One statement in "The Numbers that Really Matter to Your Business" got a lot of attention because people didn't agree with it. I wrote, "There is simply no way to compare metrics from different companies and deliver realistic results." Responses varied from simply stating that the reader disagreed to explanations as to why I don't understand how things work.
There are several reasons why benchmarking against competitors doesn't work and won't deliver realistic results. Before diving in, there is one qualification. My statement does not include manufacturing and bulk warehousing. Companies that produce the same products with the same equipment and automation can compare production metrics. Comparisons are helpful even when the equipment and automation varies because it allows the less automated company see the potential gains if they upgrade. Bulk warehousing is similar to manufacturing. Product moved by pallet load is similar no matter what items are being moved. Weight and distance differentials can be scaled.
Marketing and service metrics are different. There are too many variances to provide a realistic comparison. This includes:
Corporate Culture - Every business is different because companies are comprised of people. The responses to marketing and service vary by individual preferences.
Customers - All customers are not created equal. Ask anyone who has bought a business to find that half of the people in the customer database are hit & runners. Comparing response rates between companies is an exercise in futility.
Service - Quality of service is directly related to customer expectations. People expect different things from different companies. Expectations can be managed but they can't be controlled.
Costs - Corporate expenses are dependent on so many factors it is impossible for an outsider to verify accuracy. Service levels, pay scales, bonuses, productivity, and perks are a few of the items that can vary. It's hard enough defining the costs of doing business for your company. Why try to do it for another?
Productivity - The time required to serve customers and fulfill orders varies between companies. Order dynamics drive productivity. For example, apparel companies that have an average of three items per order can have very different productivity levels. If one typically has orders with three pieces of soft goods and the other has two pieces of soft goods along with a pair of shoes, the processing time will vary.
Social Activity - Comparing social activity is useless unless the companies are having the same conversations with the same people. We have clients that have very little community participation but are generating revenue every day from their social activity. We also have clients who have extremely active communities that also generate revenue. Which one is best? Both. Can they be compared? No.
ROI - Calculating the return on investment requires accurate information across the board. It is highly unlikely that you will receive everything you need in real numbers.
Transparency - Sharing proprietary information is foolhardy. If a competitor shares metrics for comparison, don't expect them to be accurate. In some cases, there are errors in the collection and documentation. In others, the numbers are adjusted for appearance.
Wanting to know how your business compares to the competition is understandable. Asking questions so you have an idea of what they are doing and how it affects their metrics is a good way to get some insight. Trying to benchmark your business by another company's standards is a waste of resources and will do more harm than good in the long run. Benchmarking against yourself and striving for continuous improvement is a much better way to succeed.
PS: Thank you to those who shared their opinions with me and inspired this post.