Competitive Benchmarking

Knowing your position in the market is needed for growth, and tracking key performance indicators is essential to measure your progress.

While focusing on operations internally is important, looking outward can reveal new opportunities. This is where competitive benchmarking analysis becomes valuable.

It offers a structured approach to compare your business with industry leaders, highlighting areas for innovation and enabling you to refine your competitive benchmarking strategy.

What is competitive benchmarking?

Competitive benchmarking is the process of comparing your company’s products, services, and processes to those of direct and indirect competitors and industry leaders.

It's not about copying what others do.

Instead, it’s about understanding their performance to identify gaps in your own strategies, strengthen your company's performance, and discover opportunities for improvement.

Why is competitive benchmarking important?

Competitive benchmarking provides an external perspective on your performance, helping you break free from assumptions.

By informing your business strategy, this process is vital for several reasons:

• Identifies Strengths and Weaknesses: It highlights where you excel and, more importantly, where you lag behind competitors.
  

• Reveals Best Practices: By understanding what top performers are doing differently, you can uncover proven strategies to adopt.
  

• Fosters Innovation: Benchmarking encourages your teams to think creatively and find new ways to improve.
  

• Optimises Resource Allocation: It helps you invest time and money more effectively in areas that will yield the greatest returns.

Types of Competitive Benchmarking

Depending on what you want to measure, different approaches can provide different insights.

You might start with internal benchmarking to compare your own departments or processes before looking outward for external comparisons.

• Process Benchmarking: This focuses on specific operational processes or workflows. You might compare your customer onboarding process, supply chain efficiency, or software development cycle against a competitor’s to identify opportunities for greater speed and efficiency.
  

• Strategic Benchmarking: Here, the focus is on high-level strategies and business models. You would examine how leading companies approach market entry, diversification, or customer retention to inform your own long-term planning and gain a competitive edge.
  

• Performance Benchmarking: This involves comparing performance outcomes using specific metrics. You might look at metrics like sales growth, market share, customer satisfaction scores, or cost per acquisition. This quantitative comparison helps you gauge your overall market performance.

Competitive Benchmarking Metrics

The metrics you choose will depend on your goals.

Conducting a thorough competitor analysis can help you identify which benchmarks are most relevant to your industry and objectives.

• Financial Metrics: Revenue, profit margins, return on investment (ROI).

• Marketing Metrics: Market share, brand awareness, customer acquisition cost (CAC), lead conversion rates.

• Customer Metrics: Customer satisfaction (CSAT), Net Promoter Score (NPS), customer lifetime value (CLV), churn rate.

• Product Metrics: Product quality ratings, feature adoption rates, time to market.

• Operational Metrics: Employee productivity, cost per unit, order fulfilment time.

How to Do Competitive Benchmarking

1. Define What to Benchmark: Begin by identifying the specific area of your business you want to improve. Is it your marketing efforts, your customer service response time, or your product pricing? Be precise about your focus to ensure your efforts are targeted.
   

2. Identify Competitors and Leaders: Select a handful of direct competitors and industry leaders to benchmark against. Don't just look at who you compete with today; include aspirational companies that excel in the area you’re analysing.
   

3. Gather Data: Collect relevant data on the metrics you defined. This information can come from public sources like annual reports, industry publications, and market research firms. You can also use tools for website analysis, social media monitoring, and customer reviews.
   

4. Analyse the Data and Identify Gaps: Once you have your data, compare your performance against your chosen benchmarks. Look for significant differences and identify performance gaps. Ask why these gaps exist. Is it a difference in technology, process, or strategy?
   

5. Develop and Implement an Action Plan: With your insights in hand, create a clear, actionable plan to close the gaps. Set realistic goals, assign ownership to team members, and establish a timeline for implementation.
   

6. Monitor and Repeat: Benchmarking is not a one-time project. Continuously monitor your progress against your goals and the performance of your competitors. Markets evolve, so your benchmarks should too.

Competitive Benchmarking Examples

To see how this works in practice, consider these scenarios:

• An e-commerce retailer notices its cart abandonment rate is higher than the industry average. Through process benchmarking, they analyse the checkout processes of leading online stores. They discover that top performers offer guest checkout and more payment options. The retailer implements these changes and sees a significant reduction in abandoned carts.
  

• A SaaS company wants to improve its customer retention. It conducts performance benchmarking by comparing its churn rate and Net Promoter Score (NPS) against its main competitors. The analysis reveals that a competitor with a high NPS offers extensive video tutorials and a proactive customer success programme. The SaaS company decides to invest in creating its own library of educational content and building a customer success team.
  

• A manufacturing firm is struggling with high production costs. It undertakes process benchmarking, visiting a non-competing but highly efficient factory in a different industry. By observing their lean manufacturing techniques and inventory management systems, the firm identifies several ways to streamline its own operations and reduce waste.

Competitive Analysis vs Benchmarking

	Competitive Analysis	Competitive Benchmarking
Definition	A broad assessment of competitors' strengths and weaknesses.	A focused, comparative process that measures your performance against specific, quantifiable metrics.
Scope	Examines products, pricing, marketing strategies, and overall market position.	Uses insights from competitive analysis to measure performance against specific metrics.
Goal	To understand the competitive landscape and identify threats and opportunities.	To set performance goals based on the proven success of competitors and establish a standard for improvement.
Key Question	What are my competitors doing?	How well are my competitors doing it, and how do we measure up?

Advantages of Competitive Benchmarking

• Clear Path to Improvement: Competitive benchmarking provides a data-driven approach to setting ambitious yet achievable goals based on real-world performance.
  

• Encourages Continuous Learning: It fosters a culture of innovation, as teams are motivated to identify new ways to close performance gaps.
  

• Informed Decision-Making: By replacing guesswork with evidence, benchmarking improves strategic decisions.
  

• Resource Allocation: Understanding industry best practices helps in prioritising high-impact projects and allocating resources more effectively.
  

• Boosts Performance and Profitability: Ultimately, this process enhances overall business performance and profitability.

Elevate Market Performance with Actomate

Competitive benchmarking equips you with the knowledge to not only keep pace with the competition, but to surpass it. To turn the insights into action, you need powerful tools.

Actomate provides the business analytics and Power BI dashboard services you need to track key metrics and execute your improvement plans with precision.

See how Actomate can help you close the gap between where you are and where you want to be. Start your journey to market leadership today.