One of the many ways to grow as a company is by comparing it with its competitors. This typically involves the use of certain relevant metrics, while investigating how competitors achieved their own results. Keep reading to know more about competitive benchmarking and how to maximize it for your business.
Competitive Benchmarking Explained
Competitive benchmarking involves the strategic monitoring of one’s competitors, their actions and continuing strategies. It’s essentially an endeavour to measure how others are doing relative to one’s company over time.
A benchmarking analysis uses a group of metrics for the comparison. But a comprehensive analysis will comprise an attempt to understand what led to the metrics. By implication, a company can seek out the best way to obtain certain metrics which are pointers to the best practices. This makes to see how much the company’s approach aligns with the identified best practices.
It is worth noting that competitive benchmarking and comprehensive analysis are not the same. The former is simply one of the processes involved in the more comprehensive latter.
How Benchmarking Analysis Works
Completing a benchmarking analysis involves three important processes, as listed and explained below.
1. Selecting Competitive Benchmarks: The first step is to determine the benchmark, i.e, those things to be measured. This may be by identifying essential metrics to be improved on, especially from the company’s current key performance indicators (KPIs). Customer satisfaction and retention, brand awareness and social reach are all examples of suitable competitive benchmarks.
2. Identifying Competitors: To maximise competitive benchmarking, it’s important to carefully select the competitors for comparison. A company should make its choice based on what it intends to benchmark and its purpose for benchmarking.
Ideally, a company may benchmark against companies of similar size and success, that is, their closest rivals. They may also benchmark against industry leaders or even those ranking behind them in the industry.
3. Defining How to Quantify Competitive Metrics: Some competitors’ data are public and can be easily measured through popular benchmarking tools. But getting hold of one’s competitors’ private data can be quite hard, but it’s not impossible.
Therefore, personal research presents a way out. Studying competitors’ press releases, sales reports and news articles can offer more specific information about them. Also, the company can source data from certain companies dealing in the kind of data required for benchmarking analysis.
However, some companies have provided paid tools and platforms to facilitate benchmarking analysis. Likewise, there are adaptable, sector-based competitor benchmarking report templates which companies may find useful.
Benefits of Competitive Benchmarking
Benchmarking metrics can be used to achieve three crucial goals namely; to improve processes, strategies (business approaches and models) or performance (outcomes). All of these combine to reduce inefficiency and foster business growth.
In addition, competitive benchmarking helps companies to identify trends faster and fine-tune their objectives accordingly. This is typically motivated by results obtained after benchmarking their competitors.
Furthermore, competitors’ actions and strategies become clearer with competitive benchmarking. This is because companies can discern what their competitors are doing better and replicate such, especially where their competitors continually outperform them in a certain KPI.
In fact, an excellent competitive benchmarking may propel a company to alter its entire approach in ways they could never imagine, while positioning itself for success
Be that as it may, setting up and tracking competitive benchmarking is often time-consuming. It may incur considerable costs in some cases. However, the resultant insights are generally deemed to be worth the investment of time and resources. And while competitive benchmarking is desirable, a company must still prioritise setting SMART goals and executing a clear differentiation strategy, i.e, setting it apart from competition.
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