Competitive Benchmarking: Best Practice Guide for 2024

Competitive benchmarking, in simpler words, allows you to dive deeper into how you measure up against your competitors. It is the first step to becoming an industry leader in your space.

In this guide, let's discuss competitive benchmarking, types of benchmarking, its benefits, whether your business needs it, & how to do it, step-by-step.

Let’s begin, shall we? 

What is Competitive Benchmarking?

Said to be in use since the 1900s, competitive benchmarking is defined as a process to evaluate the performance of your company with its competitors and the overall market, utilizing a variety of metrics.

Let's say you have made a lot of assumptions about who your competitors are, what makes you better than them, and where you might be falling behind.

However, you know what they say; assumptions or hunches cannot compare to data, facts, or evidence. With competitive benchmarking, you get to keep an eye on how your competitors are doing to gain all the insights you need to match and exceed their brand value hassle-free!

Competitive benchmarking is a strategy designed to:

• Identify areas of improvement
• Highlight the strengths
• And determine the best course of action to stay ahead of your competition

Competitive benchmarking, in simpler words, allows you to dive deeper into how you measure up against your competitors. It is the first step to becoming an industry leader in your space.

Competitive Benchmarking vs Competitor Analysis

From their product offerings to customer engagement campaigns and marketing efforts to their sales funnel, competitor analysis is a strategy of dissecting every move of your competitor.

It's more than glancing through their websites or checking out their social media page. Competitor analysis will help you understand what makes them tick and tock, carve out your niche, and find a sweet spot in the market by differentiating your offerings.

As discussed earlier, competitive benchmarking is a strategy for measuring your products, services, and processes against your competitors. It is a reality check to see where you're standing.

It will tell your strengths and your position in the market to help you make informed decisions and become a leader in your space.

From the product line efficiency to how proactive your customer service is and how your pricing stacks up against the big, established players, benchmarking is about learning from the best to elevate your game. 

An Example

To explain this further, let's take health checkups as an example. Health checkups compare your vital stats like blood sugar, pressure, or cholesterol levels to the "normal" ranges to answer whether you're in good shape or need to make lifestyle changes. That's competitive benchmarking. It helps you assess the health of your business.

Now, imagine you're a professional coach scouting the competition before a game. How would you assess them? You're not going to just watch the game highlights.  You will dig into their strategies, key players, strengths, and where they drop the ball. And that's competitor analysis. It's more about understanding your competitor's playbook.

Both approaches are extremely important for making business decisions. But how do we gather the data for this? Using SurveySparrow, you can create targeted surveys to track brand perception and satisfaction, collect instant feedback, and analyze the data to identify areas for improvement and where you hold a competitive advantage. 

Benefits of Competitive Benchmarking

Here are the top 4 benefits of competitive benchmarking to help you understand if benchmarking is truly critical for your business success.

Drive Continuous Improvement

Benchmarking allows you to identify strengths and weaknesses by comparing your performance against the industry leaders, highlighting areas where you excel and where you need to improve.

By assessing the performance of the big players, the benchmarking insights help you set realistic goals and create a culture of improvement to close the gap between you and industry best practices.

Enhance Productivity

Optimize your processes by comparing them to your competitors and uncover inefficiencies. Competitive Benchmarking will also help you create a culture of innovation. It may inspire your employees to work more efficiently, & be more engaged, leading to increased employee productivity and improved results.

Strategic Decision Making

By tracking the performance of industry leaders, competitive benchmarking helps you stay ahead of trends, forecast challenges & drive strategic decision-making, such as product development, market expansion, and resource allocation.

The encompassing view of your competitive landscape would help you create strategies to strengthen your market position.

Cost Reduction

Competitive benchmarking can help your business negotiate better deals with suppliers by providing data on industry pricing and practices. Benchmarking will help you improve processes, reduce waste, & improve your bottom line by identifying areas of insufficiency. 

Types of Competitive Benchmarking

You've learned how benchmarking is a valuable practice that can help you to improve business performance. Now, let's discuss the different types of competitive benchmarking you can use.

Internal Benchmarking

This strategy is used when you want to compare the performance within different departments or divisions of the same company.

For instance, by conducting internal benchmarking, a large retail chain may find a particular store is consistently outperforming its other stores in terms of sales and customer satisfaction. The insights can help the retail chain,

• Replicate the success with other stores using the same strategies.
• Foster collaboration between the high-performing stores and under-performing stores to close the gap
• Analyze the reasons for other stores not performing well and develop targeted improvement plans

External Benchmarking

This is when you're comparing your performance against competitors within the same or different industries.

For example, a smartphone manufacturer might compare its market share, customer satisfaction ratings, and product features to those of its competitors like Apple and Samsung.

Functional Benchmarking

This type of benchmarking is done when you want to compare specific functions or processes within a company to best-in-class organizations, regardless of industry.

For example, a manufacturing company might benchmark its supply chain management practices against a logistics company known for its efficiency.

Strategic Benchmarking

This method of benchmarking is used when you want to compare overall business strategies and competitive positioning to your competitors.

For example, an e-commerce company might analyze the websites, mobile apps, customer experience, and delivery services of its competitors, like Amazon, to improve its online presence.

Performance Benchmarking

With this competitive benchmarking method, compare specific business performance metrics, such as profitability, market share, or revenue, and improve profitability.

For example, a restaurant chain might compare its average customer spending and repeat business rates to those of its competitors.

Process Benchmarking

This benchmarking method is used when you're looking to compare specific business processes or operations with those of your competitor, such as customer support.

For example, a bank might benchmark its loan approval process against a competitor known for its speed and efficiency.

Customer Benchmarking

As the name suggests, this method compares your business's customer satisfaction, loyalty, and feedback to your competitors.

For example, a hotel chain might compare its customer satisfaction scores and online reviews to those of its competitors.

Metrics for Competitive Benchmarking

You can measure competitive benchmarking in a multitude of ways. For instance, tracking how your competition positions its brand publicly over time can become a crucial benchmark.

The KPIs for your business that you want to focus on will vary from one industry and business to another. Here are the most common metrics measured for competitive benchmarking:

Brand Awareness

Using brand awareness surveys, market research, or social media analytics, you can compare the awareness levels with competitors. It's the best metric to measure the visibility and reach of a company's brand.

Brand Perception

Perception is the overall impression customers have of a brand or product. You can use surveys, focus groups, or social media tracking to understand how your customers perceive your product when compared to your competitor.

Here's a sample template you can use to track brand perception. Roll it out via the channel of your choice and collect data effortlessly. Once the responses start flowing in, analyze the data with advanced analytics tools! 

Feel free to customize it the way you like! 

Brand Perception Survey Template

Preview Template

Use This Template

Likelihood to Recommend 

A strong indicator of loyalty and satisfaction, calculate the Net Promoter Score (NPS®) to measure customer willingness to recommend your brand or product.

Customer Satisfaction

The level of satisfaction customers have directly impacts customer loyalty, repeat business, and word-of-mouth marketing.

You can rely on customer satisfaction surveys, customer feedback analysis, and key performance indicators (KPIs) to measure customer satisfaction and compare it to competitors.

How to Do Competitive Benchmarking for your Business?

We have now finished discussing the types of benchmarking and the metrics you can use to measure it. Now, let's move on to the steps involved in measuring competitive benchmarking. 

• Identify competitors: Based on your goals, identify businesses in the same market that offer similar products or alternative solutions that fit the same customer needs. You can also track industry leaders.
• Set the benchmarking criteria: Based on the benchmarking objective, select the metrics that you want to measure & improve.
• You must keep an eye out for news articles, press releases, and sales reports that can provide you with the data you need for competitive benchmarking analysis. Public companies will share their annual reports, and you can get data from there.
• Develop improvement plans: Create action plans to address weaknesses, capitalize on strengths & close the competitive gap.
• Remember to allocate necessary resources, including budget, personnel, and time, to implement your improvement plans.

Competitive Benchmarking: A Buzzword or Necessity?

Like a map that shows you exactly where you are, where you must go, and the best way to reach your destination, competitive benchmarking helps you obtain a comprehensive view of your standing within the market landscape, by setting benchmarks against industry leaders and your key competitors.

Businesses can drive data-backed decisions to grow their market share by understanding their position relative to competitors. Maybe you can start small, share an NPS® survey, and see how well you do against your competitors. Analyze what's holding them back and what makes you a customer favorite. And apply the insights to build a product loved by all.

And, having the backup of an advanced tool is extremely important for insightful decisions. Don't forget to give SurveySparrow a try before you go. 

The 14-day free trial will give you an idea of the advanced features. You can always switch to the free forever plan. The paid plan with additional functionalities starts at $19/month.