What is benchmarking?
Benchmarking is the process of comparing how your business is doing against the performance of other leaders in your industry. For example, if you ran a technology company and wanted to see how your sales compared to industry benchmarks, you’d most likely run your numbers against big companies like Google or Apple.
Companies use benchmarking as a way to identify gaps in processes and sales and to examine how leaders have been able to accomplish their goals. By identifying where your company is falling short and seeing how much others have achieved, you can make strides when it comes to internal growth. Closely studying benchmarking examples can also be useful when it comes to finding new ways to increase profit and how to deal with crises like economic downturns or employee retention issues.
The downside of benchmarking
The act of benchmarking can be useful when it comes to setting goals and identifying competitors, but it can also serve as a deterrent. How big is your business? Sure, it can be encouraging to set lofty goals and track the progress of industry giants, but it can also make you feel like you’re not doing enough.
Identifying and setting goals is crucial, but getting so wrapped up in how you measure up against others will never be helpful. This is where benchmarking sometimes becomes harmful to entrepreneurs. Your focus must be on finding ways to improve your business and achieve your own mission rather than competing with others for market share or sales. What got you into your industry in the first place? It wasn’t that you wanted to knock out Google. You had an idea that would provide real value to the lives of your clients and you found a way to turn that passion into a business. And to make your business talkably different, you need to align your company with your values and create an inspiring vision for the future. This is likely not the same vision your competitors have – nor should it be.
As a business owner, you should never forget that your motivation and goals are unique and the comparison that is inherent in industry benchmarks can make you lose sight of that.
Focusing on what matters
If you really want to make improvements in business, stop comparing yourself to others with benchmarking and start assessing how well you know your customer. Marketing guru Jay Abraham states in his Strategy of Preeminence that the key to success is falling in love with your customers. This involves getting to know them as fully as possible and understanding their hopes, dreams and pain points. When you take the focus off increasing profits and comparing yourself to industry benchmarks and put it solely on those you serve, you improve your probability of success and feel more fulfilled in the process. Once you dig deep into your customer’s lives, you can then craft the ultimate customer experience.
Developing buyer personas can be very helpful in this area so you really understand the ideal audience for your products or services. Are you still offering them value? Are you not only meeting but anticipating their needs? Your customers need to be raving fans of your business. Without people who are dedicated to following and making purchases from your brand, your company will crumble. Instead of using benchmarking as a way to compare yourself to other companies in the industry, use it as a tool to help yourself provide more for your customer. What are other brands doing to successfully retain current clients and attract new ones?
Lead your clients with compassion
Once you truly understand your customers, you can anticipate their needs – sometimes even better than they can. Jay’s Strategy of Preeminence states that great companies always strive to provide leadership to their customers. They demonstrate a definitive belief system and an absolute conviction in their point of view that convinces their customers that they can provide greater results or happiness through their products or services.
This type of servant leader mentality eclipses any type of benchmark marketing or other methods of gaining profit share. When you run your company with your customers’ or clients’ needs in mind, you make clients so happy that they will end up doing much of your marketing for you.
Staying true to your mission
For an emerging technology company, Apple will always serve as a point of inspiration. However, you didn’t launch a company to constantly talk about how Apple is incredible – you did so because you want to make your own strides in the industry. Instead of using benchmarking as a way to compete with companies like Apple, use it as a springboard to create new and better customer experiences. When you find yourself spending too much time thinking about what doesn’t serve you, you lose valuable time that you could be using to better your own company. Connect back to your original purpose – how can you build the life you dreamed of by making your company run more efficiently?
Understand that expectations change
Benchmarking can be useful if taken at face value. That is, measuring your present success by how the industry is performing today can prove useful. But what industry benchmarks don’t account for is the changing nature of any business sector. Every day, the needs and desires of humans can change. If Henry Ford had modeled his transportation company after the success of the railroad, then would Ford cars even exist? Instead, he looked ahead and found new ways to provide reliable transportation. Market expectations can shift in an instant. Be aware of current customer expectations, but be knowledgeable enough to anticipate the changing needs of your target audience so that you can strategically innovate and continue to meet your customers’ needs in the future.
Jay advocates that taking the focus off the product or service and selling a belief or outcome will keep your company relevant and inspire customer loyalty. If you promote and sell athletic clothing, the styles and fabrics may go out of fashion. If you instead sell an active, healthy lifestyle – with the clothes being a means to an end – your company will never become outdated.
Benchmarking is a common marketing practice to help you determine where you stand in comparison to your competitors. But when you focus too much on the efforts of other businesses, you lose sight of your personal business goals.
When you answer the question of “What is benchmarking in business,” you’ll see that it can prove useful in some ways but can be detrimental in others. Remembering why you started your business in the first place, staying true to your brand identity and always putting your clients and customer needs first allows you to utilize benchmarking without letting it disrupt your mission.
Discover how to effectively use benchmarking
As with most business strategies, benchmarking can be helpful if you learn to use it in the right ways. You should not disregard the positives simply because you are worried about the negatives. Learn methods to systematically optimize your business through methods like benchmarking with Tony Robbins’ complimentary Seven Forces content series.