What is Competitive Benchmarking? Best Practices
Benchmarking competitors is a crucial part of growing your business. Today, we will discuss the key metrics, best practices, and core elements of strategic competitive benchmarking.
Creating a detailed go-to-market strategy is impossible without benchmarking your competitors’ performance. There are key metrics you need to focus on and a few good practices to follow.
Here’s what’s ahead of us today:
- What is competitive benchmarking?
- Benefits of competitive benchmarking
- Types of competitive analysis frameworks
- The most important metrics for competitive benchmarking
- Competitive benchmarking tools
- Best practices for competitive benchmarking
- How can I use competitive benchmarking to optimize my business?
What is competitive benchmarking?
The competitive benchmarking process is a crucial part of defining the go-to-market strategy. It helps you understand your market position and how you match your rivals with business goals. To perform the analysis, you should define key performance indicators, benchmarking metrics, and compare your brand to your main competitors.
Every valuable insight you can get from all the data gathered will be based on your set of metrics, so it’s important to talk through your plans with your team.
In the following chapters, I will walk you through the competitive benchmarking process, its benefits, variants, the most important metrics to track, and tools that might help you in your work.
Try media monitoring as a part of your competitive benchmarking process!
Benefits of competitive benchmarking
It’s hard to grow your business without the knowledge of what your competitors do. It’s not about copying every existing solution, but if the market research shows similar patterns in industry practices, you shouldn’t stay behind. Why? Because your customers might feel your products lack something important.
Competitive benchmarking puts you in a state of constant alert but also growth.
Here’s the list of benefits of benchmarking the key industry players.
01 Identify gaps in your business strategies
Keeping track of your competitors will let you know which activities you do not perform in your business strategy. Performance benchmarking is all about looking for strategic gaps and updating your existing business model with what you believe is crucial to staying on top in your market niche.
02 Track your competitors
Apart from looking for important gaps, you should also track your competitors to be aware of their achievements and the latest industry trends. If you regularly benchmark against industry leaders, you will know how much revenue you can aim for with your products, where to scale, and which departments to expand.
03 Get an overview of your organization
By performing competitive benchmarking, you will gain a lot of knowledge about your company. While setting metrics for the benchmark you will uncover insights within the organization and will be able to understand how you stack up in the market. This is a great opportunity to set up an unbiased opinion about your product.
04 Improve the company culture
Comparing your organization to others in the market niche allows you to identify the cultural areas that need improvement. This includes things like benefits, salaries, but also events and conferences you might attend. If you stay behind, your employers could be tempted to switch jobs.
05 Improve marketing communications
Your marketing team will also benefit from benchmarking against competitors. You can compare customer feedback and social media performance of your main rivals and see which techniques work best in your niche. Overall customer satisfaction should be one of your benchmarking metrics.
06 Increase revenue
Last but not least, performing competitive benchmarks can help you boost your sales and profits. If you compare your sales reports to your main competitors’, you will most probably find hidden opportunities for new customers and markets.
Types of competitive analysis frameworks
Hopefully, you are now hooked up on the idea of competitive benchmarks, so let’s jump to more specific details.
There are various types of competitive analysis frameworks you can try. Here are three popular solutions. You can find more after you process benchmarking.
SWOT analysis is the one you would learn first in any business school. Although there are now many new and innovative frameworks available, this one is still relevant today and can teach you a lot about your business.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. The first two cover internal factors, whereas the latter two indicate external aspects.
You can estimate SWOT for both your brand and your competitors to find chances for growth and ranking improvements.
02 Customer journey map
Another benchmarking process you can include in your analysis is the customer journey map where you inspect all the touchpoints customers have with your brand.
Map all your customer channels (your website, social media, e-mail, etc.) and define buyer personas. Analyze all customer touchpoints according to the personas and find room for improvements.
See how it compares to relevant competitors.
03 Growth-share matrix
The growth-share matrix is divided into four parts:
- Stars – products with high market growth and high market share.
- Question marks – products with high market growth but low market share.
- Cash cows – products with low growth but high share.
- Pets – low growth and low share.
When you divide your products and/or services into these four groups, you will be able to decide where to put your efforts and which solutions are not worth focusing on.
The most important metrics for competitive benchmarking
There are key points to consider in competitive benchmarks. You don’t have to take them all into consideration, but the more metrics you have, the more thorough your benchmarking process is.
Here are some competitive benchmark metrics you can use in your analysis:
01 Brand awareness
It’s hard to measure brand awareness, but there are internet tools that will help you calculate your overall online presence and reach, and compare it to your competition.
By “traffic” I mean both the traffic trends and volume. Analyze your most popular sources, geography, and demographics. More traffic in volume does not always mean more conversions, that’s why it’s good to check traffic sources for competitors that have more revenue.
03 Brand sentiment
Is your brand perceived positively or negatively? Tools like Brand24 can help you analyze the sentiment and context of discussion around your brand to discover what customers think about your product and organization.
04 Social media reach
Calculating social media reach will give you an overview of how popular your brand is against the competitors. There are many tools that will help you to calculate this metric, so don’t worry – you don’t have to do it manually. Scroll down to see some of the most popular competitive benchmarking tools.
By analyzing your (and your competitors’) reach on social media you can also evaluate which types of posts perform the best for your brand and in your niche.
05 Net Promoter Score (NPS)
This metric is used to calculate how your customers feel about the will to recommend your product or services to their friends or family. It’s usually done using a survey.
NPS will tell you a lot about customer loyalty in the market. The higher the score, the more loyal customers you have.
06 Customer Satisfaction Score (CSAT)
CSAT is a common benchmarking metric that helps to measure how satisfied the customers are with the product and/or services. It’s very similar to NPS (discussed above) – the main difference is that NPS calculates loyalty, whereas CSAT measures satisfaction.
By polling the target audience you can gather public data for both NPS and CSAT and compare your brand to close competitors.
07 Average Revenue Per User (ARPU)
To calculate ARPU you should divide your revenue by the number of active users in the measured period. Some brands share ARPU regularly in their business reports, so it’s good to follow your competitors and include it in the competitive benchmarking process.
Competitive benchmarking tools
To follow the best industry practices and perform a thorough competitive benchmarking you can use digital tools that will help you organize and automatize your work. Here are some of the most popular tools that will assist you while analyzing your competitive benchmarking metrics.
While Brand24 is mostly aimed at monitoring your brand’s online presence, it’s a perfect tool for following industry leaders and trends, too. You can set up projects to monitor your main competitors and perform social media audits and calculate their presence score.
Pricing: Plans start at $49 / month
Benchmark against your competitors using a media monitoring tool.
BuzzSumo offers competitive intelligence reports. If you want to follow your industry competitors, you can use BuzzSumo to learn what content they are producing, which social media channels they are most popular on, and how your content compares to theirs in terms of performance.
Pricing: Free plan available, professional plans start at $99 / month.
SimilarWeb is the best tool for checking engagement metrics on sites you don’t have access to their Google Analytics (which is unlikely). SimilarWeb will allow you to check estimated web traffic, sources, and simplified demographics.
Pricing: Free limited plan and tailored premium options.
To check the competitor’s site’s performance, use Ahrefs or a similar tool. Ahrefs can also estimate web traffic but, most importantly, it will also give you an SEO overview of the website. Check what keywords are your competitors ranking with and perform a gap analysis to discover opportunities for new content.
Pricing: Ahrefs starts at $99 / month.
Best practices for competitive benchmarking
At the end of the day, competitive benchmarking is supposed to help you, but to achieve success you need to stay modest and objective. Here’s what you need to remember about while benchmarking against competitors:
- Stay objective – don’t undermine your competitor’s performance, and don’t overestimate your success.
- Remember that competitive benchmarking is an ongoing process. Update your analysis regularly to stay on track.
- Think through every metric you take into consideration. Will you be able to improve in these areas? Are those KPIs measurable?
How can I use competitive benchmarking to optimize my business?
Various business models involve the need to processing benchmarking public and private data to analyze growth.
By using different tools and measures for competitive benchmarking analysis, you can learn a lot about your organization and your close competitors. A thorough analysis will be helpful not only in reaching marketing goals, but also strengthening good practices within the company’s culture, improving investor relations, and increasing revenue.
Competitive research will keep you updated about market trends, rivals’ moves, and changes in the target audience.
The benchmarking process encourages to find gaps, opportunities, and weak points in your strategy. Use competitive benchmarking to improve your digital channels and ensure the product’s success!
Read also: A guide to competitor analysis