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What are your competitor’s strengths and weaknesses?
How does your company stack up against them, are you falling behind in some areas?
How are other companies responding to the latest industry trends?
If you don’t have the answers to these questions, it means your competitive landscape is a bit foggy at the moment.
But, you can clear it with the help of competitive benchmarking.
When done properly, competitive benchmarking brings a treasure trove of benefits to the table, helping you gain a competitive edge over your competitors and establish a better market position.
In this article, we’ll go into detail about some of the major benefits of competitive benchmarking that you can take advantage of.
- What Is Competitive Benchmarking?
- 8 Advantages of Competitive Benchmarking
- Commonly Used Competitive Benchmarking Metrics
- Free Benchmark Groups to Join
- Cut Your Competitive Benchmarking Process in (at Least) Half with Databox
What Is Competitive Benchmarking?
Competitive benchmarking is a type of external benchmarking and the process of comparing your company’s performance to the performance of industry competitors.
We do this by using specific metrics that are related to the department we want to compare (finance, sales, management, marketing, etc.).
Through competitive benchmarking, companies can determine their market position, find the best and worst-performing areas, and identify some new practices that they can implement.
But we’ll get into these specific benefits in a lot more detail in just a few seconds.
You should keep in mind that benchmarking isn’t a one-time thing. Industries are constantly changing and so is your market position along with it.
There’s a constant influx of new competitors, the old ones might slowly fade away, trends are changing non-stop… you need to keep an eye on all of these things.
The popular TV show “Silicon Valley” can serve as a great example of how competitive benchmarking works.
In the series, a startup company called “Pied Pepper” is launching a new and improved compression algorithm, but they’re struggling to establish themselves on the market due to the huge competition.
This changes when Richard Hendricks (the main character) starts reverse-engineering the algorithm of their biggest competitor (Hooli).
He finds that even though their product is faster, it’s significantly less efficient in terms of storage options.
By identifying this weakness, Pied Pepper now manages to improve their algorithm and make it both faster and more efficient, giving them a huge competitive advantage in the market.
To learn more about benchmarking in general, here is a 101 benchmarking guide that will help you get started.
8 Advantages of Competitive Benchmarking
Now that we have the basics covered, let’s go through some of the biggest advantages of competitive benchmarking.
- Get an Objective View of Your Business Performance
- Improve Sales, Revenue, and Profit
- Use Benchmarks in Your Marketing
- Monitor the Performance of Your Competitors
- Stay on Top of Trends
- React Promptly to Market Shifts
- Set Realistic and Actionable Goals
- Identify Performance Gaps and Opportunities for Improvement
Get an Objective View of Your Business Performance
Business owners usually have a good idea of how their company is positioned in the industry, but they have a hard time taking a step back and analyzing the situation objectively.
To eliminate any risk of clouded judgment, you’ll want to arm yourself with relevant data that shows you exactly how things stand.
And competitive benchmarking is one of the best ways to obtain this data.
You get an objective view of where your company is at and how it stacks up against similar-sized competitors or set industry standards.
And as we mentioned above, due to constant shifts in the market, it’s extremely important that you’re making decisions based on real-time data.
With the help of our Benchmarking tool, you can do just that.
Not only can you access real-time benchmark data, but you can also get more granular by preselecting conditions such as company size, revenue, industry, and more.
While there are some tools on the market that do give this kind of insight as well, they only focus on a single area of your business.
We can give you a completely objective view of your performance, with KPIs from every department in your company (marketing, finance, sales, HR, and more).
Improve Sales, Revenue, and Profit
From uncovering some new best practices that you can implement to figuring out which areas need to be optimized, competitive benchmarking gives you a ton of actionable data.
And if you take action on this data, well, your company’s performance will also see a boost. This later leads to more sales and more generated revenue, right?
For example, if you’re analyzing your competitor’s product and find a few new ways to make yours better, then more people will buy it.
Or, if you’ve optimized your customer support, then customer satisfaction will be higher, and you’re likely to get more referrals.
No matter how you spin it, taking action on the insights you get from competitive benchmarking leads to better performances, improved sales, and more profit.
Use Benchmarks in Your Marketing
Another great way to make use of your benchmark data is to share it in your content (e.g. blog posts or informational videos).
Readers respond to data-driven statements and you can use it to build a compelling narrative or story.
You can also use benchmarks in case studies, research reports, sales and demo materials, and several more mediums.
Some companies use them in investor pitches to showcase their results and pinpoint the exact areas in which they’re outperforming the competition.
And if you’re using Databox for reporting, you can connect the relevant benchmarks directly to your dashboard. This makes the entire process more time-efficient and understandable for the audience.
Monitor the Performance of Your Competitors
This again correlates to the importance of working with real-time data in your benchmarking process.
Even if you currently have some sort of competitive edge in the market, your competitors aren’t going to sit around with their arms crossed – they’ll be coming up with new ways to outperform you.
And occasionally, they might end up with a strategy that lets them do just that. Or a new competitor with a better product will arrive.
Whatever the scenario, you need to stay on top of what they’re doing and keep tabs on their latest strategies.
After analyzing them for longer periods, you’ll also be quicker to understand why a certain strategy is helping them… and use that to your advantage as well.
Stay on Top of Trends
Market trends can change in a blink of an eye, which is why competitive benchmarking is such an invaluable tool to help you maintain or improve your company’s current position.
Real-time benchmarking helps you stay on top of all the latest market changes and you’ll be able to react to new trends immediately.
One great example of this is the COVID-19 pandemic. The companies that adapted the best to the lockdowns and new state of things were the ones that anticipated the need for remote working opportunities, new messaging, etc.
Sure, the global pandemic is a black swan event, but even drastically smaller changes can have a huge impact on your company if you’re not ready for them and aren’t preparing in advance.
React Promptly to Market Shifts
Although similar to trends, market shifts refer to the major changes in the market and can have a significant impact on your business.
These major shifts aren’t as common as trends, but when they do occur, there’s usually some sort of opportunity that you can take advantage of and boost your company’s performance.
These changes can be caused by a number of factors, including changes in consumer behavior, technological advancements, or changes in government regulations.
And while benchmarking can be of huge help here, most companies have a hard time finding appropriate benchmarks for their specific industry, especially if they specialize in a very narrow niche.
For example, while you might be able to find benchmarks for software businesses, it’s a lot harder to find proper ones for health tech (e.g.).
That’s another thing we had in mind when creating Benchmark Groups.
We already have hundreds of pre-built groups in the product and you can niche them down even further with criteria like company size, revenue, business type, and industry.
And if you want to go even further or can’t find a specific group that matches your business, you can contact our team and we’ll build one just for you for free.
Set Realistic and Actionable Goals
Benchmark data can be extremely valuable during monthly or quarterly meetings where you need to showcase your results to clients or company shareholders.
You can use the data to show where you’re company is outperforming the rest of the industry, which areas have been improved, and recommend new projects.
The idea is to show where you are now and where you can be by taking a certain action.
Once you have all this information, setting realistic and actionable goals becomes a whole lot easier since you’ll have a set standard you’ll be aiming for.
Related: Benchmark Reporting: How to Prepare, Analyze and Present a Good Benchmark Report?
Identify Performance Gaps and Opportunities for Improvement
What are your competitors doing really well? What are their biggest weaknesses and are there any major gaps in their business that your company can fill?
These are some of the major questions that competitive benchmarking will help you answer.
And don’t forget to check out these same things in your own business, you don’t want to miss out on any potential opportunities for improvement.
As Sun Tzu said in Art of War, “If you know the enemy and know yourself, you need not fear the result of a hundred battles.”
Commonly Used Competitive Benchmarking Metrics
Benchmarking metrics are the reference points you will use for comparisons, and they can come from any business department.
Finance, sales, marketing, HR… each of these departments comes with dozens of metrics specific to them that you can benchmark.
Because of the sheer volume, it might be hard to find a place to start.
If that’s the case, here are a few commonly used competitive benchmarking metrics to help you get started:
- Net Promoter Score (NPS) – Measures customer satisfaction and loyalty by examining promoters and detractors. Promoters are the people that are highly satisfied with your product and gladly recommend it, while the detractors are those who are likely to discourage others from using it. Naturally, you’ll want to aim for a positive NPS score.
- Customer Satisfaction Score (CSAT) – This is the overall satisfaction level customers have with your company and one of the most popular satisfaction metrics in general. It’s typically measured by asking your customers how satisfied they are with your services, and then averaging the scores. It’s similar to NPS but doesn’t reflect customer loyalty, which is why most businesses measure both.
- Customer Effort Score (CES) – Measures how much effort it takes for a customer to resolve a certain problem with your product/service. In other words, it shows how easy your company is to work with.
- Brand Awareness – How familiar or recognizable your brand is to consumers.
- Web Traffic – The number of users that visit your website in a specific time period.
- Brand Sentiment – Measures the public opinion of your brand, taking into account customer surveys, social media feedback, reviews, etc. The sentiment can be positive, neutral, or negative.
