What is benchmarking for businesses?
Measuring the performance of your products and your business strategy is an objective that is so basic that, many times, it goes unnoticed.
The mistake lies in waiting until you have applied the strategy to start to analyze the results. At that point in time, how do you know what you should measure? Who should measure the strategy? At what point in time in each stage? What are the metrics that mean success?
A business should think about a benchmarking plan before the start. Benchmarking is the set of processes dedicated to measuring the performance of your products, services, and business strategy.
A good benchmarking plan defines your objectives and the areas that should be measured from the very start in order to apply those analyses quickly and be able to improve internally and externally on the fly, without waiting for the defining end-of-year moment.
The basics: market research
Competition and key players
Study who the brands or vendors similar to your profile and product type are, as well as those who directly compete with you. Focus on the big names, because they will be your main hurdle and your great source of information at the same time in order to learn how products are being positioned and sold.
Also pay attention to other ‘second row’ competitors, also known as ‘indirect competitors,’ as there can always be a change in strategy or trend that makes them direct competitors.
Market size and type
What is the market where you are interested in selling your products like? Size, division into regions, consumption trends amongst the population, metrics from the last few months, and the sectors with best results.
That data can give you a clue to help with your positioning and with identifying the channels on which there are realistic sales opportunities.
If you are a brand or manufacturer, it is a good idea to apply this analysis to the distribution network and retailer network available on your specific market. Setting the goals of your strategy in physical and/or digital shops will depend on them.
Regions with similar population and socioeconomic features may turn out to be quite different. Personalize your market study in accordance with the most noteworthy sales and buying trends of the last year and the predictions obtained from that data.
Observing a region or market in detail provides very valuable information about which product trends may seem fleeting and which ones are more solid.
From the very get-go, you should have your ideal buyer profile well defined. From there, how does that profile fit on the market? Are there groups of your target customers? Where are they located? What are their more traditional and digital habits?
You’ll have to adapt your strategy depending on the channels on which your customers buy your product type. This is essential to position your products on the proper retailer networks and channels.
Within the same market, there can be differences – especially if your are considering a continent-based market, national market, or market based on languages.
Analyze the submarkets on which your products work best: selling snow suits in a cold part of the country is not the same as selling them in a warm part of the same country. This will affect your supply and distribution decision as well as your sales and marketing decisions.
Taking action: metrics for benchmarking
If you work in the manufacture or sale of products, on many occasions the reason for the success or failure of your strategy lies in your product itself.
What gap do you want to fill on the market? What consumer needs will your product fulfill? Is your product related with a current trend? What makes it different from the competition? A benchmark analysis allows you to discover if the product is meeting your goals and what you should adapt (the product itself, its promotion, its sales channels, etc.) for it to fit with your goals.
Good benchmarking for any business model starts with measuring performance from the start of the supply chain.
To avoid inventory excess and scarcity on your sales channels, the key is to measure how your product stock is being distributed.
In this section, you should use metrics applied to however many distributors, retailers, points of sale, and physical shops have your products in stock, the frequency with which orders and sales are made, the average volume, and the annual value of your relationship with each player – like the ACV (Annual Contract Value) for your customers.
While prices may vary over time as the market, consumption, and competition evolves, it is important to monitor price fluctuations in order to be able to successfully measure your sales objectives.
Set forth some minimum price guides and constantly study the average sale values of your products on the different channels and in the hands of third parties.
You also need to define goals geared towards measuring the sales success of your products. Are they getting to the desired consumer segments? Are they doing so at the pace and in the volume originally set as goals? Are they being positioned properly in the areas and on the channels of your interest?
Lastly, the product doesn’t exist if it can’t be seen. The metrics from your promotional activities go hand in hand with all the rest. That includes metrics on marketing activities geared towards other sale players (retailers and providers through events and correspondence) and towards the end consumer (their impression on the brand and shopping experience).
Likewise, it is useful to apply measurements of temporary objectives, like the results from promotions applied to your products during a period of time or a specific campaign. This will allow you to know if those specific actions align with the general objectives and if they should be repeated or not.
In summary, a good benchmarking plan for any business model should be made up of 5 phases.
- Choose a product or market that you want to analyze.
- Select and study the direct competition in that field.
- Collect all the necessary metrics about the sale process and positioning.
- Analyze the results and compare your data with the competition and the market state.
- Obtain conclusions and turn them into actions: specific change or drastic changes, applied quickly or over the medium term, to improve your product or business.
When undertaking benchmarking studies in businesses with products, whether they be manufacturers or retailers, one of the most noteworthy points is the need to improve the product information management process. And the most popular solution for taking care of these problems is PIM software (Product Information Management). This software automates your catalog work, allows more complex strategies to be applied, and offers more satisfactory shopping experiences for the customer.
Try Sales Layer’s PIM solution for free now and don’t wait until the next goals meeting to set a milestone in your benchmarking plan.