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Michael Lowenstein, Ph.D., CMC Thought Leadership Principal, Beyond Philosophy

Marketers are always looking to optimize their perceived customer value proposition, and to improve the elements of transactional and relationship experiences needed to deliver that value. What competitors are doing always comes into the dialogue, and companies must be aware of how the value offered and the communication tools used by competitors in the marketplace impacts their own performance. This gives them the flexibility to mitigate threats, spot new ideas, improve products or processes, and/or offer more desirable value.

The methods used to understand competitors most often involve one or more approaches to benchmarking. Benchmarking goes beyond competitive analysis to interpret how peer organizations do what they do in terms of quality, time, cost and overall customer value dimensions. As identified by noted benchmarking theorist and management scientist H. James Harrington, “Benchmarking is creating better solutions upon a firm knowledge base. It is not copying the best.” Done well, insights from competitive performance benchmarking can:

– Identify business opportunities 

– Challenge internal operating paradigms

– Help set realistic but assertive performance goals

– Uncover strengths and weaknesses within the organization

– Provide learning from leaders’ experiences

– Support intrapreneurship and creativity

– Guide methods for performance improvement 

– Prioritize and allocate resources (time, money, people, facilities, technology)

One of the more actionable and accurate definitions of benchmarking I’ve seen goes like this: ‘Benchmarking is a strategic and analytical process of continuously measuring an organization’s products, services and operating methods against best practices of recognized leaders (inside or outside of the company’s business areas) for the purposes of improving performance results.’ This pretty much sums up the way benchmarking should help companies perform relative to peers within their business arena. Simply put, competitive benchmarking can move a company out of its comfort zone and into measurable improvement and action.

Some companies, however, go too far with benchmarking initiatives; and they can become hyper-concerned, even obsessed, with competitive focus inside of their industry. Adequate consideration may not be given to the soundness, for example, of a direct competitor’s goals and methods. As experts like Harrington identify, benchmark-centric companies often end up with undesirable results, such as targeting processes that aren’t critical to the business, not understanding what customers really want, leaping into fixes without upfront defined plans or goals, expecting instantaneous results, etc. We’ve seen this in the past with directly competitive product and service feature-for-feature advertising and marketing; and we are still identifying it in such sectors as automotive, retailing, cable television, banking, and wireless lelecom..

Benchmarking should be seen as a means to a desired end, and it will have little worth if not accompanied by disciplined plans to change. Rather than get ‘red-herringed’ and overly attentive to what direct competitors are doing (Harrington has warned companies that overstressing comparisons to their peers can backfire if, for example, all of these companies are seen by their customers as providing mediocre value), organizations can conduct targeted research and analysis which will help identify, in depth, the positioning and elements of delivery that other companies in their arena are offering, and also how it affects their current, potential, and former customers.

For example, many companies are now more actively using gamification as both a competitive weapon and as a customer data-gathering device. So, in benchmarking gamification efforts of a peer, an organization may take up similar approaches. Having done so, they may be hard-pressed to understand why an initiative such as this doesn’t generate more positive results.

Briefly, here’s why. Consumers seem to be increasingly aware of the benefits, in both purchases and information, that they are providing to vendors. They are putting more and more pressure on these companies, in both loyalty programs and the act of shopping and the purchase transaction itself, to provide more personal value. In studies of loyalty program participation, high percentages of customers have said they would spend more with vendors that offer points for activities other than making purchases. They are looking for better experiences across channels, as well as reasons to spend. Gamification, though it doesn’t always involve actual games, does reach out with methods to socially involve consumers. If organizations work to understand the degree of this desirability (relative to the features their competitors are offering), they can certainly leverage it to their advantage. The same holds true for other rational and emotional elements of product and service value delivery.

If organizations understand the real pros and cons of competitive analysis and benchmarking, they can effectively use the suite of valuable performance assessment tools as key elements in their continuous improvement initiatives.

Republished with permission from CustomerThink.com