Why competitor benchmarking matters
So, what do we mean by competitor benchmarking? Well, we’re referring to the evaluation of your company’s products, services and strategies in direct comparison to your closest competitors. It’s crucial to analyze how you stack up against the competition. Why? Benchmarking your performance against industry standards and metrics from competitors means you won’t lag behind in attaining critical information. This information could include a whole range of knowledge – for example, emerging industry trends, a competitor’s upcoming product launch, or an analysis of other companies’ social media visibility.
A few of the benefits enabled by effective competitor benchmarking:
- Gain a comprehensive understanding of your competitors’ performance – their strengths and weak points
- Identify gaps in the market and keep track of emerging trends in the operating environment
- Get insight into areas of improvement for your brand strategy and marketing
- Anticipate competitors’ actions, helping your company make the right decisions at the right time
- Save costs through improved resource allocation
- Generate ideas on innovations for your products
Competitor benchmarking equals competitive advantage
The more knowledge your company has about its competitors and the more systematically it collects information, the better it can create a competitive advantage to stand out from the crowd – and avoid becoming obsolete.
Competitor benchmarking can even improve company culture. This is because it demonstrates a commitment to continuous improvement and a willingness to invest in long-term strategic thinking.
The risks of not doing competitor benchmarking
So, we’ve seen the advantages of competitor benchmarking – industry and competitor awareness, trend tracking, and strategic enhancement – but what about the risks of not doing competitor benchmarking?
The most glaring risk is the lack of competitive awareness. Not having a thorough understanding of rivals’ strategies or products can lead to blind spots within an organization. The same goes for industry trends. You can’t effectively plan for the future if you don’t have data-driven insight into emerging tendencies.
A company’s own strengths and weaknesses are also difficult to accurately estimate without external benchmarking. Not knowing in what areas your competitors are ahead of you (and vice versa) means there’s a risk of competitive disadvantage.
Different benchmarks for different needs
Benchmarking can take many forms. It’s not a one-size-fits-all approach. Instead, benchmarking will often be tailored to the requirements of a specific project. It may be internal benchmarking to identify improvements within a company. Or it could be aspirational benchmarking. This looks further than direct competitors, instead setting sights on best-in-class industry leaders. Doing so means companies can gain broader industry insight and take inspiration from the approaches used by industry frontrunners.
But let’s focus on competitor benchmarking – the direct comparison of your company’s competitors, using various metrics. So, here are the five best practices for conducting this benchmarking.
1. Define your goals
Doing competitor benchmarking without objectives can lead to a loss of focus. Lacking defined goals can make it tricky to identify exactly what business problem your analysis should help with. To derive the most value from your benchmarking – in terms of actionable insight for stakeholders – your analysis must have clear aims.
Depending on the project, you’ll want to define at least the following:
- Who are the stakeholders in the benchmarking
- How your analysis will best serve the stakeholders
- Exactly what questions your analysis should be answering
- The metrics and KPIs your benchmarking will use
Defining these goals means you can conduct your benchmarking in a focused manner with clear aims. Otherwise, trying to answer an indefinite number of questions can lead to ill-defined conclusions that are difficult for stakeholders to derive value from.
Quick tip: Determine benchmarking metrics
For example, let’s imagine an online retailer is considering their positioning in social media. They want visibility into how their online presence compares to their competitors and a strategy to improve their social media performance. There are many approaches benchmarking could take. But narrowing it down to a few core questions means processes are effective and project resources are optimized.
This retailer’s benchmarking may start with identifying what stakeholders and departments are responsible for e-commerce and social media presence. Next, the metrics and key questions that benchmarking should cover will be defined. The retailer may want insight into competitors’ tone of voice, the volume of publicity, or reputation messages. Successful benchmarking will give the retailer an understanding of its strengths and weaknesses in social media. The retailer will understand the level of online praise (and criticism) aimed at their competitors’ customer service. And this whole process begins with determining benchmarking metrics, allowing competitor analysis to gather and interpret data effectively.
2. Build stakeholder alignment
Once your benchmarking’s stakeholders are identified, crafting stakeholder alignment on category definitions and scoring criteria is crucial. Building this alignment helps ensure that all players are on the same page when understanding competitor evaluation and business objectives.
Category definitions may include pricing, product features, marketing strategies and customer service. Scoring criteria assign scores or ratings to these various strands of competitors’ performance, products, or capabilities. Category definitions and scoring go hand-in-hand as scoring criteria are often based on the agreed goals and categories for benchmarking. Without a unified understanding of metrics and aims, building scoring criteria can be tricky.
Keeping a clear picture of prioritization in scoring criteria is essential. Doing so means benchmarking focuses on the relevant metrics for stakeholders. This can be made more accessible by using a scoring system based on a scale of one to five (one being low priority and five being high priority). A traffic light system, from red to green, is also an effective, transparent way of ranking priorities.
Quick tip: Agree with stakeholders on category definitions
Let’s examine how stakeholder alignment could play out in real life. A tech company is benchmarking a new fintech product. Now, there are several aspects to this product and various stakeholders involved. If stakeholder alignment has taken place, the key players agree upon the category definitions and scoring criteria. And this is important because it narrows down the metrics and the focus areas for benchmarking.
For example, it may be desired that the security capabilities of this fintech product are benchmarked. But security can mean different things to different sets of stakeholders. One group may have data breaches in mind, while another may be thinking about secure payment processing. Having strongly delineated category definitions will keep benchmarking on track and focused. Trying to answer various stakeholders’ interpretations of what security means runs the risk of defocusing benchmarking. At worst, you may end up with formless masses of data from which it’s difficult to draw meaningful conclusions. But having stakeholder alignment on category definitions keeps benchmarking on track and ensures stakeholders are provided with insights into agreed-upon areas.
3. Draw data from diverse sources
To optimize your competitor benchmarking, you’ll want to utilize data from various sources. Doing so will give you a comprehensive range of information. This is vital to understanding a market and ensuring your benchmarking is as accurate as possible. Having diverse data sources is also a great way to identify industry best practices clearly.
The amount of primary and secondary research that can be considered in competitor benchmarking is almost limitless. It also takes some expertise to narrow down your research. Defined goals and stakeholder alignment – our first two best practices – will be invaluable in helping you choose your research methods.
Primary and secondary research and data sources for competitor benchmarking may include:
- Customer surveys
- Social media
- Press releases
- Industry publications
- Competitor websites
- Financial reports
- Competitor or competitor partner interviews
- Internal data
Diversifying your data sources means minimizing unintentional bias and skewed interpretations – this is a real risk if you rely on a single data source. It keeps your perspective broad, empowering critical thinking and holistic problem-solving. Let’s look at one real-life example of imaginative competitor benchmarking that we did for an M-Brain customer.
Quick tip: Don’t forget unconventional data sources
A retailer considering entering a foreign market wanted to benchmark to help their entry strategy. The benchmarking identified that understanding customers’ purchase-making decisions was a vital goal. It was determined that one of the best forms of research available was to conduct mystery shopper visits inside this foreign market. Alongside other research and data collated from secondary sources, these mystery shopper trips revealed valuable insights into the marketplace, such as price points and customer behavior, that enhanced the retailer’s entry strategy.
This could be considered an unconventional data source. Examples of unconventional data sources include online forums and communities or indirect competitors in different industries. Don’t overlook these in your benchmarking; they can unveil knowledge into emerging trends or unrealized market potential.
4. Forge relationships with suppliers, competitors and partners to unlock insights
Sure, competitor benchmarking involves deep diving into data. Lots of data. But just as crucial to gleaning valuable insights is building solid relationships with suppliers, competitors and partners. Let’s break this down.
Suppliers may possess essential information about competitors, such as manufacturing techniques or capabilities, product sourcing, or new product development. Suppliers can also pinpoint potential weaknesses in competitors. Let’s take the example of a global electronics manufacturer. The goal of their competitor benchmarking is to gain greater insight into competitors’ supply chain strategies. And this is where the importance of forging a good relationship with suppliers comes into play. The electronics manufacturer can glean crucial benchmarking information about competitors’ sourcing strategies, production processes, inventory management, or distribution network through open communication with the supplier.
Quick tip: Don’t be afraid to communicate with competitors
Building relationships with rivals offers one of the most direct sources of insight for benchmarking. Open communication with competitors could be done in neutral settings such as industry-specific events or networking forums. These discussions can lead to a mutually beneficial understanding of market trends or industry best practices.
Partners and strategic allies can be excellent sources of information on the competitive landscape. This type of collaboration could involve conducting joint market research or sharing non-sensitive information that leads to the co-development of innovations. Building relationships with partners doesn’t simply strengthen your benchmarking – it can also bolster customer experience and market positioning.
5. Continuously update your data to remain relevant
So, your competitor benchmarking has been conducted. All stakeholders are happy, and your benchmarking hits every KPI. Now what?
Optimal competitor benchmarking is not a static process. It’s a dynamic operation that reflects the ever-shifting competitive landscape. Data must be continuously updated and refreshed to stay relevant and ensure that informed decisions can continue to be made.
Competitors are not standing still. Their strategies are evolving. Updating your data means you have visibility into rivals’ refined moves. For example, imagine a competitor has launched a new product or expanded into a new market. Then imagine you haven’t updated your data. You could remain unaware of these developments, making your benchmarking obsolete. But continuous monitoring means you can factor in these moves and derive new insights.
The same logic applies to emerging trends and technologies. These are constantly changing, throwing up both threats and opportunities. To fully comprehend the ramifications and stay ahead of the curve, you must keep on top of new data. The number of disruptors transforming multiple industries – from tech to retail to manufacturing – means not updating your data is similar to driving in the dark with your headlights off. You have no way of planning what’s ahead and no awareness of new bends in the road.
Quick tip: Get actionable insights through constant data collection
Keeping track of customer expectations is also aided by continuous updating. For example, frequent collection and analysis of customer feedback can align an offering with customer preferences. This is a data-driven way of remaining relevant to your customers and maintaining loyalty.
Let’s look at pricing strategy as a real-life example of how continuous data refreshing can enhance competitiveness. Monitoring rivals’ pricing allows businesses to adjust their own pricing models to remain relevant to consumers’ expectations. Constant data collection enables tracking price changes, discounts, and promotions. Having this information means businesses can make data-driven pricing decisions.
How to leverage competitive benchmarking results
Once you’ve carried out our five benchmarking best practices, there are a few more steps you can take to ensure you get the best out of your benchmarking results.
The priority for your findings should be on converting them into actionable insight for stakeholders. One way of doing this is through product roadmaps – strategic plans that align product development with high-level business objectives. Included in the roadmap may be key features or future product enhancements based on strategic insights. Prioritization of product features can also be part of the roadmap. This helps ensure that resources are correctly allocated and that businesses are able to focus on the right tasks to achieve their business goals.
Why stakeholder collaboration is key
You’ll also want to collaborate as closely as possible with stakeholders. This could involve meeting stakeholders regularly and keeping them updated on findings. Identification of realistic business goals based on your benchmarking is another way to make insights actionable. These performance targets can be evaluated using relevant KPIs – depending on the benchmarking, this could range from customer satisfaction to market share or operational efficiency.
When presenting findings to stakeholders, consider a competitive enablement tool. This collects all relevant information about competitors – such as the latest news or field intelligence – in one location. It can be super useful for providing actionable insights to teams.
Start making data-driven decisions today
Remember that one of the biggest advantages competitor benchmarking offers to businesses is the chance to make data-driven decisions. Your benchmarking should identify market gaps, emerging trends, opportunities and threats, internal strengths and weaknesses, and resource allocation. Presenting these in digestible formats – like roadmaps – enables stakeholders to focus on the right issues in order to stay ahead of their rivals. And continuous monitoring of your data ensures your findings stay relevant, helping your customer’s strategy evolve.
At M-Brain, we operate at the intersection of AI and human insight. Competitor benchmarking is only going to increase in importance as new disruptors come into play. AI tools are transforming the way competitor benchmarking is done, making intelligence gathering faster and more accurate. To find out more about how to stay a step ahead of your competition, contact us.