Benchmarking is a common sense way to compare one facet of company performance to another company’s performance. However, as is too often the case, common sense isn’t always common practice.
3 Benchmarking Success Factors:
1. Know Your Customer – Before companies decide to benchmark their performance they should invest time to ensure they know their customers. Customers have different preferences. So, unless you run a boutique consulting business, don’t attempt to please everyone.
2. Measure Relevant Attributes – For customer service, the 3 essential attributes are speed, quality, and cost.
Speed – For my products and services is speed important? If a neurosurgeon thinks they’ll get paid more and have more satisfied patients by performing faster brain-surgery… well, you get the idea.
Quality – Volvo has a reputation for building cars built to last forever. Benchmarking themselves against inferior quality autos would give them a false sense of achievement.
Cost – Again automakers present an interesting comparison point. Think of Ford and Lincoln. Big cost difference. People purchasing a Lincoln are willing to spend more because they are buying the Lincoln brand which has historically signified quality.
3. Make Appropriate Comparisons – This success factor is as important as knowing your customer. It is effectively the same as defining your market. To which company should you compare your company? In a highly competitive market, compare yourself to your closest competitors. So Pepsi should make a comparison to Coca-Cola. But if you define the market differently, say as consumable beverages then perhaps a better comparison would be to Budweiser.
Benchmarking can be an expensive undertaking. Some of the largest companies in the world invest millions to grow market share and make smart investments. Even with a small budget, the exercise of thinking through the success factors can help set your company apart from the competition. After all, any company can invest in ways to become faster, reduce costs, or improve quality. Your goal is to improve in ways that matter to customers.
The pivot point is that benchmarking provides a way to know if you are winning the race, losing the race, or even in the race.