What Is Benchmarking?

Guide To Benchmarking?

What is it?
Benchmarking is a structured analysis of the online services, capabilities and performance of competitors.

Who uses it?
Organisations who want to compare themselves against their competitors and see what they are offering and how they are run, if you don’t know what the standard is you cannot compare yourself against it.

Why is it useful to an organisation?

  • By showing how to better competitors, benchmarking ensures the basic survival of the business.
  • It is vital in positioning a website to compete effectively with competitors.
  • It opens your mind to new ideas and helps the company to continue improving.
  • It provides the organisation with both the reason to improve and a definition of what constitutes improvement.
  • Benchmarking help place organisational focus on change and provides the direction for the change process.

Limitations

  • If the competitor’s goals and visions were flawed or severely restricted due to some specific factor, an organisation by benchmarking such standards runs the risk of copying the same flawed standards.
  • Benchmarking reveals the standards attained by competitors but does not consider the circumstances under which the competitors attained such standards.
  • Many organisations tend to relax after excelling beyond competitors’ standards, allowing complacency to develop. The realisation of having become the industry leader soon leads to arrogance, when considerable scope for further improvements remains.

Top tips

  • Continue to improve even if you find that you are the industry leader.
  • No matter how you collect and action the benchmarking data it’s essential to review your action plan regularly. An annual review is not frequent enough to give you all the benefits benchmarking offers. To gain the most from benchmarking you should think of it as a process of continuous improvement rather than a one-off exercise.
  • It’s best to compare your results with firms that are similar in size and business model to your own.
  • Benchmarking businesses in your business sector that are larger than yours will provide benchmarking data about whether your business is ready to grow.
  • When analysing benchmarking data, don’t forget there may be valid reasons for the differences you find. For example, your website expenses may be greater than for your competitors because you added a shopping cart facility and they only sell in a shop.
  • Remember that your business objectives may be different to those of your competitors and that this may be reflected in benchmarking data. For example, one engineering business may lag behind others in its marketing spend only because it has more recently been investing heavily in research and development.