What is Benchmarking? – Meaning, Types, And Process


Benchmarking is the process of measuring the performance of products or services and other aspects of your business and comparing with those of other business that are considered to be the best in the Industry.

It could also be done for measuring the internal performance of an organization between groups, teams, and projects.

Importance Of Benchmarking

Increases Performance

The foremost beneficial factor of benchmarking is performance. With relevance to the market conditions, the strong performance metrics create a positive impact when you reach the customers and clients.

The clients will look upon these metrics and compare them with your competitors. It is essential to determine and track the performance indicators of the benchmark firms that includes sales and revenue figures.

Not only the growth indicators will increase but also the performance of your team and employees will improve.


The total cost you fix for offering a product should not exceed the value of the nominal cost that the industry sets. When you look at cost of the benchmark firms to create a product, it will limit you to cut down the extra spendings.

This saves your money and leverages your investment that will return the maximum amount of money. Therefore considering benchmark firms with respect to the costing methods is an important and cost-effective one.

Enhances Quality

Some people might say that benchmarking is copying other products or services in the market. If you think so, exactly it is not like that.

But what it takes to offer a product that is different from your competitor is, delivering the product with high quality.

To ensure offering such a quality product or service, benchmarking the industry standards is quite necessary for the company, especially sticking to the recent trends and technology.

Explore Growth Opportunities

The business model and marketing channels you chose to promote your product may seem to be vague sometimes. As time passes, it happens naturally, but leaving unidentified those factors would deviate from your path of reaching the goal.

Benchmarking helps your company to explore more growth prospects that will lead your business to be a scalable one and increases profit rapidly. By looking at the competitors, you will get to know their methodologies and how they are adapting to the recent trends.

Secure Market Position

Benchmark firms have already secured a better position in the marketplace.

The crucial things you could get from those firms are their strategies and insights on the industry’s growth potential.

Having identified the potential markets, you could gain a competitive advantage by putting all the efforts together in the right place.

Improve coordination In The Company

Above all the benefits, it improves the coordination of the employees of various departments in the company. This drives and motivates each person working in a company to unanimously achieve the target both in the short and long term.

Further, it increases the job satisfaction level for all the employees, when they work in a team with a common goal. It will induce a thought of winning mindset for them and helps in the decision-making process, which will work for the betterment of the company.

7 Types of Benchmarking

Benchmarking applies to both internal and external aspects of an organization.

The entrepreneur who wants to compare and compete with the best performer in the industry needs to check these aspects.

This would help you to get a clear insight into your overall performance and improve your business from the present state to the desired future.

Process Benchmarking

At the early stages of Startup business, entrepreneurs would look upon the benchmark companies, how a certain business process is carried out in that particular industry.

Also, the entire process of such companies who perform the best practices could be measured and compared to improve the performance and get effective results.

Product Benchmarking

In Product Benchmarking the Company used to buy the rival’s product and try to know the features of that product.

By doing so, you will understand the performance of the rival’s product and you could change your product entirely or some features and relaunch the product.

This is also commonly known as the reverse engineering process.

Performance Benchmarking

Performance Benchmarking includes the collection of information regarding outcomes from Benchmark firms.

Managers use these data to analyze, compare, and identify the performance gaps between your organization and the Benchmark firms.

This would be useful for you to make the right decisions, bridge the performance gaps, and achieve success.

Strategic Benchmarking

Strategic Benchmarking is identifying the strategic approach of a certain business model in the industry. It is used to analyze the Strengths and Weaknesses of the best companies, and to get the best strategic methods and approaches that would solve their problems.

This would be challenging and good learning for you to adopt such strategies and should be concerned about other features while implementing those successful methods on your business model.

Functional Benchmarking

Comparing your business with the Benchmarking firms, which focuses on the specific function of a business instead of measuring all the performances is called Functional Benchmarking.

It can be applied to improve the operations of specific functions like support, services, etc… of any department in an organization.

Generic Benchmarking

Generic Benchmarking is different from other types as it is used to compare the performance of the best companies which is not related to your industry.

The new business model could adopt the methods of best companies that show exceptional performances in determining the return on investment concerning every resource they use.

Global Benchmarking

The process of comparing and analyzing the performance of a company with the companies which are considered to be the best at the global level is called Global Benchmarking.

The performance of your company could be compared with many top-level firms in other countries within the same or different industries.

This will let you perform the business with global standards and gain a competitive advantage against the local performers.

5 Steps Of Benchmarking Process


The first and important step in Benchmarking is planning.

Planning includes some of the key areas that you need to check before you start the process

  • Define the product, service, functions, or department to benchmark.
  • Identify the best business firm in your industry or your internal department that you will set as a benchmark to compare and analyze.
  • Prepare the best team in your organization to perform an end-to-end process in benchmarking.

Collection of Information

The next step after planning is to collect data about your predefined benchmark firm.

Collect all kinds of information in every aspect that would be needed for you to analyze, like how they outperform their competitors, essential inputs, and efforts they put in to become the best in the marketplace.

Collect both the descriptive and numeric data, and also metrics, which could be done by conducting surveys, interviews, questionnaires, journals, and direct contact.

Analyze the Data

After collecting the data, analyze and compare the performance of yours and the benchmark firm by creating charts, infographics, and by using strategy tools.

Identify the gaps through variations shown between both performances.


The next step after identifying the gaps is to bridge the gap by conducting brainstorming sessions with the working team.

Get the necessary input from all the team members to optimize and improve your performances.

Once you are done with the formulations to change the product or service, it’s time to get approval from the top-level management.

And also crosscheck the whole process and implement them via all the departments and operations to get the final product to relaunch in the market.


The final step in Benchmarking is to monitor the performance after the relaunch of your customized product.

Fix a timeframe to analyze the behavior and performance of your product, which would be essential to track better results.

Monitoring the performance of the product is vital to measure the output that justifies all your efforts in optimizing the product and to ensure success.

Reader’s Insight

Let us know if we missed out on anything in this article Benchmarking – importance, types, and process and share your thoughts in the comment section.

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