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.

Serving customers well is the foundation of every successful business. Rarely will a company with sub-par service grow and prosper. People expect quality in customer care but is top-notch service enough to create loyalty and sustainable growth?

If a study by the Corporate Execute Board is representative, the answer is probably not. The study was very comprehensive with 75,000 participants and revealed an ugly reality:

• 20% of “satisfied” customers intend to leave
• 20% of “dissatisfied” customers intend to stay

Ouch! The numbers suggest that pleasing customers may not need to be the top priority in your growth strategy. Keeping customers happy improves their experience and reduces service costs but it may not be the best way to keep them coming back. Shouldn’t loyal customers be the goal instead of simply trying to make people happy?

Customer retention is created by exclusivity and relationships.

If your company offers exclusive items, people who want them have to buy from you. The quality of service has little to do with repeat purchases. Exclusivity is a short-term retention strategy because sooner or later, a competitor will emerge. If you don’t have good relationships with your customers, there will be a mass exodus and your business will disappear.

Relationship retention is sustainable and predictable. People who have a good relationship with your company will stay even when the competition offers lower prices. Think about that for a moment. How would your business change if it were driven by relationships instead of price? Would there be more profits? Happier customers and employees? Less stress?

Creating relationships that last a lifetime is a commitment not a campaign.

Time and resources have to be allocated. Every interaction with customers and prospects is an investment in your corporate future. The work is challenging. The rewards are phenomenal because when your commitment reaches the tipping point, your customers become your best sales people.

Relationships are messy. What works for one can fail another. Individuals are, well, individual. They have unique needs and preferences but some things are universal. They want to be respected, appreciated, and valued. If you start there, you are on your way to good relationships. Other things to do include:

• Make it easy for people to shop, buy, and return. The same study mentioned above found that easy trumps exceptional when using service to create loyal customers.

• Give power to your customers. When people have a problem with your products or services, ask them how they want you to make it right. Usually the answers are less than you would offer. If it is more, you can negotiate.

• Be grateful. Saying “thank you” when a transaction is completed is common courtesy. Be uncommon and go beyond the lip service. Instill a sense of gratitude for your customers throughout your organization. Don’t allow people to complain about customers or speak ill of them in any way.

• Educate your customers and prospects. The more people know about your products and services, the easier it is for them to understand why your company is the best choice.

• Remember time is of the essence. Time is our most valuable asset. It is not renewable. Respect your customers’ time. Complete transactions and resolve problems as quickly as possible.

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.

Creating benchmarks that work to grow your business and improve profitability along the way requires an intimate knowledge of your company, customers, and team members. Your competitors’ metrics choice rarely matters except to provide fodder for bragging rights. If they have 10,000 Facebook followers and your company has 100,000, it may look good to your CEO but it doesn’t mean that you are ten times better. You may be much worse because their 10,000 may consist of loyal customers while your 100,000 are people who liked you when you said something funny or shared a viral video.

The same is true with customers. If your competitors have 200,000 people in their active customer file to your 100,000, you may still be light years ahead of them. Their file may have 150,000 hit & run customers to your 10,000. There is simply no way to compare metrics from different companies and deliver realistic results.

Competitors’ service levels don’t matter either. If your customers expect to receive their order in five days and receive it in four, you’ve exceeded their expectations even if your competitors are delivering orders in three.

Everything is relative and must be treated as such. Defining the numbers that really matter for your business is a project that starts with sales and profitability. It then drills down to the cause and effect items that ultimately make or break businesses. The process of identifying and analyzing the data for the benchmarks is as important as the final results because you discover things along the way.

When looking at data, invariably you’ll notice things that aren’t showing up on reports. Things like items being ordered together, oddities in shipping times, and abnormal service requests. The process is so beneficial at providing insight to unexpected events and effects reviewing the raw data on a regular basis is a best practice.

There are numbers that matter for every business. They are your starting point for defining benchmarks. They include:

• Sales Dollars
• Orders/Transactions
• Average order/transaction (This helps you compare channels and campaigns.)
• Customer Acquisition, Retention, and Attrition
• Service Levels
• Costs
• Profitability

When these numbers are established as benchmarks, start drilling down into your data for more information to help you grow your business. You may just find a gold mine.

Customer acquisition is the only pillar of social media that cannot stand alone. Brands can attract tens of thousands of fans and followers without ever acquiring a new customer or making a single sale attributable to the channel. Ouch! That’s scary to think about. Imagine all of the resources that have been invested in social marketing over the last five years that haven’t generated one iota of return.

Companies that offer deep discounts (like Woot!) draw new customers with incredible offers. Others like Apple have passionate fans that drive social activity with minimal company involvement. Everyone else has to rely on their customers to attract prospects that can be converted. Communities must have a solid customer base foundation to succeed.

Early corporate adopters of the social channel were often disappointed in the results and stopped participating. Their frustration is easy to understand because they expected their activity to attract customers. When it didn’t, they were told that they weren’t remarkable enough and shown success stories from Apple and Zappos! No one bothered to explain that the companies used for examples were exceptions. They had an established fan base before entering the social arena.

Building a solid community from your loyal customer base is the best way to attract quality prospects that can be converted. The people who use your products and services are the ones who are most likely to have friends and family that would like your company too. You have already established a trusted relationship, so you don’t have to do the “like me because I have great content dog and pony show.” You have great content because you are communicating with your customers.

Use every opportunity to encourage your customers to participate in your social communities. Tacking a link at the bottom of an email or webpage is availability, not encouragement. Sending an email with the sole purpose of increasing your customer activity on your pages is encouragement. Adding an added value like a discount is motivation. People will participate if the reasons are compelling enough. Finding the things that motivate your customers to join your communities is a top priority in a successful social strategy.

After you’ve established your core base, encourage them to invite their friends. The best way to do this varies by company, but finding what works with your customers is worth the effort. They become your best sales team. This is almost perpetual motion marketing. You treat your customers right and encourage them to share with their friends. They share their experiences and attract new customers. You treat the new customers right and encourage them to share with their friends. They share…well, you get the idea.

There are two things that make social media work as a prospecting channel: Treating customers right and encouraging them to share with their friends. Expecting anyone to introduce new people to your business because you have great content and are likeable is an exercise in futility.