“How’m I doin’?” – Erstwhile New York City mayor Ed Koch made this phrase made famous; it is human nature to benchmark our performance. Business owners can turn that desire to their advantage by using benchmarks to ascertain what they’re doing right, and what they could improve.
Benchmarks, said Veronika Noize, marketing coach and managing director at the DIY Marketing Center, allow businesses to get a sense of how they are doing compared to others in the same business or industry.
“This is especially important for small business owners who frequently have no idea how to evaluate their own success,” said Noize.
Also, she added, benchmarks can reveal growing or under-served markets which may provide a focal point for messaging and pricing.
Deciding what to benchmark
One of the challenges associated with benchmarking marketing capabilities, said Lynn Elyse, sales director for Vancouver-based digital marketing firm Gravitate, is the definition of “marketing.”
“Marketing can include promotion, pricing, distribution and the product itself,” said Elyse. “But people tend to focus on promotion.”
Here are eight marketing capabilities that can be benchmarked, along with some sample benchmarks for each:
- Product development: processes associated with testing and launching new products and services
- Pricing: how quickly you can change pricing to respond to market needs, and knowledge of competitors’ pricing tactics
- Channel management: the strength of relationship with distributors and your ability to attract and retain the best distributors
- Marketing communications: reputation management, sales training and program development and execution
- Market information management: processes associated with gathering customer and competitive information, tracking customer feedback and processes for analyzing market information
- Marketing planning: ability to effectively segment and target your markets and processes and costs for developing marketing strategies
- Marketing implementation: allocation of marketing resources and comparing program results
With so many choices available, Elyse said the first step to effective benchmarking is to “narrow down what you’re trying to keep tabs on.”
Noize explained that many small businesses focus on benchmarking total revenue, ignoring other key metrics. She cited several industry benchmarks that can put things in perspective, including profitability; cost per sale; Internet traffic; Internet conversions; sales by category, platform channel; social media activity such as likes, shares and comments; and opt-in rates. Because this data varies widely, Noize said industry-specific benchmarks can help businesses “compare apples to apples.”
Lisa Schmidt, principal of local strategic marketing firm Marketing Matters, said that market share is also an important aspect of understanding how your business is performing.
“In developing marketing to accomplish growth, it is absolutely necessary to know industry standards as well as recognized consumer cycles within your industry,” said Schmidt.
Noize said that while the frequency of benchmark comparisons will vary by industry, she generally recommends that businesses review their own metrics at least monthly. How often a firm should compare to industry data depends on the type of business.
“’Regularly’ for a business coach may mean twice a year, but weekly for a gym,” said Noize.
Benchmarking leads to best practices
Joseph Cote, professor of marketing at Washington State University Vancouver, said that benchmarking to specific numbers may be difficult for small businesses because they don’t always have those numbers themselves, or use the wrong metrics. A better approach, he said, is to think in terms of best practices that can lead to desirable outcomes, such as reducing customer support calls or returned product.
“You have to understand how the metric ties to your performance,” said Cote.
For example, it wouldn’t make sense for a utility company to measure customer satisfaction by energy use, or how many switched to a competitor. However, measuring the number of outages every month or the number of customer complaints would make sense.
Elyse gave another example of how making the right decision about what to measure can lead to best practices.
“You can have a 500-percent increase in website traffic, which might be 10 times other companies’ traffic,” said Elyse. “But if your call to action isn’t converting visitors into actual sales, you’re just tracking numbers for the sake of tracking numbers. It is important to achieve actionable insights.”
Cote said he uses the idea of a “balanced scorecard” to guide benchmarking decisions.
“You can’t just look at financial performance,” he said. “Develop drivers of performance and then develop metrics around those drivers, which become leading indicators.”
Schmidt said that looking at other industries besides one’s own can be beneficial in developing best practices.
“If you keep doing the same things you’ve always done, you’ll keep getting the same results,” said Schmidt.
Think beyond the numbers
Noize cautioned against focusing only on benchmarks and metrics.
“The number one issue I see with getting too invested in benchmarking for marketing is that it might influence businesses to follow the leader and suppress innovative thinking, and in a highly competitive market place, that’s a bad idea,” said Noize.
She said that if companies wait to see what everyone else is doing, they will always be on the tail end of what’s new and what works.
“At the end of the day marketing is both art and science,” said Elyse. “Sometimes science isn’t going to help.”
Where to go for more info
Cote said that companies should read about what they’re trying to accomplish. Two main resources are the library and the Internet.
“Two or three hours spent in the library can uncover a lot, especially if you work with a reference librarian,” said Cote.
Business owners can use the Fort Vancouver library’s databases, which can be accessed remotely via the Internet. Two such databases are the ABI/Inform, which has access to trade journals, and the Proquest Research Library. Both can be found at https://fvrl.ent.sirsi.net. In addition, any resident of Southwest Washington can access WSU Vancouver’s databases at the WSU library.
Noize suggested that companies also use information published by industry associations, the IRS, business publications like Inc, and marketing websites. Elyse said that some online communication services, such as MailChimp, can help small to medium sized businesses, because the service offers built measurement tools that can track clicks, opens and social activity.