What is benchmarking and how is it done?

Managing a business involves constant self-questioning in order to adapt its strategy to market changes and consumer demands. Some tools, such as benchmarking, allow evaluating an organization's performance while providing insights into the models to follow to achieve its goals.

What is benchmarking?

Benchmarking (or benchmark) is a marketing technique that involves comparing one's company with other players to assess its position in the market. Benchmarking is done through a comparative competitive analysis of the management and organization methods of rival companies, aiming to identify best practices with the intention to implement them internally.

The 4 types of benchmarking:

There are several methods to carry out benchmarking within a structure. From internal audits to analyzing competition on a specific function, the different types of benchmarking complement each other and provide a comprehensive market view. They can be conducted separately, depending on the needs and expectations of the company undertaking this approach.

1 - Internal Benchmarking:As the name suggests, this is a benchmarking carried out within the company itself. The goal is to compare performances and practices between different departments. This methodology mainly concerns large structures. In this case, benchmarking is easy to implement: all the necessary information is already held internally.

2 - Functional Benchmarking:Functional benchmarking focuses on a specific function within the company, such as customer service or the marketing department. The analysis involves comparing the service in question with more efficient companies in the same sector. An e-commerce site could, for example, conduct functional benchmarking on the entire logistics aspect by analyzing the methods of market leaders like La Redoute or Amazon.

3 - Generic Benchmarking:It is similar to functional benchmarking, but the comparison is made with companies from other sectors. It's also referred to as horizontal benchmarking. The idea is to choose highly efficient structures that are not operating in the same market at all. Thus, the comparison only concerns the way a certain process within the company is managed, disregarding products or services.

4 - Competitive Benchmarking:This approach, often considered the most important, involves comparing oneself with direct and indirect competitors with the goal of outperforming them. It relies on an in-depth competitive analysis that can be achieved using various tools:

  • Competitive monitoring: This involves researching, collecting, and analyzing information about the activities of other companies in the market.
  • Market research: This involves 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 consider internal processes, unlike other types of benchmarking.

What's the value of benchmarking?Benchmarking can be done when launching a new product or service in the market. Widely used in innovative fields, it significantly reduces risks. However, benchmarking isn't limited only to new projects. Instead, it offers numerous advantages at every stage of a company's development. It allows companies to draw inspiration from proven practices in other organizations, thereby enhancing competitiveness and productivity. Overall, implementing benchmarking provides a real competitive edge. It's not about copying success models but using them as a source of inspiration.

Benchmarking can be the starting point for a comprehensive strategic plan aimed at optimizing company performance and/or launching a product or service. External benchmarks are crucial to gain perspective and quickly define new actions to deploy. Benchmarking should be seen as a tool to synthesize information, making it more understandable, not as spying on rival companies.

How to benchmark in 6 steps?

While there are different types of benchmarking, there's a common methodology followed in 6 main steps. These steps should be strictly followed to ensure the success of the project.

1 - Conduct a self-assessment:
This is the starting point of any benchmarking. This step is somewhat a self-critique. Initially, the company should determine which elements will be analyzed. After choosing the focus, a comprehensive assessment is necessary. The SWOT analysis is a relevant tool for this self-assessment.

2 - Identify competitors:
Which companies will be the benchmarking references? It's essential to define their number. Analyzing only one company isn't ideal since there's a real risk of plagiarism. It's crucial to be open-minded and not limit oneself to just one type of company. Listing and quantifying comparison elements is also beneficial to stay focused.

3 - Collect data:
Once the groundwork is laid, the company can proceed to data collection. Reliable sources must be used, and the collected data should be in numerical form.

4 - Analyze the information:
With the data collected, the company can compare this with its internal data. Performance gaps can thus be identified. After this observation, necessary lessons should be drawn, causes for the gaps identified, and new objectives set.

5 - Communicate the results:
Internal departments involved in the benchmarking should have access to the results. Introducing internal changes is a process that takes time and requires the commitment of every employee.

6 - Follow an action plan and renew benchmarking:
To initiate transformation, clear new objectives should be defined. Benchmarking shouldn't be a one-off activity. It should be renewed regularly to measure results and continuously adapt the strategy.

What is the difference between competitive monitoring and benchmarking?

The main difference between benchmarking and competitive monitoring lies in their execution:

Competitive monitoring is a continuous process in which a company observes the evolution of external factors that can impact its activity. This encompasses its competitors, but also market trends and the environment in general. The goal here is to anticipate changes in the company's environment and adapt accordingly.Benchmarking, on the other hand, is a specific project carried out at a particular point in time. The person responsible for the benchmark will observe the techniques currently used by selected competitors and compare them with their company. The goal here is to see how the company positions itself compared to the competition.

Limitations of benchmarking:

Benchmarking offers many advantages but also has certain limitations. It's essential to be aware of these before embarking on such a process.

Firstly, this methodology requires time and resources. An entire team typically needs to be dedicated to the project, implying significant costs for the company.Next, the success of the benchmark is conditioned by the behavior and dynamics of the employees. They need to be open to change, especially the management team.Lastly, the line between inspiration and plagiarism is thin. One of the pitfalls of benchmarking can be copying a product or service or adopting practices that don't match the company's culture. A point of caution before starting!

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 should not be improvised, and the technique must be mastered to reap its benefits. It's not a miracle method but simply a first step towards change.

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