Why do companies benchmark? In short, a benchmark provides context for decision-making. For example, let’s say you spend a million dollars a year on events. Why? If your CEO asks you this question, what will you say? Your CMO finds an additional $75,000 in incremental budget, how do you recommend where to spend it? Or perhaps the CFO wants to know how much revenue the marketing organization should be sourcing as a target, what is your answer? These are all questions benchmarks can and should help you answer.
Benchmarks can range from investment levels (e.g., how much should we spend on advertising?) to conversion rates (e.g., what should our MQL to SAL conversion rate be?) to velocity (e.g., how quickly should a lead turn into a paying customer?) and far beyond. Simply put, if you can track a result, you can benchmark it.
Does this mean you should benchmark everything possible? Absolutely not. That would be a waste of time. Instead, focus on: what areas help improve the business, what questions come up that are inputs into your team’s success, and what areas you need guidance or validation from external sources to help you take the best path forward.
Below, we provide top tips and considerations for effective benchmarking.
Now that you have an understanding of what benchmarking is, there’s one important point to know before you get started: Clean data is a must for benchmarking.
Like any data source, benchmarks are only as good as the data quality. There are two factors in quality benchmarking data:
First, you must have strong data to compare against. The source of the benchmarks should be trusted, and the methodology in collecting data should lead to a confident, clean data source. Analyst firms like IDC, Forrester, Gartner, and SiriusDecisions are great places to start for external benchmarks. Also, long-standing surveys or custom benchmarking services from reputable vendors can be valuable sources of benchmarking data.
Second, your internal data must be consistent and clean. To obtain this quality, an internal taxonomy or definitions should be created. Whether it’s marketing investment and budget categories or lead stages, having consistency across the entire organization is mandatory. Once the taxonomy is complete, data management requires constant effort. This means having the right technologies in place, such as CRM, marketing automation, and marketing performance management, to collect the right data and also the processes in place to assure data is collected in a consistent way.
With the internally clean data and externally trusted benchmark data, the other consideration is assuring these two source definitions match. This assures a one-to-one comparison. Without this, you risk comparison that is misleading.
3 Areas Where Benchmarking Can Help You Today
There are 3 areas where benchmarks can add value to your marketing organization and operations:
1. Decision support
Marketers are constantly asking themselves or each other: “Where should I spend my next dollar?” and “What should I do next to drive the most impact?” Benchmarks should be a key input in helping to determine the answers to these questions. Benchmarks give a view into what has been done in the past and what others in the industry are doing. With that information, marketers can have more confidence in where they should place their bets.
2. Target setting
Marketing or the business must set targets and goals to determine what the company needs from marketing to be successful. This reality is a non-negotiable component in marketing performance. Any marketing organization that does not have targets should be very concerned. But how are targets set? Sometimes from business needs and other times from past performance, but often there is no valuable guidance on what a target should be. This is where benchmarks come in. They help guide what is realistic based on what similar organizations are producing or spending.
3. Making a case
Do you want more budget? Or how about more headcount? (Of course you do.) Or, a less desirable situation, what happens when the CFO, CEO, or your boss comes to you and tells you a cut is coming? Benchmarks are a tool to make the case for getting resources, keeping resources, or shifting an approach. They give marketers an external view of what others are doing and what is needed to be successful. Just be warned: Benchmarks don’t always give you the ammunition you are looking for.
Effective benchmarking requires a significant investment of resources. But the rewards and benefits can be even greater. So whether you’re looking at previous year’s results or external data for comparisons, benchmarks are an invaluable tool for measuring and optimizing marketing performance.
Download the white paper to learn more: 4 Stages to Better Marketing Performance.