify areas for improvement in terms of the services they provide.
Analyzing the offers of competitors who have similar products is called product benchmarking. This usually involves reverse-engineering them to get a grasp of advantages and disadvantages. The goal is to find new ways to upgrade your current product or even design new products based on the data you acquire.
Useful for companies that want to focus on a particular function. For instance, accounting or finance departments are much easier to improve if you go about optimizing specific functions, one by one.
Comparing your company to the leader in your industry or the company that is considered the best in a specific aspect. This involves a lot of granular competitor analysis, but it can sometimes be easier than analyzing similar-sized competitors because of larger data samples.
Comparing energy-related performance data against set industry standards that have been determined by eco-organizations.
Now that you know what benchmarking is and how it can be categorized, let’s check out some of the major ways it can benefit your business.
Proper competitive analysis is an invaluable skill in any business.
Benchmarks are an objective measure of where you are and they help you deepen your insights into how your peers and competitors perform, while also providing you with a holistic picture of your market’s performance.
When digging for useful benchmarks from your industry competitors, you’re also directly improving your analysis process.
You’ll be able to extract more granular insights from your competitive landscape and use the information to improve your performance and gain a strategic advantage.
Benchmarking also helps you stay on top of trends since you’ll constantly be looking at what’s currently happening on the market.
You’ll know which best practices are currently being used in your industry and what strategies are working for your competitors.
After some time, you’ll probably even learn how to forecast new trends and be among the first ones to take advantage of them.
Proper benchmarking gives you a better idea of what your goals should be and which performance metrics you need to focus on.
Most of your competitors are generating more traffic to their websites? Maybe you should work on your SEO and content marketing efforts.
Are their conversion rates better? Maybe you need to optimize your landing pages.
You get the idea.
Just make sure you set achievable goals and create an appropriate outline of how you’ll achieve them.
PRO TIP: Learn how Privy is leading their teams in restructuring the way they approach KPI and goal setting.
So many companies focus solely on finding areas that they need to improve that they overlook some of the great results they’ve been having.
Furthermore, knowing where you outperform your competitors can tell you that the processes or strategies you’ve implemented are working out and that you could try them out in other areas as well.
If you’re an agency that works with several clients that aren’t that familiar with benchmarks, you can use these wins to show them the impact of your work and where exactly they’re outperforming others.
If you ever asked yourself:
Databox Benchmark Groups can finally help you answer these questions and discover how your company measures up against similar companies based on your KPIs.
When you join Benchmark Groups, you will:
When it comes to showing you how your performance compares to others, here is what it might look like for the metric Average Session Duration:
And here is an example of an open group you could join:
And this is just a fraction of what you’ll get. With Databox Benchmarks, you will need only one spot to see how all of your teams stack up — marketing, sales, customer service, product development, finance, and more.
Sounds like something you want to try out? Join a Databox Benchmark Group today!
Seeing how big of a role benchmarking plays in a company, it’s crucial that you implement it as soon as possible.
Here are the steps you can follow to do it manually:
To make the most out of your benchmarking process, you first need to clearly define what you’re going to benchmark and how you’ll go about it.
There’s usually a lot of manpower and time behind a proper benchmark process, so you’ll have to know how to manage the process each step along the way.
Make sure you’ve:
Next up, you’ll have to collect the data and information on the process you want to benchmark.
You should collect both your own data (current and historical) and your competitors’ (if it’s available).
There are several ways to conduct data collection, with some of the most popular ones being surveys, interviews, and competitor research, but this will largely depend on what you’re benchmarking.
For instance, if you want to benchmark website performance, you can look for Google Analytics benchmarks in the benchmark reports.
Google Analytics can also be a great source of SEO benchmarks (alongside tools like Ahrefs and SEMRush).
Or, if you want to stay on top of your PPC marketing campaign, you should focus on Google Ads benchmarks and Facebook Ads benchmarks.
However, none of these tools have any built-in functionality. They’re great places for extracting data that you will benchmark, but that’s pretty much it.
Just in case, always double-check whether the data you collected is accurate, relevant, and reliable.
Once you get your hands on all the data you need (or can find), it’s time to go through it.
Make sure to analyze the data coming from your company objectively, even if it’s not always up to par (don’t worry, no organization is perfect).
Then, also analyze your competitor’s data and find out whether there are any performance gaps. If there are, you can then try to pinpoint the strategies that they use to create those gaps.
There are a ton of methods that can help you out during this step, such as gap analysis, SWOT analysis, statistical analysis, etc. Choose the one that’s the most applicable to your type of data.
Lastly, you should compile your findings in one comprehensive report where everything is laid out in a clear and concise manner.
The report should be simple to understand and you should highlight the most important findings. Explain which areas you need to be optimized, alongside your recommendations on how to do it.
Present the data to key decision-makers in the company and work with them on coming up with strategies.
Okay, so now that we’ve covered the grueling process behind manual benchmarking… want to hear the easy way to do it?
It’s by using our own tool — Benchmark Groups.
With this product, you can skip all steps listed above and literally fast-forward to the part where you have all the data in front of you, and you’re simply working on devising the strategies for improvement.
Planning, data collection, analysis… all this is done for you and you instantly eliminate those long hours of hard work that usually go into it.
The only thing you need to do is to find the exact group you want to join and connect your data source.
From there, you can immediately get the big picture of how your company stacks up to hundreds of others in the same industry and start planning your next moves.
While there are some tools (e.g. we mentioned Google Analytics) that can speed up the process to some extent by providing you with Google Analytics benchmarking reports, they don’t have any other relevant functionality to offer.
Benchmark Groups is as precise as it gets… and you can break down your data in a dozen different ways (e.g. from business type and industry to company size and revenue).
Another cool thing about the product is that it can also streamline the data presentation part.
You can pull up the benchmark you extracted into a Databox dashboard and have it ready immediately for your shareholders to review.
The value of the information you receive and the time you save is probably worth thousands of dollars (at least)… but we won’t charge you anything. Joining a group is completely free.
Viewing benchmark data can be enlightening, but seeing where your company’s efforts rank against those benchmarks can be game-changing.
Browse Databox’s open Benchmark Groups and join ones relevant to your business to get free and instant performance benchmarks.
