Benchmarking is a term often used in economics, finance, and marketing. In marketing especially, this word defines the activity of study, analysis, and research that companies conduct regarding the strengths of another business similar to their own (the benchmarks).
The benchmarking activity is a sort of evaluation of competitors and, consequently, your company.
When benchmarking, you analyze the market and exploit the strengths and weaknesses of competitors.
What are benchmark and benchmarking in economics and finance
In finance and economics, a benchmark is a performance indicator that still aims to evaluate one's products on a certain aspect.
While benchmarking is the activity that leads to this evaluation based on the...
(Note: The translation ends abruptly because the original text provided was incomplete.) benchmark taken into analysis.Types of Benchmarking
Returning to marketing, there are various types of benchmarking:
- Internal Benchmarking: this type of benchmarking is the only one that does not involve a comparison with external realities. It is based, therefore, on the analysis of the benchmark (the performance indicator) of one's own company and attempts to improve these specific values through the identification of issues.
- External Benchmarking: this is the classic benchmarking also defined as competitive. As we have said in the definition, in this type of benchmarking, the elements and dynamics of other companies that excel in your sector are analyzed. An analysis of this kind is very important to understand how competition moves and how you can improve your own company.
- Functional Benchmarking: This benchmarking, also known as process benchmarking, is easier to carry out since it does not only target direct competitors but also involves the analysis of companies that excel in specific areas (such as production, sales, or human resource management). It is extremely useful, however, for improving one's own company on certain specific aspects that are not directly related to the good or product being produced.
- Generic Benchmarking: also defined as best practice benchmarking, is very difficult to achieve. Indeed, it involves a very specific analysis of the competitor identified as the sector leader. It will be extremely helpful to be able to obtain as detailed information as possible but, for this reason, it will be challenging to get it.
In any case, as seen, the types of benchmarks change depending on what you want to analyze (internal or external competitors) and what kind of analysis you want to do (very generic or more specific).
The Objectives of Benchmarking
The goal of every benchmarking activity is to measure and, if possible, specifically analyze a certain performance value (the benchmark), so as to assess one's own and improve the company in that regard.
Characteristics of the Benchmark
If in finance the transparency of the investor becomes essential, in marketing there are two fundamental factors for the authenticity of the benchmark:
- Representativeness: The analysis must concern a value that is representative both for the company being analyzed and for the significance of the performance under review.
- Replicability: Obviously, if analyzed, the factor must be replicable even with variations on one's own company.
Examples of Benchmarking
There can be many examples across industrial and strategic sectors, and obtaining true benchmarks requires years of analysis because gathering information is anything but easy.
In web marketing, however, it is much easier to gather benchmarks.
For instance, one might analyze the reference competitors for a specific sector and evaluate what can be used to increase their own fame: it will suffice to examine the competitor's website, the campaigns they have already conducted. In short, all data that are quite easily accessible on the web.
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