Benchmarking

We explain what benchmarking is, its purpose and indicators. In addition, we explore types of benchmarking, and more.

Un equipo de vendedores estudia el software que presentan a los clientes en una feria.
Benchmarking is a process of evaluating company performance against its competitors.

What is benchmarking?

Benchmarking is a comparative research process carried out by companies to measure their performance against their competitors. It uses various techniques that allow for the collection and analysis of information about company performance, products, services, advertising campaigns, and consumers.

The results of benchmarking are benchmarks, which are standards or points of reference, that is, indicators of various aspects regarding competitors. Benchmarks allow a company to plan a course of action, or to make changes in order to make the business more competitive.

The concept of benchmarking originated in the United States and gained popularity in the 1980s, based on the motto “learn from competitors”. It does not mean copying or imitating competitors, but rather identifying their impact in order to have it as a "point of reference" and compare it with the company's own performance, with the aim of obtaining different and more efficient strategies.

Benchmarking is a method that requires the use of information and communication technologies. It allows measuring and analyzing consumer data and customers’ relationship with companies, purchasing processes, and products and services through specialized software that enables data access and processing, as well as market research tools.

Purpose of benchmarking

The goal of benchmarking is to identify the aspects of a company that need to be improved. Based on benchmarks or reference information indicators from competitors, a company can develop a strategy to solve a business problem efficiently.

Benchmarking helps recognize the company's own strengths and weaknesses, the current market situation, and consumer trends, as well as to identify potential business opportunities.

Types of benchmarking

Un grupo de trabajadores intercambian información en una reunión.
Internal benchmarking can solve organizational climate issues.

The main types of benchmarking differ according to the type of comparative evaluation they measure:

  • Internal benchmarking. It is the process of internal analysis of large corporations that need to address the organizational climate to preserve a balance between the human resources, aligned with the corporate culture and the achievement of objectives.
    For example: a company has machines operating 24/7 with staff working in shifts of three working days. They carry out a performance comparative of employees in each shift to identify the factors affecting performance in order to improve production processes.
  • Competitive benchmarking. It is the process of comparing a company’s products, services or processes against those of its competitors, with the purpose of introducing competitive advantages.
    For example: a company that manufactures laptop computers has had a constant drop in sales over the past year. Performing a comparative analysis of its product against competitors’ best-selling products helps identify consumer preferences, thus improving the production process.
  • Functional benchmarking. It is the process of comparing a company's products, services or processes against brands in other sectors which, while not being direct competitors, share a similar target audience.
    For example: a luxury car conducting a survey among the clients of a luxury hotel chain to learn more about their preferences and tastes.

Benchmarks

The main benchmarks taken into account when conducting benchmarking are:

  • Marketing and SEO positioning (Search Engine Optimization). Digital analytics tools, such as Google Analytics, Semrush or Comscore, allow for data collection and data tracking, measuring the interaction between users and brand websites, as well as the types of searches they perform, and session duration.
  • Advertising and purchasing process. E-commerce tools allow for data tracking, such as users' response to online advertisements, consumer purchasing process, and preferences regarding competitors' products.
  • Accounting and financial data. Through financial statements periodically published by companies, it is possible to obtain data concerning a company's financial performance, its profitability, or liabilities. The purpose of this information is to have a reference economic scenario of competitor companies along with other benchmarks, in order to be able to measure the total impact of a particular marketing action.

Benchmarking process

The steps involved in the benchmarking process are:

  • Purpose of research. It means identifying the problem that the company needs to solve. For example: to improve its main product sales, which has been falling since the launch of a competitor's new product.
    In order to evaluate the situation, key indicators must be defined, i.e. analyze whether the problem is due to a pricing issue, quality, brand positioning, target audience, among other indicators.
  • Data collection. It involves gathering information on the competitor’ performance or products over a certain period of time through various digital analytics tools, financial reports, surveys or databases.
  • Results evaluation. It consists of reviewing and interpreting the data collected. It is important to count on the advice of professional analysts to have an insight of the data, and to elaborate value-added proposals.
  • Action plan. It is the implementation of the strategy defined as a solution or improvement to the organization's problem. For example: improve communication and customer service, offer promotions, adjust the price or quality of the product or service.
  • Plan follow-up. It is the periodic monitoring of the plan's progress and further analysis through reports made available by the different digital tools. This information is useful for decision-making.

Example of benchmarking

Benchmarking
Starbucks’ benchmarking allowed the company to find business solutions.

An example of benchmarking is the American company Starbucks, which conducted a functional benchmarking study to reduce coffee preparation time, due to the dissatisfaction shown by most customers with the long waiting time.

The company analyzed McDonald's production processes, which while not a direct competitor of Starbucks, was relevant to the study in the way it prepared its orders quickly and efficiently.

In the benchmarking analysis, Starbucks identified that its problem was due to the poor storage location of the coffee supplies, cups and the awkward layout of the counter area.

Therefore, their action plan involved introducing improvements in the store's layout to optimize the purchasing process for customers, and ensure that employees could prepare the beverages properly and in less time.

As a result in the medium term, Starbucks was able to significantly reduce the preparation time of each beverage.

References

  • "Las cinco etapas del benchmarking" (2020). Veigler.
  • "¿Qué es el benchmarking?" (2021). Sales Business School.
  • "Benchmarking, how and from where?: a systematic review of literature" (2019). vol. 40, p. 16, de Espinoza, M. & Gallegos, D. Revista Espacios.

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DE AZKUE, Inés. "Benchmarking".
Encyclopedia of Humanities. 19 January, 2024, https://humanidades.com/en/benchmarking/.

About the author

Author: Inés de Azkue

Bachelor of Arts in advertising (University of Morón)

Translated by: Marilina Gary

Degree in English Language Teaching (Juan XXIII Institute of Higher Education, Bahía Blanca, Argentina).

Updated on: 19 January, 2024
Posted on: 28 September, 2023

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