Benchmarking is a term often mentioned in digital marketing, but also in business in general. It’s a process where a brand measures itself to other businesses by putting the KPIs (key performance indicators) side by side with those of competitors.
In practice, we use the benchmarking process to assess the site’s performance, the effectiveness of the marketing channel, and brand awareness. As such, benchmarking is an invaluable tool for analyzing our market position and can be introduced for various business models.
In this article, we’ll explain the concept, talk about its differences and similarities to competitive analysis, and how you can use it to your advantage.
What is competitive benchmarking?
During this process, companies use competitive benchmarking metrics to assess successfulness of a brand in comparison to industry leaders and direct competitors. By using numerous metrics, you can analyze the performance of different departments, channels, and approaches while also establishing your market share.
Among others, it’s a fantastic tool for learning more about best industry practices. By pairing it with thorough competitive analysis, you can discover what other businesses are doing better than you and how you can improve internal processes.
That being said, competitive benchmarks are especially important for brands that have been around for a while but still haven’t reached a level of success. The method provides numerous benefits and allows companies to:
- Detect problematic areas in their business model.
- Learn more about other companies’ best practices and things that worked for them.
- Tweak own company strategy according to the accrued data.
- Improve the quality of products and services
The fantastic thing about the competitive benchmarking process is that you can use it for just about anything. That is if you have access to other companies’ sales reports and other private data. So, nowadays, businesses commonly use various SaaS to perform competitor benchmarking.
For example, you can use this process for measuring customer satisfaction, social media performance, SEO metrics, and so on. Once you find companies that are outperforming your brand in one of these segments, you can analyze their processes to improve your own.
Competitive Benchmarking vs. Competitive Analysis
There are a few common misconceptions when it comes to this methodology. Specifically, many people don’t differentiate between competitive benchmarking analysis and competitive analysis.
As we’ve mentioned, benchmarking analysis is a process where you use competitive benchmarking metrics to assess the performance of your brand. It’s a category mostly focused on comparing numbers and percentages, and we use it as a basis for extrapolating other insights.
Competitive analysis, on the other hand, is a much more comprehensive term. This is a complex process that analyses every aspect of a company’s business, whether we’re talking about marketing, sales, finances, or operations.
So basically, benchmarking analysis is much better as a precursor for other types of analysis, but also for tracking trends. Standard, competitive analysis is a deep dive which, among others, uses benchmarking for data.
How do we use competitive benchmarking?
The benchmarking process gives you a clearer picture of your company’s performance and how you stack up against competitors.
It can be used by companies of any size and at any point in development. However, it usually provides much better insights if you’ve been in the industry for a while. In the end, if you’re a brand new business, there’s no point in tweaking your business plans from the get-go.
Aside from improving your processes, benchmarking can be used to detect new opportunities. The data can tell you where your opponents are weak and how to best strike those openings.
Among other things, benchmarking can be a motivational tool. You can use it to boost a team’s confidence and allocate bonuses when your employees outperform external competitors. However, you can also use it to compare the performance of different team’s within a company, thus stirring competitive juices.
We differentiate three main types of benchmarking:
· Process benchmarking
During process benchmarking, you’re comparing your internal processes with those of your competitors. Ideally, you should segment processes into smaller categories and find similarities between them so that the data is as relevant as possible. This method is especially efficient for tweaking smaller aspects of your business.
· Performance benchmarking
Performance benchmarking is a wide category that is mostly considered with end results. You can use it for various things, such as revenue growth, subscription rates, website visitors, total sales, and so on. Aside from using it for competitors’ performance, you can use benchmarking to compare the performance of teams.
· Strategic benchmarking
This particular method is mainly used to analyze business approaches and models and alter your internal strategies. It’s a macro analysis that is crucial for setting your long-term business goals and plans.
How do companies perform benchmarking?
Traditional competitive benchmarking is a very complex process that requires some planning. You can perform it on a company level, analyzing different aspects of your business, or you can pinpoint the most troublesome areas.
Upon collecting enough relevant data, you can do a deep dive that would allow you to gather specific insights. Here’s how the entire process goes:
1. Choose areas you wish to analyze
First off, you should find areas that you wish to benchmark. You can go through your social media performance, website performance, email marketing, finances, sales, and so on.
Keep in mind that the process shouldn’t be done blindly, as there are so many things you could benchmark. In other words, going with a comprehensive analysis can take a lot of time and money, which isn’t always what you’re looking for.
2. Find the right metrics
Once you know which area you wish to improve or simply assess, you can determine specific metrics for the job. Again, you should try to limit the number of competitive benchmark metrics you’re using, as things can get hectic rather quickly. Here are a few most popular categories that companies use:
- Customer engagement metrics
- Social media metrics
- Website metrics
- Brand sentiment metrics
- Product and service metrics
- Various sales metrics
Of course, each set of metrics is unique and might work in a vacuum or in conjunction with other metrics. For example, when analyzing social media performance, you might assess factors such as:
- Number of followers per social profile.
- The average number of likes, tweets, and shares.
- The average number of clicks on your links.
3. Analyze competitors
Once you have the basics set in place, it’s time to benchmark the competition.
Unfortunately, given there are probably many brands within your industry, you should make a strategy as to which ones to analyze. Here are a few suggestions on how to go about things:
- Analyze a few biggest industry leaders. However, unless you’re managing a big brand yourself, you won’t be able to compete with their numbers. Still, they can serve as a guide showing you where you need to be.
- Create a list with numerous companies, and extrapolate their data to see how you perform compared to the industry average.
- Focus on a few relevant competitors analyzing their product or service, marketing channels, or market share. By finding a weakness in their strategy or by copying it, you can chip away at that segment of the market, improving your positioning.
Keep in mind that gathering this data isn’t always easy. This is especially true for certain internal processes such as finances. Nevertheless, there are numerous online tools you can use to assess your digital marketing performance.
4. Use data to build a strategy
Once you have all this data in front of you, it’s time to tweak your processes accordingly. When talking about online marketing, in particular, here are a few ways you can benefit from this data:
- Use benchmarking to perform the SWOT analysis (discover competitors’ Strengths, Weaknesses, Opportunities, and Threats).
- Based on this information, create a short-term and long-term strategy. Make sure that the new strategy is according to your overall business goals.
- Use this data to reduce the gaps in areas where competition is dominant and emphasize weaknesses they have in their processes.
- Keep your eyes on your performance in the upcoming period. See if the new approach has provided the results you expected. If not, make additional changes until you find a strategy fit for your business model.
Most importantly, make sure that the new process is realistic and quantifiable. For example, you can try to increase your average social shares by 50% in the next 6 months by copying a competitor’s strategy. As long as you rely on numbers, you won’t walk blindly in the dark, and you can make a real change to your performance.
Keep in mind that benchmarking isn’t a one-off. It’s a process of continuous improvement that you can do across the board. In fact, given the modern economy’s dynamic environment, you should be, now more than ever, aware of what your competitors are doing.
If you need help with digital marketing benchmarking, contact MiroMind today! We specialize in various online and SEO services, and we can definitely help you carve a niche in your industry!