Benchmarking establishes a reference point so you can gauge the success or failure of marketing and service strategies even when there isn't an obvious cause and effect. We naturally want to know how our results compare to our competition and try to benchmark against them. It's impossible to create realistic and accurate comparisons to other companies. Looking at the competition for insight into their strategy is a good thing. Investing resources in specific analytical comparison is wasteful and counter-productive. Use those resources to create solid internal benchmarks instead.
The first step in every plan should be to get all of the participants on the same page. This eliminates (or at least reduces) miscommunication and confusion. Sometimes we forget this in our haste to share information or get started. I tend to forget this step when writing about benchmarking and presume that everyone sees it the same way. When I wrote "Why Benchmarking against Competitors doesn't Work," I left the interpretation of benchmarking to the reader. I'm taking a step backwards and defining it so we start out on the same page.
Benchmarking began as a surveyors' term. Permanent marks were placed as a reference for an exact elevation. All reference points after that were in relation to the original benchmark. It is a specific and exact science. Over time, the term was borrowed and used to denote a standard measurement that can be used for comparison. When I say "benchmark" or "benchmarking", I am always referring to a metric that can be accurately and repeatedly measured. It is an exact science in my engineering mind.
Using benchmarks in marketing and service help measure the unknown. It is especially important now that we have the social channel where identifying cause and effect seems close to impossible. Establishing internal benchmarks is not for the weak of heart because capturing the information needed and converting it into usable information is hard work and requires a long-term commitment. The benefits far outweigh the challenges making it a worthwhile investment.
Direct marketers use benchmarks on a regular basis. They usually call them "controls" and measure new campaigns against the proven performer. Internal benchmarks have to go deeper than a promotional campaign control to maximize your return on investment. Service levels, operational costs, and profitability must be added to response rates, average orders, customer acquisition and other marketing metrics. This gives you a reference point that encompasses the whole organization instead of one area. When a company has comprehensive benchmarks in place, cause and effect is easier to see.
For example, if a social media campaign goes viral at the same time sales increase, does that mean that it is driving revenue? Maybe. Maybe not. If there was also an improvement in service levels at the same time, the additional sales could be generated by improved customer experiences. Without benchmarks, the increase would most likely (and possibly erroneously) be attributed solely to the social activity.
Benchmarking within an organization provides additional insight into contributing factors for sales and profitability. The more you know, the better you can plan and grow your business.