Benchmarking 101: Definition, Types, Benefits and How to Use Them

Author's avatar Analytics Feb 2, 2023 21 minutes read

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    Peter Caputa

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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.

    What Is Benchmarking?

    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.

    • In management, managers use benchmarks to stay on top of the various business units and compare information (such as sales per employee) to similar companies.
    • In marketing, we can benchmark the efficiency of different marketing campaigns and strategies (for example, email marketing benchmarks).
    • In accounting, you can compare profitability, solvency, or gross margin to the industry average.

    Here’s a visual representation of a benchmark where a company outperforms its cohort (the median values are above the group standard).

    visual representation of a benchmark where a company outperforms its cohort

    Here’s another example, one in which the company’s median value is below the standard.

    visual representation of a benchmark where company's performance is below its cohort (the standard)

    What Is Benchmark Data?

    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.

    What Are Benchmarking Metrics?

    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:

    • Marketing: cost per lead (CPL), click-through rate (CTR), return on investment (ROI), customer acquisition cost (CAC), etc.
    • Sales: average deal size, closing rate, pipeline velocity, quota attainment rate, etc. There are hundreds of sales benchmarks you can use, so it’s much better to narrow it down to one specific area.  
    • Finance: return on assets, return on equity, gross margin, net profit margin, etc.

    Why Is Benchmarking Important?

    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.

    Types of Benchmarking

    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

    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.

    Performance Benchmarking

    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.  

    Strategic Benchmarking

    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.

    Financial Benchmarking

    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.

    Benchmarking from an Investor Perspective

    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.

    Benchmarking in the Public Sector

    Public administration organizations use industry standards to identify areas for improvement in terms of the services they provide.

    Product Benchmarking

    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.

    Functional Benchmarking

    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.

    Best-in-Class Benchmarking

    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.  

    Energy Benchmarking

    Comparing energy-related performance data against set industry standards that have been determined by eco-organizations.

    The Benefits of Benchmarking

    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.

    Improve Your Overall Competitive Analysis Process

    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.

    Stay on Top of Current Trends and Forecast New Ones

    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.

    Plan and Set Goals

    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.

    Celebrate Your Wins

    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.

    Create Your Own Benchmarking Process in 4 Steps (Or Just 2 with Databox)

    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:

    Benchmarking Process Planning

    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:

    • Defined what you want to improve / benchmark
    • Know who you will benchmark against (will it be internal, external, etc.)
    • Have a list of tools that will help you extract the necessary data
    • Defined the timeline, responsibilities, and resources required

    Collecting Data

    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.

    Data Analysis

    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.

    Presenting the 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.

    Eliminate Manual Benchmarking with Databox

    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.

    Free Benchmark Groups to Join

    We have 100+ open groups that you can join for free and there’s no limit on how many you can join at the same time.

    The only important thing is that you have the corresponding data source to connect and that you meet the group criteria (e.g. Medium-Sized B2C Business).

    Groups can be as detailed as you want and you can filter by four criteria – company size, revenue size, industry, and business type.

    Let’s go through some of the currently popular groups among users.

    And by the way, if you don’t find a specific group that you’d want to join, you can get in touch with our support team and we might be able to create one just for you.

    1. Google Analytics Benchmarks for B2B Companies
    2. Google Analytics marketing benchmarks for B2C companies
    3. Facebook Ads Benchmarks for All Companies
    4. Social Media Benchmarks for B2B companies
    5. LinkedIn Company Page Benchmarks for SMBs
    6. Google Analytics 4 (GA4) for All-Sized Companies
    7. B2B Instagram Business Benchmarks
    8. Local SEO Benchmarks for Small Businesses
    9. Ecommerce Google Ads Performance Benchmarks
    10. B2B HubSpot Email Marketing Benchmarks
    11. Youtube Engagement Benchmarks
    12. TikTok Ads Benchmarks
    13. Klaviyo Benchmarks for Ecommerce and Marketplaces
    14. Google Analytics Benchmarks for the Real Estate Industry

    Google Analytics Benchmarks for B2B Companies

    Built for: B2B companies

    Available metrics: Compare your B2B website analytics KPIs using your Google Analytics Universal account. Marketing Benchmark Metrics include: users, bounce rate, pageviews, average time on page, sessions, average time on page, sessions, average session duration, pages per session, goal conversation rate, goal completions and goal value.

    Join the group here.

    Google Analytics Marketing Benchmarks for B2C companies

    Built for: B2C companies

    Available benchmarks: Compare your B2C website analytics KPIs using your Google Analytics Universal account. Marketing Benchmark Metrics include: sessions, new sessions, users and new users, bounce rate, average session duration, average time on page and pages per session.

    Join the group here.

    Facebook Ads Benchmarks for All Companies

    Built for: Both B2B and B2C companies; company size from 1-100,000+

    Available benchmarks: Reach frequency, clicks, CTR, CPM, CPC, amount spent, purchases, purchase conversion amount, and ROAS.

    Join the group here.

    Social Media Benchmarks for B2B companies

    Designed for: B2B companies (Any size)

    Available benchmarks: Facebook Ads (impressions, amount spent, and link clicks), Twitter Ads (impressions and tweet engagements), LinkedIn Ads (clicks, impressions, and spent), and Snapchat Ads (total impressions and amount spent).

    Join the group here.

    LinkedIn Company Page Benchmarks for SMBs

    Built for: Small to medium-sized companies (SMBs) with less than 250 employees.

    Available benchmark metrics: clicks, impressions, followers, likes, reactions, and comments.

    Join the group here.

    Google Analytics 4 (GA4) for All-Sized Companies

    Built for: Both B2B and B2C companies; company size 1-100,000+

    Available benchmark metrics: Sessions, users, events, engagement rate, and other related metrics for Google Analytics 4.

    Join the group here.

    B2B Instagram Business Benchmarks

    Built for: B2B companies

    Available benchmark metrics: Reach, impressions, profile visits, new posts, new followers, new following, website clicks, email clicks, and other Instagram-related metrics.

    Join the group here.

    Local SEO Benchmarks for Small Businesses

    Built for: B2C companies with 1-50 employees and $0 – $10 million in revenue

    Available benchmark metrics: Benchmark Google My Business (GMB) metrics such as searches, total reviews, phone calls, and average ratings. Plus, Google Analytics metrics such as sessions, pageviews, average session duration, and bounce rate.

    Join the group here.

    Ecommerce Google Ads Performance Benchmarks

    Built for: Ecommerce businesses 

    Available benchmark metrics: Clicks, impressions, CPC, conversions, CTR, conversion value, and more.

    Join the group here.

    B2B HubSpot Email Marketing Benchmarks

    Built for: B2B companies 

    Available benchmark metrics: Emails sent, emails delivered, emails opened, emails clicked, bounce rate, new leads, and more.

    Join the group here.

    YouTube Engagement Benchmarks

    Built for: Both B2B and B2C companies.  

    Available benchmark metrics: Views, watch time, average view duration, subscribers gained, likes, and comments.

    Join the group here.

    TikTok Ads Benchmarks

    Built for: All companies that have a Youtube channel  

    Available benchmark metrics: Clicks, conversions, CPA, CPC, CPM, impressions, total cost, and more TikTok-related metrics.

    Join the group here.

    Klaviyo Benchmarks for Ecommerce and Marketplaces

    Built for: Ecommerce and marketplace businesses.

    Available benchmark metrics: Opened email, clicked email, subscribed to list, received email, marked as spam, dropped email, bounced email, and more.

    Join the group here.

    Google Analytics Benchmarks for the Real Estate Industry

    Built for: Companies in the real estate industry

    Available benchmark metrics: Sessions, users, bounce rate, average session duration, and others.

    Join the group here.

    Benchmark Your Performance against 1,000+ Companies for Free

    Benchmarking your company’s performance against industry competitors is one of the best ways to ensure your business is on the right track.

    It helps you identify the best and worst performing areas, see what needs to be improved, gain insight into some best industry practices, and set realistic goals and performance targets.

    However, while these benefits sound remarkable on paper, you can only get them through proper benchmarking.

    And proper benchmarking is tough.

    You need to spend a lot of hours on it, manage and direct a team of employees, allocate sufficient resources, analyze industry trends, check if competitor data is publicly available, go through your own organization’s metrics… things just add up.

    Plus, you’re doing everything manually for the most part. Benchmark reports and features from certain tools you are already using are helpful to some extent, but they don’t eliminate the major part of the process.

    But Databox’s Benchmark Groups product does.

    With our product, you can quickly see how you stack up against your industry competitors or companies that are similar in size.

    There are 1,000+ metrics you can benchmark, from 50+ of the most popular marketing, financial software, sales, and SEO tools.

    All of this is completely free, there’s no catch.

    To join our groups, we only ask you to share your data for the metrics that you want to see and benchmark. Your data is completely anonymous and so is your competitor’s. You can also opt out of the groups at any moment.

    Hundreds of valuable insights are just a few clicks away!

    Join Databox Benchmark Groups today to eliminate the hassle of manual benchmarking once and for all.

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    Article by
    Filip Stojanovic

    Filip Stojanovic is a content writer who studies Business and Political Sciences. Also, I am a huge tennis enthusiast. Although my dream is to win a Grand Slam, working as a content writer is also interesting.

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