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Benchmarking is the practice of comparing your business to a cross-section of businesses within the same niche. You don’t get any real data about any of the other businesses. Rather, you only get a compiled data set of all the other businesses with an average, or mean, for comparison purposes. So what good is it?

Benchmarking does have its place, but it has limitations. First, the benefits:

  • You get to compare your business to the average business in your niche and see where you fall
  • Any data that can be measured can be benchmarked
  • Benchmarking can take place over a short term or a long period of time
  • Information you gather from benchmarking can be used to better market your business and position it within the marketplace

Now what are the drawbacks?

  • As competitive intelligence, you can’t get any real data on any specific business
  • If you don’t know what you are looking for then you can easily misinterpret the data
  • You cannot benchmark data that you can not measure in some way

Benchmarking is useful for a specific purpose – it tells you where you stack up against your competition based on industry averages. In other words, if you have 5 key competitors and their average sales is 10% higher than yours then you know that you are 10% behind the average business in your niche. What you don’t know is which competitors are higher or lower than you (there’s other data for that).

When you want to see where you stack up against the average business in your niche, benchmarking is an excellent marketing tool.

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