What Is Benchmarking? Rank Your Firm & Discover Gains
Business is competitive by nature, so every business owner wants to know how they’re faring against their competitors. It’s crucial information that reveals not just your performance, but also improvements that can give you an edge and nudge your profits past the competition. And the best way to get this information? Benchmarking! But what is benchmarking, exactly? And how do you complete an accurate benchmark analysis against your competitors, and discover ways to excel?
What is benchmarking?
Benchmarking is comparing your company’s performance or processes to other companies’ so that you can identify your ranking, and discover areas of improvement. These companies can be competitors, or they can be companies that excel in areas you want to improve in.
When carrying out competitive benchmarking, you would decide on metrics to compare, and then analyse your performance against your competitors. These metrics could be anything—website performance, customer loyalty, product satisfaction, etc.—provided they tell you how you’re faring against others in your industry. Once finished, you’ll have a good idea of how much your business might grow compared to your competitors, and a list of improvements that can spur that growth.
If you’re benchmarking against a company you want to emulate in some way, such as one who has exceptional customer support, you would compare your own support metrics and processes to theirs, and identify the gaps. This allows you to figure out why they’re so damn good, and then copy them. It’s a great way to discover ideas on how to grow.
Benchmarking can be used in almost every area of your business:
- Marketing—a company has excellent engagement on social media, and you want to understand why so you can grow your social audience. Or you may want to measure their SEO performance as a whole using a combination of metrics.
- Sales—your competitors seem to convert more leads than you, and you want to see how you compare against them, and where to make improvements.
- Products and services—a competitor’s service may be extremely popular, and you want to find out why so you can enhance your own.
- Support—a company has famously amazing support, which has led to lots of loyal customers. You want to figure out why so you can copy them.
- Manufacturing—a company is able to produce a high-quality product cheaply, and you want to understand how.
- Business strategy—a company you admire has seen excellent growth recently, and you want to figure out how they’ve achieved it.
Marketing can be a particularly effective area for benchmarking. It’s an extremely accurate predictor of growth (people who invest in profitable marketing will grow faster), and there’s plenty of publicly accessible data for you to find on other companies, using tools like SEMRush, PageSpeed, and Social Sprout. You can choose to focus on particular areas of marketing like adverts or SEO, or even complete a comprehensive benchmarking analysis that covers every key marketing area, with individual scores for each, as well as a final weighted score (more on this below).
Benchmarking can be broken down into three types:
- Performance benchmarking—comparing quantitative performance metrics like website traffic and impressions. This is the most “accurate” type of benchmarking because you’re using real data. It can focus on single metrics, or a weighted combination of metrics to assess a certain area, like social marketing.
- Process benchmarking—comparing processes like your sales cycle, product manufacturing, or customer support, to discover what you can enhance.
- Strategic benchmarking—comparing strategies such as your marketing strategy, price strategy, or growth strategy, to see where you might fall short.
The improvements that are identified in a benchmarking analysis can be tackled in an incremental, continuous way, like making small changes to your marketing, or as a larger one-off project, such as revamping your entire customer support process (known as business process re-engineering).
Benchmarking is an excellent exercise with tons of benefits:
- It allows you to gauge your performance compared to other companies.
- You can discover lots of ways to improve, creating strategies that help you grow.
- It gives managers the data they need to make effective decisions, like where to allocate resources.
- You can unearth innovations that your company hasn’t yet discovered.
- You can set effective goals based on what is working for other businesses.
- It serves as a form of gap analysis, telling you where you are now, and where you need to be.
- It’s great for management to see how the company is doing, and serves as justification for investing resources.
How to benchmark competitors
If you’re thinking of completing a benchmarking analysis, competitor benchmarking is a great place to start because it can give you clear insight into your performance, and how you can narrow potential gaps and grow your business. Here’s a step-by-step overview on how it works.
1. Decide on a goal
Benchmarking is a time-consuming process, so to get the most out of it, you’ll need to decide on a goal that will help you to grow your business. This can be anything you want—getting more leads through your website, improving the usability of a product, or boosting your Net Promoter Score are a few examples.
We’ll use lead generation for our example, with a goal to generate 25% more website leads over a six month period.
2. Select your metrics
Identify the metrics that are best suited to measuring your goal. This is critical to get right because if you measure the wrong thing, the exercise is wasted. Here’s a few examples of measurements for different goal types:
- Website lead generation—organic clicks, keyword rankings, domain authority.
- Social media engagement—impressions, reach, clicks, shares, comments, mentions, reactions.
- Website performance—page speed, usability scores.
- Customer satisfaction—customer reviews.
If your goal is related to digital marketing, you can find the most important things to measure in our digital marketing metrics guide, which covers metrics for every type.
When deciding these metrics, you’ll also need to identify how you can get the information for your competitors. There’s plenty of tools that have publicly available data on companies, especially in marketing. Here’s a sample:
- Google Ads
- Google Reviews
- Social Sprout
- Industry reports
You may need to get creative in this step and search for ways to get the data you need, but it may not be accessible in some cases, so you’ll need to remove that metric from your analysis.
3. Identify your direct competitors
Your direct competitors are similarly-sized companies who sell the same products to the same groups of customers. You probably already know who these are, and have been keeping tabs on them.
Pick the closest competitors you want to include in the benchmarking study. The more the better, but keep in mind that every new competitor will increase your workload because you’ll need to find data for each of them.
4. Get the metrics for your company
Identify your chosen metrics using the most appropriate tools available to you. These will vary depending on your metrics, but some common tools are:
- Google Analytics
- Google Search Console
- Google Ad Manager
- Google PageSpeed
- Social Sprout
- Social media management tools
For tracking metrics for lead generations, we’d use Google Search Console for clicks, Google for keyword rankings, and the MOZ toolbar for domain authority.
If you’re tracking more than one metric, you’ll have individual benchmarks for each, but you can also combine them into a weighted metric to give yourself a “final” score. For example, of the three metrics we’re tracking for lead generations, we can assign the following weights based on how important we think they are:
- Domain authority: 25%
- Clicks: 25%
- Keyword rankings: 50%
We assigned 50% to keyword rankings because they determine whether people will see the results in the first place, so are the most important of the three. Deciding weights is more of an art than a science, and because your metrics are unlikely to use a similar scale (e.g. domain authority goes up to a hundred, and clicks into thousands), the calculation to align them is quite complex. We recommend reading more about weighting techniques before deciding whether to do this part. You’ll still have valuable benchmarking data without it.
5. Get the data for your competitors
Use the tools you’ve identified in step two to get the data for your competitors. For our metrics, we’d use the Moz toolbar for domain authority, SEMRush for clicks, and Google search for keyword rankings.
6. Compare the data to identify performance gaps
Put all of the data into a spreadsheet, with columns for each metric and a weighted score if you’ve created one. This is how our example data looks:
Now sort the data by one of the columns to see how you rank. This is your final benchmarking data that shows how you’re doing against your competitors, and your ranking will determine where you can make improvements. For example:
- We rank third for domain authority, in which case we need to figure out how to increase that number. One of the best ways to achieve this is by creating blogs that bring more people to the site, or another task that boosts our rankings in Google.
- We rank second for clicks, so we’d consider improving our pages titles to make our search results more enticing.
- We rank third for keyword rankings, so we may want to complete some keyword optimisation tasks, or create related content that supports our primary keywords.
7. Make the improvements to close the gaps
Once you’ve identified your benchmarks and improvements that can be made, start making them! If you need to get approval from managers for these changes, presenting your benchmark information and methodology is an effective way to get it. These changes can also be a good opportunity to review how much you budget for marketing, and make the adjustments you need to include them.
8. Re-do your benchmarks after a period of time
When your improvements are made, you’ll want to re-do your benchmarks to determine whether they have made a difference and helped you to achieve your goal. How long you wait will depend on what you’ve changed. In our example, making SEO-related changes like content improvements and keyword optimisation can take many months to have an effect, which is why we set a six month goal. You’ll need to use your judgement for your own timeframe, but as a rule of thumb, three or six months is usually a good time period.
What is benchmarking? It’s a powerful way to rank yourself against other companies, and find ways to improve. With the right tools and methodology, business benchmarks can be easily discovered, so you can start upgrading your processes and achieving growth. We hope this article has provided a clear overview of the process—good luck!