In this month’s “John’s Corner,” John discusses the limits of benchmarking and its alternatives with CMB's Megan McManaman.
MM: Today we’re discussing a topic that you feel strongly about, the misuse of benchmarking in marketing. Can you tell us what benchmarking is and how it’s used?
JM: Before we get too far along, I want to make it clear that benchmarking is a process aimed at enabling you to become the best through improvements. It is not a score. Often benchmarking is used poorly in marketing, with too much emphasis on standardized “descriptive” scores. Yes, a comparative score is useful in raising a red flag, but then what should you do for success? Unfortunately, there are third parties that don’t just offer comparative scores, but encourage you to meet or exceed this score using a diagnosis based on a “standard” set of externally generated criteria. By focusing on the gaps between you and your competition you are assuming you can become the “best” by essentially copying competitors using criteria. In reality that will actually ensure you will not become distinctive.
MM: I can see why a “best in class” company might not want to focus on standardized competitor scores, but what about the fifth ranked company, the tenth?
JM: For companies somewhere in the middle I also consider it unlikely they will gain a notable market advantage by closing the gap with higher score competitors. In fact it could be quite detrimental. A focus on scores using standard measures will obscure what makes your company unique and distinctive. It is your commitment to innovation that will better your performance and market standing, leading to improved financial performance. Apple does this well. They are a company committed to being distinctive: they would hardly be where they are today by copying others.
MM: It strikes me that this has been a fundamental problem with how benchmarking has been used in marketing from the beginning, is it particularly problematic now?
JM: Yes, it’s true. People are acquiring information differently and at faster rates, and it is not just because of the internet. The myopia that comes with focusing on standard benchmarking scores and gaps is particularly dangerous for companies in a marketplace saturated with a broader set of competitors. In part because people travel more widely, and information is not centralized, there are very few companies that are the “only game in town” and that number will grow fewer. So benchmarking as a process striving for distinctiveness will become even more important.
MM: Could you help me understand what a diagnostic approach aimed at distinctiveness looks like?
JM: Remembering that benchmarking is a process, the essential nature of a best practice is diagnostic: functionally and in what is produced. In marketing we must aim at a holistic perspective due to the interconnectivity of all the strategic and tactical elements, and also the growing relationship to operations or value delivery. So, the “diagnostic approach” recognizes the need to know what your competitors are doing, but rather than scoring yourself in comparison, you customize systems and methodologies directly relevant to your unique organization that focus on what will both help you stand out in the marketplace and improve your efficiency.
A process with a customized diagnostic approach allows both small and large companies to account for emerging challenges and opportunities, and be more nimble and distinctive in the face of these changes than companies that focus more on comparative standards. Innovation and distinctiveness are more important than ever, and a custom diagnostic approach reveals these in a way that a competitive descriptive score based benchmarking cannot.
Download the full conference presentation here: The Perils of Benchmarking 10 things to consider when deciding how you should benchmark against the market.
So what do you think? Does benchmarking stifle innovation? does it encourage marketers to "keep up with the Joneses?"
There is a very interesting conversation going on right now in the Consumer Insights Group on LinkedIn about the future of the marketing research profession and how researchers and firms must adapt to be successful in the long term. There are new methods, skill sets, and mindsets that will be needed and placing a big bet on something new can be both a great opportunity, or potentially a colossal failure.
Among all of the forward looking talk, one of the comments captured a common, yet very real mindset with the research industry:
"We all talk big..but we have families to raise, mouths to feed, futures to protect, not to mention our backs and our very jobs. So..it's wonderful..really wonderful..to talk about the Brave New World of WHAT'S NEEDED. The problem is...when it's really down to the short hairs, it's REVENUE & SECURITY. And..in our wonderful business...that comes back to:
1. Do you have norms (G-d forbid you offer something new, without 20 years of norms...next candidate please)?
2. Do you have proven statistics that prevent our in-house cynics (or even us) from saying 'Yeah..we know..we're already doing that'?
3. Most important...do you have a prospective buyer IN A NEED STATE?"
Upon reading this I understood right away what the author meant. But I also thought to myself: "We rarely use norms and benchmarks and get on quite well." Certainly benchmarks play an important role in driving improvement for some companies, but they are not always all they are cracked up to be.
Chadwick Martin Bailey's chairman, John Martin, is generally not a believer in using benchmarks, especially when they are used blindly. At this year's MRA (Market Research Association) Annual Conference (June 9 here in Boston) he'll be presenting "The Perils of Benchmarking: 10 things to consider when deciding how you should benchmark against the market."
In this presentation, John lays out some of the challenges facing organizations who benchmark blindly and why benchmarking is bad for market leaders. After the conference we'll share the entire deck, but as you think about whether or not you are using benchmarks for good, as yourself three questions:
- What is the role of market oriented benchmarking and benchmarks in your company?
- Do they accommodate the market and organizational realities of today and tomorrow?
- Are you caught in the myopia of using standardized external sourced competitive benchmarks to diagnose for improvements?
In fact, those are the questions you should be asking about all of your measurement programs. Are they adapting to the realities of today and tomorrow or just rehashing old questions and techniques. The world of marketing is changing and both supplier and client side researchers can't afford to be left behind.
Posted by Josh Mendelsohn. Josh is our VP of Marketing and loves live music, tv, great food, market research, New Orleans, marketing, his family, Boston and sports. You can follow him on Twitter @mendelj2.