Introduction
How do you compare against your competitors?
Who’s leading the market? Who’s on the rise or falling away? Who has the most competitive pricing? Or the best messaging? What promotions are the most popular?
It’s vital to understand the competitive landscape and your place in it. The more you know, the clearer and more informed your decision-making will be.
By contrast, not having these insights can lead to more guesswork and assumptive decision-making that’s harder to quantify.
At a time when 40% of companies failed to meet their sales goals, it’s little wonder that competitive benchmarking is growing in popularity amongst companies, big and small.
In this article, we take a closer look at the role of competitive benchmarking – what it is, how it creates a competitive advantage and how to run it within your organisation.
What Is Competitive Benchmarking?
Competitive benchmarking is a way of comparing your competitors against each other and against your own organisation across defined metrics. It is used to understand performance, strengths and weaknesses, providing insights that can be used to improve decision-making and strategic planning.
The Purpose Of Competitive Benchmarking
Competitive benchmarking is used to gain a clearer picture of the competitive landscape of the market you’re in. Who’s leading or lagging? Who’s on the rise or falling away? Who’s campaigns and strategies are delivering the best results? How is the market evolving and what does that mean? And ultimately, how do you compare against them all?
Armed with that intelligence, you can make smarter, better-informed decisions and build more effective strategies and campaigns. You can react faster to threats and opportunities, identify areas for improvement and investment and clarify what strengths you can leverage in your sales and marketing.
A Brief History
Competitive benchmarking isn’t a new phenomenon. In its article, The History of Benchmarking, Benchmarking.com Australia says:
“The first formally recorded business benchmarkers emerged in the early 1800s during the industrial revolution. Industrialists such as Francis Lowell invested time and money into studying his manufacturing competitors and determining the techniques he could use for his own factories.”
While the principle and idea behind competitive benchmarking remain, the methods have drastically evolved. Hotstat’s article on the same subject charts the birth of competitive benchmarking to the 1970s and one company in particular:
“In the mid-1970s, Xerox embarked on creating the next phase of benchmarking, competitive benchmarking. For many years Xerox was the king of copy machine manufacturing, but they found themselves in a precarious position when their Japanese competitors were able to manufacture higher quality copy machines for far less than Xerox. Xerox saw their market share plummeting and decided to do something about it.
“The company went on a quest to determine how their competitors were able to accomplish these quality and operational efficiencies, thus creating competitive benchmarking. By the time Xerox was awarded the Malcolm Baldridge National Quality Award in 1989 they had benchmarked nearly 230 performance areas across multiple industries.”
Competitive Benchmarking Today
Fast-forward to today and the internet has made it easier to access an ocean of intel about rival organisations faster than ever before. Competitive insight tools are capable of tracking competitor activity, news and performance in real-time.
That intelligence can take many forms but a number of tools have been built with competitive benchmarking in mind, allowing you to set who and what you want to track and measure.
In the next section, we outline the key decisions when deploying competitor benchmarking.
The 4 Main Types Of Competitive Benchmarking
In general there are 4 different types of competitive benchmarking that’s applicable for the vast majority of businesses and worth taking into consideration:
Process benchmarking
This type of benchmarking involves comparing your company’s processes to those of the industry leaders or competitors. The aim is to understand their best practices and try to implement similar methods in your organization to improve efficiency.
Performance benchmarking
This involves comparing key performance indicators, such as quality, time, and cost, across different companies. It aims to provide an insight into where your company stands in terms of effectiveness.
Strategic benchmarking
The focus here is on how companies compete in the market. It examines the strategies that successful companies use and provides insights that can help shape your own strategic decisions.
Product benchmarking
This is when a company studies a competitor’s products or services to compare their features and benefits. It can help in the design of new products or improvements to existing ones.
The 5 Steps Required For Effective Competitive Benchmarking
1) Identify your competitors
Competitors come in many forms. You have direct rivals with similar product offerings in the same territory.
Those that compete in different territories with similar product offerings. And there are some in the same territory with different product offerings.
If it’s your first venture into competitive benchmarking, you may find it useful to start small by focusing on your direct competitors and adding more over time.
It’s important to include up-and-coming competitors alongside more established organisations as well as track new entrants into the market.
As you become comfortable handling and analysing the data, you can start adding more competitors who post a direct or indirect threat to your revenue.
2) Set your competitor benchmarking criteria
What you track will depend on the nuances of your market and where things are won and lost.
For example, in fashion, social media engagement will be more revealing than in an FMCG category – although it’s still worth keeping an eye on.
The real value of competitive benchmarking is gathering data that is usable – intelligence that will shape your strategies and marketing campaigns. While the options are seemingly endless, some of the most popular areas to benchmark are pricing, promotions (frequency and details), products (including roll-outs, updates, feature specification and more), social media (followers and engagement numbers), financial performance and consumer review scores.
Don’t focus solely on the areas where you believe you’re strong or weak, be comprehensive and build up as complete a picture as possible to help you understand how you compare.
A final note on this. Some competitive benchmarking and intelligence-gathering tools will provide market analysts to help you set up your benchmarking approach and get the most from your investment.
3) Identify who needs the data
Competitive benchmarking is of particular value to marketing and sales teams whose activity is in direct competition with that of other organisations. They can use it to identify threats and opportunities that lead to better strategies and results.
But the insights you gather have far broader potential. From product teams to senior management, there may be a number of groups and individuals in your organisation who will benefit from understanding your strengths and weaknesses in the context of the competition.
Identifying a list of people or departments at the outset will help you get the most value out of competitor benchmarking.
4) Clarify how you’ll get the data to them
How you share the insights you gather from competitive benchmarking matters. Not everyone will be comfortable analysing graphs and charts, while others won’t want to read in-depth reports.
Integrating your benchmarking software with the communication and data visualisation tools that people are already using and comfortable with will go a long way to ensuring a smooth transition into becoming a more data-driven organisation.
You also need to consider frequency and format when presenting the data. Who needs daily or weekly updates versus detailed reports? Do you need both?
5) Turn competitive benchmarking into a competitive advantage
We’ve already spoken about the importance of using what you’re learning to make the investment worthwhile. To encourage buy-in, you need to mobilise the organisation. This is done by identifying clear areas of responsibility and expectation, and processes for how benchmarking should be used.
The easier you make it for people to understand the competitive landscape and make data-driven strategic decisions, the more value you’ll get.
Final Thoughts
According to TechJury, data analytics makes decision-making 5x faster for businesses. That means faster responses to threats, more opportunities being seized and greater control of the market you’re in. Speed of response can also help organisations become more innovative, which will create new opportunities for gaining a competitive advantage.
But it’s not just speed. Competitive benchmarking leads to smarter, better-informed decision-making. It can be the first step towards being a data-driven organisation.
FAQs About Competitive Benchmarking
1) What are some key metrics to consider when conducting competitive benchmarking?
It’s important to consider relevant metrics that provide meaningful insights into your competitors’ performance.
Some key metrics to consider when planning competitor benchmarking include market share, pricing strategies, product features and quality, customer satisfaction ratings, brand reputation, marketing campaigns and messaging, and digital presence (website traffic, social media engagement).
By analysing these metrics in comparison to your organisation, you can identify areas where you can differentiate yourself and outperform your competitors.
2) How frequently should I conduct competitive benchmarking?
The frequency of conducting competitive benchmarking depends on various factors such as the nature of your industry, the pace of market changes, and your strategic goals. Competitor benchmarking could be a periodic activity, conducted once or twice a year, or an ongoing process using a competitor intelligence platform.
The key thing is to stay updated on your competitors’ activities, track market trends, and make informed decisions. In fast-paced industries or during periods of intense competition, frequent benchmarking can help you to stay agile and respond to emerging threats and opportunities.
3) How can competitive benchmarking drive innovation within my organisation?
Competitive benchmarking provides insights into best practices, emerging trends, and successful strategies employed by your competitors.
By analysing these insights, you can identify parts of the market that are untapped or in need of a better service or product. While in-house, you’ll be better placed to identify opportunities for improvement to your ways of working.
Benchmarking can inspire creative thinking, spark new ideas, and help you stay ahead of industry trends. It encourages a proactive mindset, pushing your organisation to continuously improve and differentiate itself from competitors.
