What is benchmarking and how to do it

Managing a business involves constant questioning in order to adapt its strategy to changes in the market and to consumer demands. Certain tools like benchmarking make it possible to evaluate the performance of an organization, while giving some keys on the patterns to follow to achieve its objectives.

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The 4 types of benchmarking

There are several methods to carry out benchmarking within a structure. From internal audit to analyzing the competition for a specific function, the different types of benchmarking are complementary and provide a global view of the market. They can be carried out separately, according to the needs and expectations of the company undertaking this process.

Internal benchmarking

As its name suggests, this is benchmarking carried out within the company itself. The objective is to compare the performances and practices between different services. This methodology mainly concerns large structures. In this case, benchmarking is easy to implement: all the necessary information is already held internally.

Functional benchmarking

Functional benchmarking focuses on a specific function within the company, such as after-sales service or the marketing department. The analysis consists of comparing the service in question with more efficient companies in the same sector. An e-commerce site could, for example, carry out functional benchmarking on the entire logistics aspect by analyzing the methods of La Redoute or Amazon, which are market leaders.

Generic benchmarking

It strongly resembles functional benchmarking but the comparison is made with companies from other sectors of activity. We also talk about horizontal benchmarking. The idea is to choose very efficient structures that do not develop at all in the same market. Thus, the comparison is only about how to manage a certain process within the company, without considering products or services.

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Competitive benchmarking

This approach, often considered the most important, is to compare yourself with your direct and indirect competitors with the aim of outperforming them. It is based on an in-depth competitive analysis which can be carried out using several tools:

  • Competitive intelligence: this involves researching, collecting and analyzing information on the activity of other companies present on the market.
  • Market research: it comes down to researching, collecting and analyzing data on the needs and expectations of the target audience.

Competitive benchmarking analyzes what is directly visible to customers, i.e. products and / or services. It does not take internal processes into account, as can be the case with other types of benchmarking.

What is the point of benchmarking?

Benchmarking can be carried out as part of the launch of a new product or service on the market. Particularly used in innovative fields, it thus considerably reduces risks. But benchmarking is not just confined to new projects. On the contrary, it has many advantages at every stage of the development of a business. It gives the opportunity to draw inspiration from other proven practices, in other structures, and thus improve its competitiveness and productivity. Overall, the implementation of benchmarking offers a real competitive advantage. It is not about copying the patterns of success but rather making them a source of inspiration.

Benchmarking can represent the starting point of a complete strategic plan, with a view to optimizing the performance of the company and / or launching a product or service. External repositories are indeed essential in order to take a step back and quickly define new actions to be deployed. Benchmarking should be seen as a tool for synthesizing information, to make it more readable, and not as spying on competing companies.

While there are different types of benchmarking, there is however a common methodology, in 6 main stages. These must be followed rigorously to ensure the success of the project.

1 – Carry out a self-assessment

This is the starting point for all benchmarking. This step corresponds in a way to self-criticism. To begin with, the business will need to determine what will come into play in the analysis. Processes, products or services are all possibilities. After choosing the angle of attack, it’s time to take a full inventory. The SWOT analysis is then a relevant tool to carry out this self-assessment.

2 – Identify the competitors

Who will be the benchmark competitors for benchmarking? It is important to define the number, to begin with. No need to select too many: this can cause dispersion. Conversely, analyzing a single company is also irrelevant since the risk of plagiarism is very real. It is important to be open-minded and not to limit yourself to just one type of business. Start-ups, micro-businesses, SMEs or large groups: there is a lot to learn in each structure. As for the sector of activity of the companies in question, it all depends on the type of benchmarking selected. They may be direct or indirect competitors or else companies that do not operate in the same market at all. Finally, taking the time to list and quantify the elements of comparison is also interesting. Again, this helps to avoid scattering.

3 – Collect the data

Now that the basics have been laid, the company carrying out the benchmark can move on to collecting the information. These can be obtained through different channels: the media, social networks, studies, questionnaires or even institutional sites. It is essential to use reliable sources. The data collected must be in the form of figures.

4 – Analyze the information

In light of the information gathered on the competition, the company can then compare it with its own internal data. This step is carried out simply and quickly using an Excel table. Performance gaps can thus be identified. After this observation, it is necessary to draw the necessary lessons, to identify the causes of such discrepancies and to set up new objectives. This approach makes it possible to show the margin of progress of a company.

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5 – Communicate the results

The internal services concerned by the benchmarking must have access to the results of the analysis. The company will be able to provide a summary that highlights the main results, initial conclusions and strategic recommendations. However, there is no need to be hasty here: introducing internal changes is a process that takes time and implies that each employee is voluntary and committed.

6 – Follow an action plan and renew the benchmarking

To initiate a transformation within the company, it is essential to define new clear objectives. Ideally, they should fit into a very specific time frame in order to be better accepted by the various stakeholders. Precision is important for a good understanding. Second, benchmarking should not be an isolated and one-off action. It will have to be renewed regularly, in order to measure the results and to constantly adapt the strategy.

The limits of benchmarking

Benchmarking has many advantages but still has certain limitations. It is important to know them before taking such a step.

  • First, this methodology mobilizes time but also resources. An entire team must generally be dedicated to the project: this is synonymous with significant costs for the company.
  • Then, the success of the benchmark is conditioned by the behavior and dynamics of the employees. They must be open to change, and even more so to the management team.
  • Finally, there is a fine line between inspiration and plagiarism. One of the pitfalls of benchmarking can be to copy a product or a service or to adopt practices that do not correspond to its corporate culture. A point of vigilance before embarking!

Used wisely, benchmarking is now an essential marketing tool to help companies, regardless of their size, find their place in the market. However, this approach cannot be improvised and the technique must be perfectly mastered in order to derive benefits. This is not a miracle process but quite simply a first step towards change.

To go further, download this free market research guide for study your competitors and identify the profile of your potential customers.

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