Benchmarking: what is it and what are its benefits?

Benchmarking is an essential tool in the business world. Far from being a passing fad, it has become a strategy that can make the difference between success and stagnation.

That is why we are not only going to tell you what benchmarking is, but we are going to go deeper into its different types and how it can be effectively applied in the real world so that you can get the most out of your venture.

What is benchmarking?

Benchmarking is a systematic and continuous process that evaluates the products, services and work processes of companies that are recognised as representing best practice. Its objective, of course, is to improve business performance based on how businesses that can be considered as benchmarks in each sector operate.

This technique involves looking outwards (to other companies) to examine how activities, processes or functions are performed. The aim? To identify good practices that solve possible shortcomings in a business and apply them in the company itself as solutions that help to obtain even better results.

The importance of benchmarking lies in its ability to provide an objective, external perspective, helping companies understand how they compare with their competitors to identify potential areas for improvement. By learning from market leaders, companies can improve their efficiency, productivity and ultimately their competitiveness in the marketplace.

What are the 3 types of benchmarking?

Benchmarking can be classified into different types, each with its own specific characteristics and approaches.

• Internal benchmarking: This focuses on comparing internal practices and processes within the same company, which is particularly useful in large companies with multiple departments or locations. It allows identifying best practices within the same organisation and replicating them in other areas or departments to improve efficiency and employee perception.
• Competitive benchmarking: This involves directly comparing the company's practices and processes with those of its most direct competitors. This type of benchmarking is essential to understand the company's position in the market and to identify areas for improvement in relation to competitors.
• Functional benchmarking: This type of benchmarking focuses on comparing processes and practices with companies that are not direct competitors, but are leaders in certain functions or processes. It allows learning from best practices in different industries, which can provide innovative and creative ideas to apply to a company that is looking to improve its procedures.

Knowing how to differentiate the characteristics of each of these types of benchmarking and when to apply each of them depending on the needs of each company is one of the things that students of our Official Degree in Advertising and Branding inMadrid learn during their university training at UDIT.

Example of how to do benchmarking

To better understand how benchmarking works in practice, it is best to pay attention to some real examples that demonstrate how easily this principle can be applied in today's industry.

Benchmarking in the fashion industry

A fashion company can perform competitive benchmarking by analysing the marketing and distribution strategies of a leading competitor. This could include studying their advertising campaigns, social media presence, and pricing strategies.

This principle is one of those studied in the Degree in Fashion Management and Communication Madrid, as it is important to be aware that not all good ideas always come from within the company.

Benchmarking in the technology industry

A technology company can employ functional benchmarking by studying how a leading company in another industry manages its customer service.

This could involve adapting innovative technologies or processes in its own customer service to improve customer satisfaction, since one of the features that customers value most is being able to rely on the assistance of good after-sales service when they need it most.

These examples show how benchmarking can be effectively applied to gain competitive advantage and continuously improve in an ever-changing business environment.