We also explore the difference between industry benchmarking and key performance indicators, take you through the different types of benchmarking for businesses and explain why customer feedback is an excellent benchmarking tool.
What are industry benchmarks?
Industry benchmarking is when you compare your business processes and performance metrics to other businesses within your space or industry, typically your competitors. An industry benchmark is any reference point that can be compared, such as customer satisfaction, product quality or operational costs.
Why is benchmarking important?
Understanding how you’re performing against your competitors will help you see where you stand in the market and what you need to focus on to start outperforming them. If you’re a smaller business or just starting out, you can use benchmarking to guide your financial forecasting and budgeting, as you can see the industry standards.
Industry benchmarking also allows you to get ideas and inspiration from your competitors. What are they doing differently? Is it working or failing? How can you do what they do, but better? These are all questions that benchmarking can help you answer.
So, if you want to grow and improve your business, or you simply want to see where you stand in relation to your competitors, industry benchmarking should be a key part of your growth strategy.
Examples of benchmarking in business
There are plenty of ways to benchmark your business against others in your industry. You could:
- Compare sales figures for similar products made by your company and your closest competitors.
- Measure service delivery timeframes of your competitors and compare them with your own.
- Survey multiple companies within your industry to identify best practices.
- Analyse marketing processes and platforms used by competitors to see how your own compare.
- Investigate customer reviews and ratings for products and services offered by other businesses to understand consumer sentiment and identify ways to improve your own customer experience.
What is internal benchmarking?
Internal benchmarking is the process of comparing processes and performance metrics within your own company, to understand how well your business is doing and identify opportunities for growth. If you want to know what success looks like within your business, you should look at what certain teams are already capable of – or have been capable of in the past. You can compare how different teams carry out business processes, workflows or activities to identify what works best.
Once you’ve identified what ‘best practice’ looks like, this should then become the standard for improvement within your business.
The limitations of internal benchmarking
Internal benchmarking can be useful to assess company performance and identify areas for improvement. However, there are limitations as the scope of internal benchmarking is very narrow. Your business needs to be aware of your competition and not solely focus on internal operations and processes. By comparing yourself to others in your industry, you’ll ensure your business remains competitive.
How does industry benchmarking work?
If you’re ready to start industry benchmarking, follow these simple steps to help you understand how you’re performing against your competitors.
- Identify what you want to benchmark
First, you need to decide what you want to benchmark, for example, a product, service or process. Think about your weakest areas or those you want to focus on. If your customer service is your unique selling point, for example, you may want to discover if your team is outperforming your competitors. There are always improvements that can be made.
- Establish how you’re going to benchmark
Once you’ve decided what you’re going to benchmark, the next step is to establish your measurement for success. How are you going to compare whatever you’re benchmarking to the competition? Price benchmarking, for example, is fairly straightforward, while product benchmarking may involve you heavily researching your competitor’s products and creating a comparison list between your product’s features, strengths and weaknesses.
- Decide who you want to benchmark against
It’s unlikely you’d want to benchmark yourself against every single one of your competitors. Pick your biggest competitors or the ones that you think are the strongest in the field you’re trying to benchmark against. Remember that benchmarking can be internal as well as external – for example, you could benchmark one of your processes against another, or one team against another.
- Start collecting the data you need to benchmark
The data you need to collect will depend on the type of benchmarking you choose to do. It could vary from review and survey responses, to live chat response times and Google rankings. Your own business data should be easy to obtain. To gather data on your competitors, you’ll need to do your research, which could include looking at their website, recent press releases, any reports they’ve published or been featured in, and using various competitor analysis tools, such as SEMrush or SimilarWeb.
- Act on the results to make improvements
Now you have the data, it’s time to decide what changes you’re going to make and how you’re going to measure the success of these changes. You could conduct a customer survey every six months or regularly measure your Net Promoter Score, for example. Whatever you decide, make sure you act on the information you discover to ensure your benchmarking efforts don’t go to waste.
How to benchmark against competitors
After you’ve identified who your competitors are, you need to start researching and collecting the data you need to benchmark yourself against the competition. Getting hold of information on your competitors can be a challenge, however some metrics are easier to find than others.
SEO performance
There are several tools available to help you understand the performance of your competitors’ websites. While the information is public, some of the best tools on the market aren’t free, so you may have to invest to get the data you need.
Share of voice
You can also measure information on a competitor’s share of voice across online channels, review websites and social media platforms. There are many digital tools available to help you measure share of voice – they can help you understand what people really think about a particular brand, as well as how many consumers are talking about them and the sentiment of the conversation.
Private data
While private company data is much harder to access, there will be some useful information about your competitors in the public domain. Research company documents such as sales reports, news articles and press releases to learn what information your competitors are releasing. If you can find regular press releases, for example, you might be able to glean trends that could be helpful for your benchmarking.
Customer surveys
One of the most effective ways to find information about your competitors is through benchmarking surveys. By sending out surveys, you can ask anyone about anything – including your competition. Use them to ask consumers what products or services they’ve used before and whether they’d use them again or recommend them to friends and family.
What’s the difference between industry benchmarking and KPIs?
Key performance indicators, or KPIs, are used to track your business’s performance in relation to a specific goal. For example, your goal may be to increase sales revenue by 10% this year or reduce customer service response rates by 40%. KPIs tell you whether you’re on track to reach that goal.
While KPIs help you compare the progress you’re making towards a specific goal, industry benchmarking compares your performance against your competitor’s. Both allow you to identify ways to improve your own performance.
What are the different types of benchmarking?
There are different types of benchmarking, depending on what you want to achieve. Here, we take a look at some of the most common types of industry benchmarking.
Process benchmarking
Are your processes as efficient, fast and effective as they could be? Process benchmarking allows you to better understand your processes, by comparing them to how the top players in your industry operate. Improving your processes is important to keep your business running smoothly and at maximum efficiency.
Strategic benchmarking
To strengthen your strategies, approaches and business model, you need to see what your competitors are doing differently. What strategies do they employ that work and result in effective teams? By understanding the different strategies being used in your industry, as well as their strengths and weaknesses, you can help improve your own planning and determine your business’s priorities.
Performance benchmarking
Performance benchmarking allows you to measure the performance outcomes that are essential to reaching your objectives, such as customer satisfaction or revenue growth. These outcomes are usually measured by running in-depth surveys or interviews. This type of benchmarking can help you to identify any performance gaps, as well as how you’re performing in comparison to your competitors.
Price benchmarking
If you want to make sure you remain competitive on price, or if you’re a new business trying to assess your products or services, price benchmarking is vital. It considers both the pricing of competitors’ products and services, as well as comparing quality. This allows you to price your products and services fairly, as well as gain knowledge that can help you outperform the competition.
Product benchmarking
Product benchmarking compares your products with your competitors’, helping you to discover ways to make changes and improvements, and identify your market position. Use product testing and consumer research to determine your product’s strengths and weaknesses, allowing you to compare them with others on the market.
How can Feefo help with industry benchmarking?
Customer feedback is an excellent benchmarking tool. Not only can you compare review scores against your competition, but you can also collect honest opinions from your customers, allowing you to learn more about your business and your competition. Feefo has a range of tools that can help you with industry benchmarking.
Understand product quality using product ratings
If you’re planning to conduct product or price benchmarking, collecting product reviews is vital. By understanding how your customers rate your products and why, you can see where they sit in the market compared to similar products. When collecting product reviews, use Feefo’s Product Attributes feature to ask customers to rate features such as ‘quality’, allowing you to benchmark prices against other products of a similar quality.
Research the competition with customer surveys
Surveys are flexible, private and can be distributed to anyone, allowing you to ask anyone about anything, including your competition. Use surveys to collect in-depth feedback on your latest products and see how they compare to similar products on the market. Ask consumers what products they’ve bought before and gather more details about what they thought of each product. Surveys should play a key role in your benchmarking efforts, as they can be used to collect a wealth of information from customers, prospects and employees.
Measure your customer loyalty with Net Promoter Score
Knowing how loyal your customers are can play an important role in performance benchmarking. Net Promoter Score, also known as NPS, is a metric that’s widely used to measure customer loyalty. Understanding your NPS is easy. Simply add one question to your surveys or feedback forms: ‘How likely are you to recommend [business name] to a friend, relative or colleague?’. Customers answer on a scale of 0 – 10, which puts them into one of three groups: promoters, passives and detractors.
The higher your NPS score, the more loyal your customers are. By digging deeper into your reviews and surveys, you can see what promoters love about your business and what detractors would change, allowing you to identify your strengths and weaknesses and make improvements.
Improve your processes with Customer Effort Score
Customer Effort Score (CES) measures how easy or difficult it is for a customer to complete a task, such as making a purchase from your website or returning an item. This is useful when you’re process benchmarking, as it allows you to measure how easy some processes are compared to others.
CES questions can be added to any Feefo survey, asking customers to answer on a simple 1 – 5 scale, with 1 being ‘Very difficult’ to 5 being ‘Very easy’. You can add additional questions to your survey to discover why customers struggled with a specific task, allowing you to see which processes people are struggling with most and make meaningful improvements.
Learn if your customers are happy with Customer Satisfaction Score
Another metric you can measure with Feefo is Customer Satisfaction Score (CSAT). This allows you to see how happy your customers are with a particular product, service or process. For example, you may want to know how satisfied customers are with the level of support new customers receive and benchmark this against the support existing customers receive. You may even want to survey customers who have just moved from a competitor brand to yours.
Identify common feedback themes with Performance Profiling
Feefo’s Customer Sentiment Insight tool uses artificial intelligence technology to automatically analyse all the feedback you receive and identify common themes and the sentiment surrounding them. If you collect thousands of customer reviews or surveys, this tool will save you time and effort by automatically identifying trends in your feedback. This makes it easier for you to see what people love about your business and what needs to be improved and can be used to benchmark products, services or processes against one another.
