What is Benchmarking? What Is It and How Do You Use It?
Benchmarking consists of identifying the “best practices” of the competition and applying them to your company.
In this article, we explain this popular method of competitor analysis simply.
What is Benchmarking?
This method will sound familiar even if you don’t know the term “benchmarking” yet.
Even without calling this process anything specific, it is undoubtedly used many times, and its use is taken for granted.
The term benchmarking designates a management instrument that constantly compares one’s products, processes, techniques, and values with standard or the competition’s values (especially those of the main competitors).
The criteria can be selected according to various criteria, although they are generally analyzed for quality, time and costs.
Based on the results obtained, on the one hand, it is possible to classify the company itself. On the other, the campaigns themselves are optimized.
Benchmarking makes it possible to get closer to those who occupy the first sales positions, press the existing gap, and even get ahead of the competition.
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It is also about learning from the best; therefore, “benchmarking” can be used by all companies, including those operating in Ecommerce. But it is not exclusively a sectoral comparison; for example, analyzing indices or “benchmarks” within a company is also possible.
In other words, it is about finding examples of “good practices” to improve productivity, which, in turn, serve as guidance to improve one’s own performance.
But it is not about copying the competition; on the contrary, it is about deploying the potential for improvement.
Furthermore, through “benchmarking”, concrete solutions are not achieved. Still, the current situation is analyzed to obtain conclusions that lead us to adopt “good practices.”
What is a Benchmark?
The “benchmark” spoken of in this context (a term that initially comes from statistics) designates a standard that will be taken as a reference to measure and evaluate something.
From a business point of view, this reference value can generally be given in the form of the best performance of the competition concerning which one’s approach must be adapted.
The benchmark defines comparative values based on their values to measure the objectives.
The benchmarking procedure
The “benchmarking” steps can be defined as follows:
- The selection of the object (product, method, process) will be analyzed and compared.
- Selection of the company you want to compare. To do this, it is essential to determine what similarities must occur to guarantee comparability.
- Data collection (analysis of secondary information, obtaining primary information, for example, during a series of visits to the company).
- Determination of performance gaps and their causes.
- Establishment and execution of improvement measures.
The objects, partners and final magnitudes of comparison must be previously defined to use the “benchmarking” method.
However, the benchmarking process must be applied consistently and systematically.
The company must constantly optimize itself through said comparison to maintain long-term competitiveness accordingly.
Types of Benchmarking
Depending on the definition, several types of “benchmarking” are distinguished in the business field.
- For example, internal benchmarking (within a company) between several regional divisions.
- External benchmarking (analysis of external companies considered the most potent competitors).
- Strategic benchmarking ( investigates the general strategies and approaches of successful competitors)
- Competitive benchmarking (classification of the company itself about the performance of products and services)
The “benchmarking” of the process (comparison with the company that applies “good practices” and that offers comparable products)
Functional benchmarking ( comparison with partners from other sectors to find ways to improve work processes)
How is Benchmarking used?
Benchmarking can be used in different ways by companies. As mentioned, it allows for designing the necessary methods to achieve better performance.
This applies, for example, to operational efficiency or product design. But comparisons can also be established regarding the expenses incurred, the analysis of which will allow the company’s own expenses to be recorded and optimized accordingly.
Furthermore, with the help of benchmarking, it is possible to focus on resources that can constitute a strategic advantage.
Here are some tips for successful benchmarking:
- Clearly define benchmarking objectives. What do you want to achieve with benchmarking?
- Choose the right benchmarking partners. Make sure you compare yourself to companies that are leaders in your sector.
- Collect quality data. Make sure you collect accurate and comparable data.
- Analyze the data carefully. Identify areas where you can improve.
- Develop an action plan. Develop a plan to implement the identified improvements.
- Measure the results. Be sure to measure the results of your benchmarking efforts to see if you are achieving your goals.
Benchmarking can be a valuable tool for companies that want to improve their performance. However, it is essential to note that benchmarking is not a magic solution. It requires time, effort and commitment on the company’s part to succeed.
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