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In the previous post, we covered SWOT analysis, which helps to identify a company’s strengths and use them to maximize opportunities for success. SWOT analysis focuses on both internal and external factors related to the company itself.
Today, however, we will focus on competitive benchmarking, which involves comparing your company to its competitors in the market.
We’ll also explore how competitive benchmarking and SWOT analysis can be used together. But first, let’s dive deeper into the concept of competitive benchmarking.
What is competitive benchmarking?
Competitive benchmarking is the process to compare your products or services against those of your competitors. It focuses on objective data rather than assumptions.
This method is valuable for both start-up companies and established companies which look to accelerate their growth.
By comparing yourself to other companies, you gain insights into who your competitors are, where you stand in the market, and what areas need improvement to achieve greater success. Benchmarking helps to identify effective strategies and practices from successful companies.
Difference in benchmarking and analysis
The key difference between benchmarking and analysis is the scope and focus of the research.
Competitive benchmarking involves a broad comparison across the entire market using metrics like functions, costs, support services. As mentioned earlier, it helps a company to understand its competitors’ strengths and its market position.
Competitive benchmarking typically requires significant time and effort to collect relevant data from multiple companies.
In contrast, Analysis focuses on a specific company, product, or service.
While analysis also requires relative evaluation, its research is narrower and more detailed. It gathers insights into a company’s strategies, strengths, weaknesses, and other factors to better understand its competitive standing.
Both benchmarking and analysis are important, but they serve for different purposes. Benchmarking actively compares collected data from competitors with your own company’s performance, while analysis dives deeper into understanding a particular competitor’s offerings.
However, the two can complement each other: the insights gained from analysis can help refine benchmarking metrics, and benchmarking data can inform a more targeted approach in competitor analysis.
Let’s walk through the competitive benchmarking process.
Process of competitive benchmarking
- Deciding what to benchmark
This is one of the most critical steps in the process because it determines the focus of your research. For companies, this decision might require approval from senior management or your boss, especially if it involves important data.
To begin, you need to clarify what you want to learn from the benchmarking process. Are you looking to evaluate your strategy, understand your product positioning, or identify your weak ends? It’s important to conduct an internal analize first to highlight areas that need to be searched. Tools like SWOT analysis can guide you in choosing the right metrics for your benchmarking.
- Deciding who your competitors are and collecting data
This decision is also important in the benchmarking process.
You should start from choosing competitors including at least those three types of companies.
- A market leader
- A company with similar targets or business objectives
- A company of comparable size to yours
By focusing on these three types of competitors, you’ll gain a comprehensive view of the market. However, it’s important to carefully consider what you want to learn from the process because this will help the choice of competitors.
That said, gathering accurate data can be challenging. Because companies often keep their data confidential, it’s difficult to get reliable information. You can attempt to gather data from sources like companies’ web sites, interviews, or industry rumors, but always be careful about the accuracy of the information.
If you can’t find sufficient data from your chosen competitors, you might need to adjust your selection . You can replace them with companies which share similarities product offerings, company size, or successful experience.
Additionally, your choice of competitors doesn’t have to be limited to direct rivals.You can also look at businesses in different industries for insights. For example, you can learn about innovative business models, successful strategies, and effective organization structures. You can consider those companies as “competitors” in the broader sense, even if they don’t directly compete with you.
- Analyzing the benchmarking chart
In this step, you compare the data you’ve collected and identify areas where you need to improve. You can also utilize effective methods used by your competitors that could be adopted to enhance your own business.
The goal of benchmarking is to learn from there insights apply them to improve your company’s existing process. It’s important to ensure everyone that everyone in the company shares this information – not just senior management, but all employees.
Now, let’s take a look at an example!
Example of competitive benchmarking: Stripe
Source: Stripe
In this example, we’ll once again look at Stripe, as we did in the previous post.
Stripe is a fintech company which provides solutions to support digital payment adoptions. Today, we’ll focus on Stripe Terminal, which is a POS (Point of sale) system.
- Deciding what to benchmark
First, let’s conduct a SWOT analysis of Stripe Terminal. You can find full details of this analysis in our previous post, but here’s a brief summary below.
If you’d like to know more, please check out the full post here. On that page, you’ll find an explanation of SWOT analysis and more detailed examples using Stripe Terminal.
For our benchmarking process, we’ll assume that our goal is to understand a stripe Terminal’s current position in the market.
From the SWOT analysis, we’ve identify key factors to compare, including hardware flexibility, omni-channel integration, and costs. Additionally, we’ll look at scalability, ease of integration, and customer experience enhancement as our key metrics for benchmarking today.
- Deciding who your competitors are and collecting data
For this benchmarking exercise, we’ve chosen Square, Shopify, and PayPal as our competitors. We will collect relevant information through their websites.
Why did we choose these companies?
- Square
Source: Square
Square is a leader in digital payment adoption. It offers customizable, user-friendly services as well as an extensive ecosystem, including payment terminals, online sales integration, and inventory management. This makes them a direct competitor to a Stripe Terminal.
- Shopify
Source: Shopify
Shopify offers Shopify POS, which seamlessly integrates online and offline payment solutions within its e-commerce platform. Both Stripe and Shopify target retailers which aim for a global market and focus on enhancing customer satisfaction through omni-channel operations. As such, Shopify POS serves as an essential benchmark for comparing Stripe Terminal.
- Paypal
Source: Paypal
PayPal provides a simple and cost-effective solution called PayPal Zettle, designed for businesses which need basic in-person payment capabilities. Although PayPal’s target market is slightly different from Stripe’s, comparing the two offers valuable insights into how Stripe Terminal competes with a solution that prioritizes ease of use, affordability, and integration with PayPal’s widely used online payment platform.
- Analysis of the benchmarking chart
Looking at the comparison, it’s clear that Stripe is in a strong position in the market.
It receives high ratings across most metrics, except for ease of integration and costs. The medium rating for ease of integration is due to the technical setup required, which might be challenging for beginners.
Additionally, the cost is slightly higher than that of its competitors, which could be a significant factor for larger companies adopting the system.
As a result, Stripe is likely to focus on improving these areas.
By mastering competitive benchmarking, you can gain a clear understanding of your position in the market and identify areas for improvement to compete with industry leaders.
Competitive benchmarking is not limited to business applications. It can also be used in our daily life.. For example, if you’re a soccer player, you can compare your performance to that of your teammates using metrics like shooting power, speed, dribble skills, and more. By identifying your weaknesses, you can work on improving them and increase your chances of becoming a regular team member!
As you can see, applying business concepts can enhance various aspects of your everyday life. Let’s explore new ideas and discover innovative insights that can improve how we approach challenges!
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