How To Avoid Benchmarking In CX?

Founder of and CEO of Success Drivers
// Pioneering Causal AI for Insights since 2001 //
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Author: Frank Buckler, Ph.D.
Published on: September 21, 2021 * 8 min read

While benchmarking can be a powerful tool for comparative analysis and understanding best practices, it can also lead to bad conclusions if the wrong information is compared.

But first, you need to understand what benchmarking is. It is a process to measure the performance of a company’s services, products, or processes against those of another business considered the best in the industry. 

Benchmarking is a simple and five-step process as shown by the following points:

  • Choosing a service, product, or internal department to benchmark
  • Determining organizations, you should benchmark against
  • Gathering information on their internal performance or metrics
  • Comparing the data to identify gaps in your company’s performance
  • Adopting the processes and policies in place within the best-in-class performers

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Why Do Business Partners Ask For Benchmarking?

In the previous blogs, we discussed how to collect customer experience data and how to analyze it. Further, we saw how to quantify unstructured feedback and gain insight and use it in a dashboard interface to help the businesses draw the right conclusions. 

Sometimes, there comes the request to do some benchmarking. Why? It’s because most companies are used to it as business partners ask them to do it. So, if you present numbers to the marketing department of C-suite, they immediately think of:

  • Is it good?
  • Is it bad?
  • Do you have benchmarks?

Let’s talk about the perceived benefits of benchmarking, as it is an important topic to talk about.

  • We benchmark as it provides an easy answer to the question :
    • Are we doing good or bad?
    • Do we still have the potential to improve?
  • Benchmarking gives you relief when you are performing relatively well or even better than the best-in-class performers. You feel good when you do a great job and feel best when you hear that you are wonderful among all competitors in the industry.

  • Benchmarking gives you directions to meet competitive performance. It sets the goal that you achieve a competitive level or somehow exceeding it is the way to go.
Why is Benchmarking Dangerous?

In my opinion, benchmarking is very dangerous, and it provides the wrong incentives. You may be in a situation where you need to offer that. But what are the right alternatives? You may, over time, be able to offer alternatives instead of benchmarking. Why? Because it is not helpful for the business. So, benchmarking assumes the following:

  • You have the same type of customers
  • What’s important for your customers is important for competitive customers as well.

The best competitor is clearly pushing the limits.

Let’s see what the risks of benchmarking are.

  • False Signals Risk – It signals that everywhere there is a gap, you need to perform better. You need to understand what is important and what you should do to improve yourself. 
  • Wrong Benchmarking – It’s due to serving different customer segments. For instance, it is dangerous to compare apples with oranges because you will get the wrong signals. Both of these fruits belong to different classes, so we can not compare them.
  • Good vs. Bad Signals – When you get wrong signals (either good or bad) by serving different customer segments, the blame game starts and is not productive. It’s because, for several reasons, the benchmark is not actually the benchmark.

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What Are The Alternatives To Benchmarking?

Let’s talk about the alternatives to benchmarking. Consider the example below that shows two key driver canvases.

These canvases belong to the same industry i-e.,

  • YOU – It denotes the customers.
  • LEADER – It denotes the market leader.

You can see all the different topics, and the green line is just a 10% mark. Below is the competent service (written in German) in the customers’ canvas and experience at the touchpoint (written in German) in the market leader’s canvas. The positive topics of the leader are much better than those of the customers, which means that the most important mentioned topics are some way better than for us. Interestingly, it is the case for 95% or more topics in which the leader is better.

Do you think this is the case only here? According to the research of Professor Byron Sharp from Ehrenberg-Bass Institute:

“The NPS and the frequencies of the items are better for the market leaders.” 

If you look at benchmarking, you will need to level up everything the customers have. They have just a handful, maybe four or so items, that are comparable to the leader. So, it’s questionable if this is a real benchmark.

You also see that the leader’s key drivers and key leakages are different from those of your customers. So, there is a strong indication that you have attracted a different breed of customers.

The above example shows that benchmarking doesn’t lead you to good information. If you want to improve your customer experience, look at your key driver canvas, and it will tell you how to become better. It may be useful when attracting other customers as you understand what the pain points or hidden drivers of the competition are. So, you can attract them with the right marketing. But, remember that the market leader canvas is for marketing and the other one is for customer experience management. 

So, benchmarking itself is not needed as it is not a descriptive exercise. It can not tell you what’s important and what’s not. It can only tell you where you are better and where you are worse.

My recommendation is:

  • Know what’s important as it’s enough.
  • Stop blame game with arbitrary targets.
  • Constantly challenge yourself and establish a “The sky’s the limit mindset.” It’s because with benchmarking, you only address or look at where you are bad in, but it would make much more sense to take certain criteria and excel by getting much better than the competition. You don’t have to look back. Instead, you have to look forward. 

Therefore, there is no reason for looking at the competition. Look at your customers because:

You have to serve your customers, not your competition. 

Here’s a nice quote:

“Look In The Mirror. That’s Your Competition.” 

So, do not benchmark as it sets the wrong incentives.

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In a Nutshell

So far, we discussed benchmarking can benefit you by providing guidance. It can also direct you where to focus. It can only be helpful if it provides the right signals. The right signal tells you where you have the potential to improve and what is important to improve. So, if this can be met by benchmarking and circumstances can be justified, you can apply it. 

Further, we discussed the alternatives to benchmarking and concluded that it does not lead to improvements. It is a non-productive exercise that provides you with the wrong signals.

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