Topic overview




Understanding how your business stacks up against the competition can make a dramatic contribution to your success. Benchmarking can help you assess the relative effectiveness of your business activities, identify weaknesses and find opportunities to make improvements.

Choosing your metrics

Successful benchmarking starts with a clear idea of where you're starting from and what you are trying to achieve. You can then identify key metrics that help you to understand how your business is meeting its strategic objectives. For example, if your strategy focuses on product innovation, one key metric might be the percentage of your sales coming from new products.

Other common metrics include customer satisfaction, costs, wastage levels and quality control, customer loyalty, percentage of market share, marketing effectiveness and new customer acquisition.

The metrics you choose should be directly linked to the success of your operation, meaning that any improvements you're able to make (even small ones) would have a significant impact.

Selecting benchmarking partners

Although you may choose to compare internal departments against one another, most benchmarking will mean choosing external businesses to measure your organisation against. To make comparisons meaningful, make sure the partners you choose are similar in size, structure and aims, and that you understand any key operational differences that might affect metrics.

Choosing highly successful comparators can help you to understand where your business can make big improvements.

Collecting the information

Information may be available from public sources such as Companies House. Many companies also publish data and annual reports on their websites.

Otherwise, it may be possible to speak directly to the business and agree to share information for your mutual benefit - although direct competitors may be less willing to do this.

It's vital to put a confidentiality agreement (otherwise known as a non-disclosure agreement or NDA) in place, so that both parties are protected from unauthorised use of sensitive information.

Strategic benchmarking

Benchmarking can be used to assess overall business performance at a strategic level. For example, you can research whether you are charging the right prices compared to your competitors, or look at where your resources are focused.

You might want to carry out a formal benchmarking exercise, comparing your business' strengths and weaknesses against competitors and industry norms.

Research like this can help you identify what changes you could make to improve your performance. For example, price benchmarking may reveal a negative customer perception that you need to correct, perhaps by changing your marketing messages.

It can also help you to identify where your competitive edge lies, and how you can capitalise on it.

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