Benchmarking is one of the most effective methods companies use to evaluate and enhance their performance by learning from the best in their sector. It enables organisations to identify gaps, optimise processes and foster a culture of continuous improvement. But what does benchmarking mean?
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What does benchmarking mean?
Benchmarking is a systematic process through which a company compares its processes, products or strategies with those of leading organisations in its sector or in specific business areas. The goal is not only to identify differences but to understand why those leaders perform better and how their best practices can be adapted.
The term benchmark literally means “reference point” or “standard”. In business management, it implies establishing measurable standards that guide improvement and innovation.
Main characteristics of benchmarking:
- It is a structured and continuous process.
- Focuses on best practices rather than isolated results.
- Involves both quantitative and qualitative data analysis.
- Encourages continuous improvement and creativity.
What is benchmarking used for?
Organisations implement benchmarking to increase competitiveness and operational efficiency. Its main purposes include:
- Identifying areas for improvement – Reveals performance gaps between the company and industry leaders. For instance, if a logistics firm takes five days to deliver while competitors do it in two, benchmarking highlights where optimisation is needed.
- Setting realistic goals – Allows for target setting based on actual market standards rather than internal assumptions.
- Validating strategies – Helps evaluate whether current strategies are effective by comparing them with those of successful companies.
- Encouraging innovation – Comparing with external benchmarks often sparks creative solutions to surpass competitors.
Examples of benchmarking in different industries
- Retail: Amazon set a benchmark for online shopping experiences. Brands like Zara have studied its model to improve digital platforms and logistics.
- Hospitality: Marriott compares its service standards with top competitors like Ritz-Carlton to refine customer experience.
- Technology: Apple constantly benchmarks user interfaces to remain a leader in design and usability.
The main types of benchmarking
There are three primary types of benchmarking, each serving a specific strategic purpose:
Competitive Benchmarking
Involves comparing a company’s performance directly with its competitors.
Example: A local coffee chain analysing Starbucks’ pricing, location strategy and promotions to improve its own positioning.
Advantages:
- Immediate relevance of data.
- Clear identification of competitive differences.
Challenges:
- Limited access to competitors’ confidential information.
- Risk of imitation instead of innovation.
Functional Benchmarking
Focuses on comparing specific functions or processes with companies — even from other industries — that excel in those areas.
Example: A hospital studying Disney’s queue management system to improve patient flow.
Key benefits:
- Cross-industry innovation.
- Broader strategic perspective.
Internal Benchmarking
Compares performance across departments or branches within the same organisation to identify internal best practices.
Example: A restaurant chain analysing which branch achieves the highest customer satisfaction scores and replicating its approach.
Benefits:
- Easier data access.
- Greater feasibility and lower resistance to change.
How to carry out a benchmarking process step by step
- Define the objective: Identify what aspect you want to improve, ensuring it is measurable.
- Select reference companies: Choose leaders recognised for excellence in the area under study.
- Gather data: Use reports, market research, observation and interviews.
- Analyse results: With the help of the chief data officer, identify gaps, success factors and possible improvements.
- Implement actions: Develop a realistic plan with clear priorities, timelines and responsibilities.
- Monitor progress: Review performance regularly and update benchmarks as the market evolves.
Conclusion: benchmarking as a key to business growth
Benchmarking is far more than a comparison exercise — it is a strategic tool that drives innovation, operational efficiency and long-term competitiveness.
In summary:
- Benchmarking identifies best practices and improvement opportunities.
- It supports evidence-based decision-making.
- It fosters continuous learning and innovation across all business areas.
Developing skills in benchmarking and strategic analysis is essential for today’s marketing professionals. Discover more about the degrees in marketing and communication or the business and technology degrees at Universidad Europea, and take the next step towards mastering the strategies that shape successful businesses.