Benchmarking analysis is a rather large topic of conversation in the business world and for good reason. After all, it is one of the main processes used to measure the performance of a business’s products and/or services against those that are seen as the best in the industry.
For example, a new startup software company might use benchmarking to compare themselves to Apple or Microsoft.
The goal is to identify areas of improvement by studying what makes leaders superior performers, breaking it down into a list of processes that separate leaders from everyone else and then comparing against those. My point is that benchmarking can lead to huge improvements in small businesses.
For example, a small business owner might notice that its industry leader has outstanding customer service programs in place, so they will invest in better customer relationship management systems.
A Step-by-Step Look at Benchmarking
There are two primary types of benchmarking – continuous and dramatic.
Continuous benchmarking looks for small, incremental changes that can be done over time to create steady, attainable progress. Dramatic benchmarking is – well – more dramatic! It creates large changes and often reengineering is entire business processes.
- A business chooses a product or service that it wants to benchmark.
- Makes a list of the top companies within their industry.
- Gathers all of the information possible on their own internal performance.
- Compare that data with the same data from top companies in their industry in order to identify areas where they are significantly less efficient.
- Come up with new policies or changes that improve those areas.
Top Benefits of Benchmarking Analysis
What makes benchmarking so valuable is that it highlights areas that will make the most difference, giving you the insight to make those changes. Here are some of the top benefits that businesses experience when using benchmarking analysis.
1. Reduced Costs
Benchmarking can be used to lower costs.
For example, let’s assume that your business uses benchmarking to discover that one of your top competitors uses automation to make its business processes more efficient. You could then dig deeper to learn what automation systems those companies are using and then looking installing them within your company.
Most of the time, you will find that automation systems are installed by a third-party company, so you could contact them to see exactly what it would take to install them yourself. The end result would be lower costs.
2. Improved Quality of Products or Services
Are your competitor’s products and services higher quality than yours? Benchmarking will help you find ways to improve your own business.
Successful businesses have spent a lot of time developing their products and services. That’s why they’re the best. Your business can learn from that experience by comparing the two.
What is being done differently? The only way you can make this type of comparison is through benchmarking.
3. Sales and Profit Boost
Benchmarking analysis provides you with extraordinary opportunities to improve the overall operation of your business, which will naturally lead to boosts in both sales and profits. Your customers are going to notice changes made in your business so when you boost efficiency, you’re going to improve their experience. Benchmarking allows you to compare brochures, sales processes, and marketing to that of large businesses. Businesses become more efficient through benchmarking, so they drastically lower their expenses.
The bottom line is that small business owners can learn a lot from their big brothers. Sometimes it’s even possible to rework the internal structure of the business to operate more efficiently. Small changes can spark large improvements. Benchmarking is a powerful tool so be sure that you don’t miss out.
About The Author
Jacob Haney is a content marketer presently working with Research Optimus, a business research outsourcing company. A writer by day and a reader by night, he is loathed to discuss himself in the third person but can be persuaded to do so from time to time.