The benefits of market research and benchmarking

Performance Benchmarking

Benchmarking is one way businesses can use their market research effectively. Often used to improve business performance, benchmarking is a process of comparing characteristics of your business with other businesses.

Anton Benc, co-director of Benchmarking Partnerships, defines benchmarking as “a business excellence tool for finding, adapting and implementing very good or outstanding practices so organisations can improve their performance”.

When benchmarking your business, market research will be one method used to establish key indicators (benchmarks) to measure the performance of your business against. For example, purchasing an industry report (market research) that highlights benchmarks, such as important success factors for that industry, will enable a company to establish where they sit against those industry benchmarks.

Benchmarking can involve measuring and comparing the performance of your business as whole, or specific indicators, such as staff retention, customer service, productivity, brand awareness, innovation practices, debt management. “One needs to be very clear on the parts of the business you’re wanting to benchmark,” warns Benc. “Benchmarking the whole business is a difficult task because every business is different and the best value out of benchmarking is highlighting those things that are most urgent for improvement and those that are strategically important.”

Benc says the most important thing is to establish why there is a need to benchmark x, y and z. “We try and unpack the strategic intent of why they’re wanting to do benchmarking in that area. A reason for that is to make sure it is strategically linked to an organisation’s goals and it’s not just a hearsay request by a senior executive or someone wishing to compare data. Simply comparing data isn’t really all that useful. It doesn’t actually help the organisation improve its performance—it might help give a flavour of how well they’re doing compared with others, but it doesn’t tell us how to improve.”

Benchmarking Partnerships outline the benchmarking process to involve the following steps:

1.      prioritisation of strategic improvement needs (the why)

2.      measurement (the what—the benchmarks)

3.      the practices (the how—the doing of benchmarking)

4.      re-measuring then tracking performance improvement.

Choosing Partners

Businesses may want to conduct an internal benchmarking study to compare performance across different sites, divisions or branches, or you may want to establish how you’re performing within your industry, for example. External benchmarking, then, can be in the form of benchmarking across the sector, be it public or private, and specific areas of that sector, or can be across different industry partners where common industry partners may not be in direct competition but are willing to share what they do well.

“Another form of external benchmarking, which is probably the greatest value for organisations wanting to implement big change, is what we call generic benchmarking, and that’s benchmarking outside your own industry,” explains Benc. “So, if we have a financial services company, they may want to choose partners from a petroleum oil base or a utility organisation. So [the benchmarking study] doesn’t focus on the product or service, it focuses on the business outcomes across management and the operational processes for those outcomes."

The question of who you should partner with in a benchmarking study and how to go about making that partnership happen, is crucial and difficult. Service providers like Benchmarking Partnerships can help broker such relationships. External benchmarking programs can also be facilitated through industry associations and business support groups, and a number of industry benchmarking guides can also be accessed online, such as MAUS Business Systems’ (www.maus.com.au) range of 80 industry-specific benchmarking guides. Each individual guide shows you step-by-step how to benchmark your business against your specific industry.

Ruthven believes the most important thing when it comes to benchmarking is to refer to ‘world’s best practice’. “Benchmarking should never be done over what you’ve been doing in recent years, because you’re only comparing yourself with yourself and that’s a fool’s paradise. You’ve got to compare yourself with not just one other company but the best company in the world. So, benchmarking should always be done, ultimately, against world’s best practice. In other words, who is the smartest, best operator in the world and how are they doing it, both operationally and financially. That becomes your benchmark to see if you can copy them.”

All of our experts agree that market research and benchmarking should be done on an ongoing basis. While a change in the business (i.e., new product, new system, new location) may require a more specific and in-depth analysis, regular research and benchmarking practices are useful for measuring your ongoing performance, as well as your return on investment in the initial research or benchmarking project.

"Benchmarking should be an ongoing form of improvement," says Benc. "Once the benchmarking cycle of improvement is completed, if it continues to be strategically important, then it’s just a matter of monitoring the health of your performance and your practices, and one can re-measure that every now and again to get a feel for whether things are slipping or if they’re on track.”

While there’s no set amount businesses can expect to outlay for their market research and benchmarking efforts, Ruthven estimates most SMEs should expect to spend at least $10,000 a year, which could cover a few seminars and the odd industry report. The bigger SMEs might expect to spend up to about $100,000 a year, depending on their objectives.

Donegan says it all depends on the type of research. “If they do an off-the-shelf type of survey—a common benchmarking survey we use on a number of firms—you can start at a couple of thousand dollars and that includes the survey and a full report. Then, we’ve got projects that can cost more than $100,000, which would involve a combination of quantitative and qualitative results. Basically, projects that involve lots of face-to-face interviews, focus groups, and customised surveys are far more labour intensive so they can cost more.”