Benchmarking establishes a reference point so you can gauge the success or failure of marketing and service strategies even when there isn’t an obvious cause and effect. We naturally want to know how our results compare to our competition and try to benchmark against them. It’s impossible to create realistic and accurate comparisons to other companies. Looking at the competition for insight into their strategy is a good thing. Investing resources in specific analytical comparison is wasteful and counter-productive. Use those resources to create solid internal benchmarks instead.

The first step in every plan should be to get all of the participants on the same page. This eliminates (or at least reduces) miscommunication and confusion. Sometimes we forget this in our haste to share information or get started. I tend to forget this step when writing about benchmarking and presume that everyone sees it the same way. When I wrote “Why Benchmarking against Competitors doesn’t Work,” I left the interpretation of benchmarking to the reader. I’m taking a step backwards and defining it so we start out on the same page.

Benchmarking began as a surveyors’ term. Permanent marks were placed as a reference for an exact elevation. All reference points after that were in relation to the original benchmark. It is a specific and exact science. Over time, the term was borrowed and used to denote a standard measurement that can be used for comparison. When I say “benchmark” or “benchmarking”, I am always referring to a metric that can be accurately and repeatedly measured. It is an exact science in my engineering mind.

Using benchmarks in marketing and service help measure the unknown. It is especially important now that we have the social channel where identifying cause and effect seems close to impossible. Establishing internal benchmarks is not for the weak of heart because capturing the information needed and converting it into usable information is hard work and requires a long-term commitment. The benefits far outweigh the challenges making it a worthwhile investment.

Direct marketers use benchmarks on a regular basis. They usually call them “controls” and measure new campaigns against the proven performer. Internal benchmarks have to go deeper than a promotional campaign control to maximize your return on investment. Service levels, operational costs, and profitability must be added to response rates, average orders, customer acquisition and other marketing metrics. This gives you a reference point that encompasses the whole organization instead of one area. When a company has comprehensive benchmarks in place, cause and effect is easier to see.

For example, if a social media campaign goes viral at the same time sales increase, does that mean that it is driving revenue? Maybe. Maybe not. If there was also an improvement in service levels at the same time, the additional sales could be generated by improved customer experiences. Without benchmarks, the increase would most likely (and possibly erroneously) be attributed solely to the social activity.

Benchmarking within an organization provides additional insight into contributing factors for sales and profitability. The more you know, the better you can plan and grow your business.

One statement in “The Numbers that Really Matter to Your Business” got a lot of attention because people didn’t agree with it. I wrote, “There is simply no way to compare metrics from different companies and deliver realistic results.” Responses varied from simply stating that the reader disagreed to explanations as to why I don’t understand how things work.

There are several reasons why benchmarking against competitors doesn’t work and won’t deliver realistic results. Before diving in, there is one qualification. My statement does not include manufacturing and bulk warehousing. Companies that produce the same products with the same equipment and automation can compare production metrics. Comparisons are helpful even when the equipment and automation varies because it allows the less automated company see the potential gains if they upgrade. Bulk warehousing is similar to manufacturing. Product moved by pallet load is similar no matter what items are being moved. Weight and distance differentials can be scaled.

Marketing and service metrics are different. There are too many variances to provide a realistic comparison. This includes:

Corporate Culture – Every business is different because companies are comprised of people. The responses to marketing and service vary by individual preferences.

Customers – All customers are not created equal. Ask anyone who has bought a business to find that half of the people in the customer database are hit & runners. Comparing response rates between companies is an exercise in futility.

Service – Quality of service is directly related to customer expectations. People expect different things from different companies. Expectations can be managed but they can’t be controlled.

Costs – Corporate expenses are dependent on so many factors it is impossible for an outsider to verify accuracy. Service levels, pay scales, bonuses, productivity, and perks are a few of the items that can vary. It’s hard enough defining the costs of doing business for your company. Why try to do it for another?

Productivity – The time required to serve customers and fulfill orders varies between companies. Order dynamics drive productivity. For example, apparel companies that have an average of three items per order can have very different productivity levels. If one typically has orders with three pieces of soft goods and the other has two pieces of soft goods along with a pair of shoes, the processing time will vary.

Social Activity – Comparing social activity is useless unless the companies are having the same conversations with the same people. We have clients that have very little community participation but are generating revenue every day from their social activity. We also have clients who have extremely active communities that also generate revenue. Which one is best? Both. Can they be compared? No.

ROI – Calculating the return on investment requires accurate information across the board. It is highly unlikely that you will receive everything you need in real numbers.

Transparency – Sharing proprietary information is foolhardy. If a competitor shares metrics for comparison, don’t expect them to be accurate. In some cases, there are errors in the collection and documentation. In others, the numbers are adjusted for appearance.

Wanting to know how your business compares to the competition is understandable. Asking questions so you have an idea of what they are doing and how it affects their metrics is a good way to get some insight. Trying to benchmark your business by another company’s standards is a waste of resources and will do more harm than good in the long run. Benchmarking against yourself and striving for continuous improvement is a much better way to succeed.

PS: Thank you to those who shared their opinions with me and inspired this post.

Keeping customers actively buying products and services is a key component of every marketing and service strategy. The longer people remain in the buying funnel, the greater their lifetime value and contribution to corporate profitability. People can easily shift loyalties with a click of a button in our global marketplace. This makes it much harder to keep them actively engaged and committed to your business.

Companies with storefront are better equipped to keep customers because they have the opportunity to build face-to-face relationships. Ask anyone who is extremely loyal to a brand why they love it so and invariably you’ll receive a response similar to these: “The products/service is amazing.” or “Ben always takes good care of me.”

When people have good relationships with individuals within an organization, they are more loyal.

Amazing products and services contribute to loyalty but there is always another option available. If not today, rest assured that someone is working on one to replace your best sellers. The only way to guarantee a loyal customer base is to create unbreakable bonds. This is done one person at a time.

Pure play direct marketing and ecommerce companies are at a disadvantage when competing with bricks and mortar organizations. Creating bonds with individuals is much harder when transactions are handled electronically. Social media changes the playing field because it provides a venue for the one-to-one connections that create unbreakable bonds.

Capitalizing on this opportunity requires a strategic plan that includes connecting with customers across channels. The plan must include building a community of customers. Companies are investing too much money in the hopes of launching viral campaigns. Connecting with customers delivers a better return on investment. To get started, replace passive links to social media networks with aggressive campaigns that invite customers to join your communities and reward them for doing so.

Connecting with customers takes more effort and time to build your communities than typical social media acquisition strategies.

The rewards are greater too. When customers are the foundation of your community, they help you answer questions, introduce new people to your business, and respond better to your promotions. People who are actively participating in brand communities have longer customer lifespans and higher lifetime values. And, one more thing…they look forward to your marketing messages instead of complaining about them.

There is a certain safety in following the rules. When a marketing path has been tested, there are few surprises or unexpected challenges. Mediocre entrepreneurs can create successful companies by following the steps of the innovators who have gone ahead. Odds are that the copycat businesses won’t last more than a few decades without a significant management change, but they will provide income for the founders until the industry declines or something new comes along.

When I joined the direct marketing industry ages ago, there were a couple of dozen catalogs that were so similar it was impossible to identify the brand without reading the name. There were slight variations in the items, but the look, feel, and product lines were eerily alike. One of the owners explained the copycat philosophy to me. She said that the company that had originated the look did all of the heavy lifting with testing new markets and products. The copycats had higher profit margins because they didn’t invest in testing or new strategies.

The benefits gained by following the leader didn’t last. All of the copycat catalogs died an untimely death. The companies that survived the peaks and valleys of the economy were the ones who invested in quality analytics so they knew what worked with their customer base. They tested different strategies, tactics, and products. Marketing rules established by others were viewed as guidelines to be tested, not hard facts because every corporate culture is different.

Learning from others worked because the guidelines were based on sound business strategy. They had been tested by varying elements to see what works best. Marketing pioneers readily shared their discoveries with new marketers who, in turn, continued testing and improving results. The information tested and shared ultimately evolved into best practices.

Things change.

In the last few years, best practices based on controlled tests have morphed into rules formed by personal preferences. The catalyst for this change was the introduction of social media and the vision of a marketplace controlled by the people. The new age marketers’ imagined a world where people find businesses to fill their needs instead of one where companies seek customers.

The combination of tough economic conditions and the new marketing channel promising untold riches with minimal effort created a perfect environment for people willing to pillage the online community. Individuals facing record long-term unemployment searching for ways to provide for their family and executives desperately seeking to escape a sea of red ink were easy prey. Self-appointed experts commanded attention with declarations of data cooked up in imaginary labs. Testing of cause and effect required too much time and effort. It was much easier to imagine something and declare it as fact.

Rules of engagement were created and enforced by the new age marketers. In their alternative universe, traditional marketing was taboo. Anyone daring to promote their business or products via social media risked being ostracized on public forums. Requiring a return on investment indicated stodgy old school management destined to follow the dinosaurs into extinction. The new marketing rules included:

• Promote others twelve times to every one promotion for your business.
• Do not use automated direct messaging on Twitter.
• Leave comments on other people’s blogs to increase traffic to your site.
• Do not use social platforms to share promotional messages.
• Give to get.
• Be completely transparent in everything you do.
• Do as we say not as we do. (This one was unspoken. The rule makers didn’t follow any of the rules they created.)

Few dared to publicly challenge the new leaders. The new media was, well, NEW. And, different. And, people were already hurting and afraid of making another mistake. Following the leaders seemed safe and $397 for a guided tour of the new marketing channel seemed reasonable in an unreasonable world.

Did it really matter that the tour guides had little or no business experience? Or, that they aggressively promoted each other with affiliate links while pretending that they were simply sharing good sources? Or, that the how-to information they were sharing was based on personal opinion and theory instead of tested and proven tactics? Not much because it was desperate times filled with desperate people. When you are drowning even grasping a straw provides hope.

Time passes and with time comes experience.

When social media was new, no one really knew how it would evolve. The newness is gone, but there are still a lot of unknowns. It’s a shame that the people who stepped up in the leadership roles spent their time telling people to “be awesome” instead of testing different strategies to find best practices. It’s equally shameful that people followed them blindly down a dead-end path.

Fortunately, not everyone drank the social media Kool-Aid. People that didn’t get caught in the drama invested their time in testing different things to see what worked or didn’t. Real companies are making the social channel work as part of an integrated marketing strategy that includes other channels. There are a variety of successful strategies that move people from social activity into the buying cycle. Instead of trying to be awesome, successful marketing teams work to make real connections with customers and prospects. They may not have a zillion followers or fans, but what they have is much better. They have a proven strategy for using social media to generate revenue.

Testing different strategies to establish marketing rules is the best way to create sustainable growth for your company. Doing this requires a complete understanding of your customers, their behavior, preferences, and how everything works together to create a profitable strategy. Start with your data, add questions, and test everything to find proven cause and effect. It takes time and effort but the benefits are worth the investment. And, don’t listen to people who are selling new age marketing without questioning their experience, information sources, and testing strategy. The same people who promised that “it was all about the conversation” are now talking about search engine optimization, direct marketing, benchmarks, analytics, and return on investment. Being able to talk a good game doesn’t make you a player.

Where will your company be this time next year? Will you be celebrating record profits or planning a bankruptcy strategy? The answer depends on what you do now to prepare for tomorrow. Business as usual doesn’t exist anymore. Our marketplace has changed from a multichannel environment to a maze of channels and platforms that distract buyers and stretch limited resources. Maintaining a presence on all of the relevant networks is impossible for small businesses and fiscally irresponsible for large ones.

The economic downturn combined with an influx of new opportunities to connect with customers is overwhelming to even the most seasoned marketing teams. When faced with so many choices and dangers, running seems to be the only answer. Some dart from platform to platform hoping to catch a viral wave that will rain a revenue stream. Others run away from everything new seeking comfort in the tried and true tactics that have delivered past successes. Both strategies are fear driven paths to failure. When everything is said and done, a divided house cannot stand and those rooted in the past will be left behind.

Change is hard. People naturally resist it until the pain of remaining in the status quo exceeds the fear of the unknown. Vision of a better tomorrow shared with the passion of a believer is the only way to move some from the comfort of days gone by. The team responsible for the future of the company has to share the vision. They don’t have to agree on the path, but the final outcome is dependent on their ability to see a better tomorrow.

Maybe the real question is where do you stand? Are you so rooted in the past that the future will pass you by? Or, are you waiting with an open mind, willing to walk through the door of opportunity and do the heavy lifting? The tactics that got your business where it is today won’t take it to the next level. Change like you’ve never seen before is required.

Positioning your company for growth requires a solid plan that encompasses every corporate function, department, and person. The business has to work like a well-oiled machine where every gear provides leverage to the one next to it. The process won’t be easy but nothing worth doing is ever easy. Here are some steps to get you started on moving your organization to the next level:

Assemble

Start with an open mind, blank paper, and the people you need to make it happen. It is helpful if you do this at another location but if that isn’t in the budget, clear your conference room of everything that reminds you of the status quo. List your corporate strengths and weaknesses and then do the same for your competitors.

Analyze

Dig deep into your customer file so you have the best possible understanding of their behavior, buying patterns, and preferences. Keeping customers active longer is the best thing you can do for your bottom line. It increases the return on acquisition costs exponentially.

Brainstorm

Where can you improve service and satisfaction without significantly increasing costs? What do you need to do to offset weaknesses? How can you be more accessible to your customers? What channels are you missing that can make a difference in your business? What customer needs are unfilled?

Eliminate

There are always more ideas and opportunities than there are resources. Select the best and prioritize them by commitment and return. This will help you choose when and what to do based on available resources and potential return.

Strategize

Effective action requires planning. The survival rate of companies managed by knee-jerk reactions and seat of the pants methodology is extremely low. Having a plan provides vision and direction. There may be detours and rerouting along the way, but mapping out the strategy is the best way to keep your business moving forward.

Implement

The best laid plans are worthless without implementation. Executing your strategy inspires confidence and provides feedback that can be leveraged into growth and profitability. Don’t finish the year with a list of things we could have done. Finish it with a compilation of “this worked, that didn’t”. This is the foundation that supports sustainable growth.

Revise

Perfection is impossible. The very best strategy will have components that don’t work. Continuously monitor the progress, eliminating the things that don’t work and expanding the ones that do. In the end, everything may be completely different from the plan but it will be tested and successful.

Celebrate

People need wins to remain motivated. If you are constantly pushing your team to move forward without celebrating the progress, they will burn out. You’ll be left with a failed strategy because it didn’t reward the people who make it happen. Celebrations must be inclusive, crossing departments and divisions. It is only when everything and everyone works together for the greater good that your company will reach its full potential.

Remember

Moving a company to the next level is a process. Trying to plan it in a few days won’t deliver the results you want. Give it time to gestate and expand in your mind so you and your team have full ownership of the process and results.