What is benchmarking?

In business, benchmarking is a process used to measure the quality and performance of your
company’s products, services, and processes. These measurements don’t have much value on their
own—that data needs to be compared against some sort of standard. A benchmark.

The objective of benchmarking is to use the data gathered in your benchmarking process to identify
areas where improvements can be made by:

• Determining how and where other companies are achieving higher performance levels than
your company has been able to achieve.
• Comparing the competition’s processes and strategies against your own.
• Using the information you gather from your analyses and comparisons to implement
changes that will improve your company’s performance, products, and services.

Why is benchmarking important?

The goal of your business should be to grow, improve processes, increase quality, decrease costs,
and earn more money. Benchmarking is one of many tools you can use as part of any continuous
improvement model used within your organization.

Consistent benchmarking can help you:

• Improve processes and procedures.

• Gauge the effectiveness of past performance.
• Give you a better idea of how the competition operates, which will help you to identify
best practices to increase performance.
• Increase efficiency and lower costs, making your business more profitable.
• Improve quality and customer satisfaction.
Types of benchmarking

There are many different types of benchmarking that fall into three primary categories: internal,
competitive, and strategic.

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Internal benchmarking

If other teams or organizations within your company have established best practices in processes
similar to yours, internal benchmarking involves analyzing what they are doing so you can find
areas where you can improve and be more efficient.

For example, you could compare the performance of one warehousing and shipping site against
another warehousing and shipping site. The site with superior performance simply needs to share
their processes and procedures so that the entire company benefits from increased performance.

Competitive benchmarking

This type of benchmarking is a comparison of products, services, processes, and methods of your
direct competitors. This type gives you insight into your position within your industry and what
you may need to do to increase productivity.

For example, you can compare the customer satisfaction of a competitor’s product to yours. If your
competitor is getting better customer reviews, you need to analyze what the difference is and figure
out how to improve the quality of your product.

Strategic benchmarking

Use this type of benchmarking when you need to look beyond your own industry to identify world-
class performance and best practices so you can look for ways to adapt their methods to your
procedures and processes.

For example, seeing a need to improve performance, Southwest Airlines turned to NASCAR to
analyze how pit crews are able to service race cars so quickly. They realized that it all depends on
each pit crew member’s ability to perform clearly defined tasks within specific time intervals—12
to 16 seconds if all four tires need to be changed and the car needs to be fueled. As a result,
Southwest Airlines changed and streamlined processes for gate maintenance, plane cleaning, and
passenger boarding.

8 steps in the benchmarking process

1. Select a subject to benchmark

Executives and other senior management should be involved in deciding which processes are
critical to the company’s success. The processes should then be prioritized based on which metrics
are most important to all stakeholders. After prioritizing, select and define the measures you want
to collect.

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2. Decide which organizations or companies you want to benchmark

Determine if you are going to benchmark processes within your own company, a competitor, or a
company outside of your industry.

It may be hard to collect all the data you want if you benchmark a direct competitor. So you should
select several different organizations to study in order to get the data you need. Gather information
from several sources to get the most detailed information about the organization you select to
study.

3. Document your current processes

Map out your current processes so you can identify areas that need improvement and more easily
compare against the chosen organization.

4. Collect and analyze data

This step is important—but it can prove difficult when you are trying to gather data from a
competitor because a lot of that information may be confidential. Gather information through
research, interviews, casual conversations with contacts from the other companies, and with formal
interviews or questionnaires.

You can also collect secondary information from websites, reports, marketing materials, and news
articles. However, secondary information may not be as reliable.

After you have collected enough data, get all stakeholders together to analyze the data.

5. Measure your performance against the data you’ve collected

Look at the data you’ve collected side by side with the metrics you gathered from your analysis of
your own processes. You may want to layer your performance metrics on top of your process
diagrams or map out your competitor’s processes to more easily see where you’re falling behind.

As you analyze the comparisons, try to identify what causes the gaps in your process. For example,
do you have enough people and are they sufficiently trained to perform assigned tasks? Brainstorm
ideas to effectively and efficiently fill those gaps.

6. Create a plan

Create a plan to implement changes that you have identified as being the best to close performance
gaps. Implementation requires total buy-in from the top down. Your plan must include clearly
defined goals and should be written with the company’s culture in mind to help minimize any
pushback you may get from employees.

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 7. Implement the changes

Closely monitor the changes and employee performance. If new processes are not running
smoothly as expected, identify areas that need to be tweaked. Make sure all employees understand
their jobs, are well trained, and have the expertise to complete their assigned tasks.

Document all processes and make sure all employees have access to documentation and
instructions so that all are on the same page working toward the same goal.

8. Repeat the process

After successfully implementing a new process, it’s time to find other ways to improve. Review
the new processes you’ve implemented and see if there are any changes that need to be made. If
everything is running smoothly, look to other areas or more ambitious projects that you may want
to benchmark and start the process again.

When you correctly implement and follow the continuous practice of benchmarking, your
company will grow, and you will keep up with (or even surpass) your competitors. Get started now
by understanding your as-is processes.

Implementing a CRM solution also means you are implementing a CRM culture. There may be
some employees who will resist the change in processes but it is important to get each employee
to understand the benefits a CRM solution provides.

• Make Sure Everyone “Buys in” to the CRM Implementation

One of the problems that CRM implementations face is getting the entire sales team to use the
system. Some sales people believe that the way they are currently handling their sales is the best
process, and they resist having to use a CRM. It’s important to make sure that everyone knows
that implementing a CRM into the organization is done to ensure that there is consistency
throughout all sales processes.
• Know the Expectations
Customers are expecting an increasingly proficient customer service process. Implementing a
CRM solution can help your company automate many customer service processes to improve the
time it takes to resolve an issue. To make sure the CRM solution is properly utilized, you will need
to set benchmarks to measure against.
• CRM Implementation Should Support Strategic Decisions
A CRM solution will offer companies real benefits when it is properly aligned with the overall
goals of the company. It is important during the planning process that how this will be done is
carefully mapped out and agreed upon by key decision makers.

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• Not a Cut and Dry Solution
One reason why most CRM initiatives fail to score on the customer experience front is because
CRM software is viewed by many as a cut and dry technology driven by data and facts only. While
the CRM technology is used to streamline customer service processes, it doesn’t eliminate the need
to empathize with a customer’s problems to create a personal customer service experience.
• Implementing a CRM Culture Takes Time
Bringing in cultural changes is a long-term process. Companies should start training employees on
the new CRM software during the implementation process. This will give them time to experiment
with the system and ask their questions before the solution is installed across the company.
• Know the Right Size CRM to Get
Getting too much or too little in a CRM solution can make sharing information across the company
more challenging than intended. If a company is currently operating with each department being
autonomous, it’s crucial to make sure the CRM solution will reach each department and streamline
information sharing.
• Stay with It
Implementing a CRM culture is a dynamic process in which new observations and information
can affect the already laid out concrete plan. Positive information should be reinforced and
successful efforts should be replicated. Accentuate the positive that makes cultural shifts less
jarring and disruptive. Acceptance of the software, changes in processes, and a friendly people
approach to CRM implementations should be an ongoing process.
• Reward Employee Performance
Develop metrics to measure performance, training, education, and compensate the employees for
the extra effort for blending in with the new culture. Performance recognition sends out a powerful
message to all the company’s employees.
• Listen to Employee Feedback
The customer-facing staff is your best source of pertinent information regarding customer
behavior. Encourage your employees to speak up if they feel that a process could be improved
upon. Also, ask them for periodic evaluations of the changed processes toward developing an
effective CRM culture.
• Make It Pervasive
Customer satisfaction is something that every department across the company should be focusing
on. Make sure each department is using the CRM to its planned capacity. If one department is
resisting the change, there will be gaps in the CRM processes across the entire organization.
Implementing a CRM culture can be just as challenging as implementing the software itself. It is
important to make sure that each department understands why a CRM solution is being
implemented and why it is vital for each department to use the new CRM solution.

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Metrics

Metrics play a vital role in the development and success of any business. Talking about CRM, we

use the term metrics for tracking the complete performance and success.

It allows us to have appropriate control over the marketing and selling efforts. Using CRM

metrics, we can react effectively by tracking the happenings closely. It gives us dedicated

precision to our efforts in marketing and sales.

Metrics are exceptionally good for tracking CRM success. But, which particular metrics we

should track depends completely on our sales and marketing objectives.

The Top 5 CRM Metrics

1. CAC (Customer Acquisition Cost)

This metric tells you your price per lead and helps you estimate the total spend for your lead
generation efforts.

To calculate your customer acquisition cost (CAC), divide the number of customers gained in
a given period by the total amount your business spent in that same period. This includes all
advertising spend, salaries, commissions and bonuses, and overhead.

For example, if you spent $10,000 on sales and marketing this quarter and added 10 customers,
your CAC is $1,000. Use this figure to estimate the budget amount needed to add more new
customers. This metric gauges your marketing performance and indicates how you can better
allocate resources to optimize customer acquisition.
2. Customer Lifetime Value (CLV)
Customer lifetime value (CLV) is the estimated amount of money an individual will spend
throughout their relationship with your company. In other words, it’s the quantifiable benefit
of acquiring and keeping a given customer.

To calculate CLV, multiply the average annual profit you make off of customers by the average
retention time per customer. Then, subtract the cost of acquiring the customer (CAC) to find
your CLV.

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For example, say you make an average of $3,000 off of your customers each year, and they
stick around for an average of two years. Multiply these two figures to get $6,000, and then
subtract your CAC of $1,000 for a CLV of $5,000.

This metric helps you discern how to better invest in your existing customers to increase their
value over time, since acquiring a new customer costs 5x more than retaining an existing
customer.

CLV also helps you assess the quality of your customer experience. For example, a high churn
rate due to poor customer service will diminish your CLV and your revenue. If your customer
lifecycle is shorter than expected, try to identify why.

Finding ways to improve CLV – perhaps through upselling, cross-selling, and loyalty programs
– is a clear path to sustainable growth.

3. Length of Sales Cycle

The length of a sales cycle is the average time between when a prospect is created and when
they’re closed. In other words, how long does it take someone to compile the necessary
information and make a choice about your company?

How long it takes to convert a lead is key because it shows you the velocity of your sales
pipeline. This ‘closing speed’ helps you estimate the best time for mid-funnel engagements –
such as sending a quote, moving to close, etc. If a lead is lagging behind the average window
for closing, you could trigger a message to encourage action, such as an email offering a
discount.

Once you’ve established a timeline, you can work to accelerate your sales cycle from there.
Are leads getting bogged down at a certain touchpoint? Look to optimize your content assets
so your sales reps can spend their time on the most qualified leads.

Speaking of sales reps, the average sales cycle is also a baseline metric for their performance.
If one employee is slower than the rest, you can flag areas for improvement. What if a particular
rep is closing faster? Identify their path to success and spread what’s effective along to the rest
of the team.

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