Benchmarking

What is Benchmarking?

Benchmarking is defined as the process of measuring products, services, and processes against those of organizations known to be leaders in one or more aspects of their operations. Benchmarking provides necessary insights to help you understand how your organization compares with similar organizations, even if they are in a different business or have a different group of customers.

Benchmarking can also help organizations identify areas, systems, or processes for improvements—either incremental (continuous) improvements or dramatic (business process re-engineering) improvements.

Incremental Quality Improvement vs Benchmarking Breakthroughs

Benchmarking has been classified into two distinct categories: technical and competitive. The House of Quality matrix and Gantt charts are often used to plot the benchmarking evaluation.

Technical Benchmarking

Technical benchmarking is performed by design staff to determine the capabilities of products or services, especially in comparison to the products or services of leading competitors. For example, on a scale of one to four, four being best, how do designers rank the properties of your organization’s products or services? If you cannot obtain hard data, the design efforts may be insufficient, and products or services may be inadequate to be competitive.

Competitive Benchmarking

Competitive benchmarking compares how well (or poorly) an organization is doing with respect to the leading competition, especially with respect to critically important attributes, functions, or values associated with the organization’s products or services. For example, on a scale of one to four, four being best, how do customers rank your organization’s products or services compared to those of the leading competition? If you cannot obtain hard data, marketing efforts may be misdirected and design efforts misguided. 

The relationship between KPIs and benchmarks

Benchmarks help you establish the appropriate targets and performance thresholds for your KPIs so you know if you are on track or not.

For example, if your company has a goal of providing stellar customer service, you might decide to use the Net Promoter Score (NPS) as your Key Performance Indicator. NPS is a commonly used metric based on answers to the question ‘How likely are you to recommend our service / product to a friend?’ You would collect benchmarks of NPS scores of your competitors as well as your industry to set the right target and put your performance into perspective. There are several websites that offer NPS benchmark scores for multiple industries.

In addition to industry, you may decide you need to consider organization size and country for meaningful context. HubSpot, for example, recently shared the story of its journey to identify the variance it observed in its NPS score based on geographic region.

Your definition of success may look different from anyone else’s, so sometimes tracking the default KPIs isn’t enough.

Three common types of benchmarks

When searching for standards, remember you are seeking what is often referred to as the 3Rs of good benchmarking: relevant, reliable, and realistic. Here are the three types of benchmarks I hear the most about from clients.

Historical benchmarks

Even the smallest nonprofit will have historical data. Whether you’re looking at average website traffic, social media engagement, or the return on your development emails, historical data provides a starting point for evaluating current performance.

Start with averages from past years’ reports and a simple goal to move up and to the right. You can factor in anomalies you know about budget changes, major donations, and even seasonality to determine when to set more aggressive targets — and when not to.

Using only historical benchmarks can increase your risk of missing major industry or market shifts. Your organization may be seeing a 2-3 percent annual increase in website traffic but what if your competitors are enjoying a 15 percent increase because they have adopted innovative technologies? So, once you’ve got your historical benchmarks established, you can move on to look at competitors and industry groups to see where your performance lands in the wider digital marketing landscape.

Competitive benchmarks

Every organization has competitors (or alternatives to the behavior you are seeking to change), so a benchmark tactic looks directly at your competitors to not only improve your internal operations but also understand your competitors better. We all want to know where we stand against the competition. An agency specializing in digital marketing or one of several tools can give you data on competitor keywords, pay-per-click (PPC) advertising campaigns, and overall website performance. SEMrush, Moz, Ahrefs, and Ubersuggest are four popular tools.

Industry benchmarks

Industry benchmarks compare performance metrics to the best in the industry from other companies and organizations. Once again though, comparing yourself to others may not be the best benchmarking strategy.

Look at the wide range of Mobile Ad Click-Through Rates within some industries. You need context to know where to place your organization. 

MailChimp and Constant Contact regularly publish lists of their customers’ average email metrics, segmented by industry. But again, before you match it and your email campaign performance, consider millions of organizations in their customer bases. Their results may be too broad to provide meaningful benchmarks to niche businesses or nonprofits even when you break their data down by industry.