This is an age of instant feedback. By the end of the day, technology can track how many steps we’ve taken, how many people enjoyed the content we’ve created, how much money we have, and plenty of other data about our lives. Though feeling tired, loved, and wealthy may be all the information we need when we go to sleep (we should all be so lucky), humans are generally not good at evaluating personal performance, and the same is true for businesses. Even when technology provides specific data, determining “good”, “average”, and “poor” performance can be a gut reaction based on expectations and context (and often bias). When it comes to understanding complex data about your business, setting realistic benchmarks is a much better way to evaluate performance. There are three standard approaches to benchmarking–industry, competitor, and historical—which can be used singly or together to create actionable insight from data.
Industry benchmarking is the use of generalized standards available from institutions, research organizations, consulting firms, and marketing companies. Industry benchmarking is especially useful for metrics that are not observable from competitors (for example, email open rate). Search engines can quickly yield many industry benchmarks that are good enough for evaluating whether an organization is meeting basic expectations, but these sources may not give information that is very recent, relevant, or free. A day spent at the main branch of a city or university library can provide much more specific benchmarking, and the best way to start is to look at the business and marketing resources available through the library’s digital services and then ask a librarian for help.
Carol Smith is a freelance consultant who provides engineering services for utility-scale battery storage projects. She sends a monthly email newsletter to a list of 500 contacts and wants to better understand the analytics she receives. She uses a search engine to find an average bounce rate for email newsletters and happily sees her rate is smaller. After more searching, she signs up for a white paper written by an established digital marketing company that shows open- and click-through-rates for engineering service companies. With this information, Carol now understands which emails are performing below the standard.
Despite the industry resources available, some benchmarks may not be narrow enough if a company is, for example, pitted against a small group of regional competitors or an innovative new entrant to the marketplace. In these cases, competitor benchmarking is a better way to evaluate performance and is useful for metrics that are observable (for example, number of Facebook followers). Deciding how many competitors to include is a balancing act between thoroughness and convenience. Using 5-7 competitors is a good range, but this should be customized to reflect the competitive situation that’s appropriate. During the data collection and evaluation process it may become clear that a chosen competitor is not appropriate or redundant (this often happens), so one prudent choice is to include a couple more competitors than you think you may need at the beginning.
Sunshine Helpers is a solar O&M company in the Midwest that provides cleaning and maintenance services for residential PV arrays. They’re evaluating social media efforts and want to know where to spend their time and money. Although a large company with a national presence competes in the Midwest, Sunshine’s main competition is four small companies who focus on high-quality local customer service. When comparing social media channels and follower sizes, Sunshine chooses to use competitor data instead of national industry benchmarks to better reflect their regional market. Though they are tempted to ignore the national corporation whose marketing is less customized to the region, they choose instead to discount follower size according to regional population (Final Follower Size / Total Corporate Follower Size)=(Midwest Population / US Population). In the end, Sunshine is able to see where each competitor spends their marketing resources and to pick a channel and strategy best suited for their goals and their region.
The last type of benchmarking is historical (or internal). Certain metrics may not have accessible industry standards and may not be observable from the outside, so benchmarking from internal data is the only option. Even when it’s your only option, however, historical benchmarks can be a wealth of insight and also a great way to set specific marketing goals. For each chosen metric, consider the following questions: Is the industry evolving and in what direction? Is the company’s performance cyclical? What are the company’s larger goals for growth and change? Since historical benchmarking requires the most personal judgement, it’s prudent to include other people in the conversation and have someone trustworthy review your choices. This process is especially helpful during a company’s budgeting process; it’s much easier to ask for money when specific numbers tied to company goals are on the table. No matter when you set these goals, though, consider the full range of issues effecting your business and reevaluate benchmarks regularly.
TuffClose is a mid-size manufacturer of outdoor enclosures for inverters and other power integration systems. They’ve recently launched a new version of a product and created a landing page for quote requests. To evaluate the success of the new landing page, TuffClose chooses three similar landing pages and reviews visitors and button clicks for the previous two years. They discover a cyclical pattern of high activity in the first quarter of the fiscal year, followed by decreased traffic the rest of the year. They also notice a 5% increase year-over-year across all pages. With this information, TuffClose can determine an expected number of visitors and clicks and budget for advertising to close marketing gaps.
While some companies set benchmarks using complex statistics and technology that take into account many variables, other companies create simple guides for themselves once in a while (and for certain businesses this may be all that’s needed). No matter how a company measures performance, benchmarks are key to transforming the data that technology provides into the insight needed to run a business.