Benchmarks? YES!

Buzzwords are often derided as superficial, but buzzwords can be a gateway to great conversations with stakeholders and clients. As the first in a series on buzzwords, I'm digging into "Benchmarking" -- something that is commonly requested but often misunderstood. Benchmarking can be a great reason for doing important underlying work and gaining critical stakeholder alignment. It's a buzzword I've learned to appreciate. 

Benchmarks are often touted as universally valuable, a buzzword that garners almost automatic approval. Ask any marketing professional about their interest in benchmarks, and you’ll likely receive an enthusiastic ‘yes.’ However, despite their popularity, I tend to advise clients with caution. The reason is simple: benchmarks are frequently misunderstood. This misunderstanding can lead to confusion, misinterpretation, and a skewed perception of what benchmarks truly represent. Often viewed as straightforward and easy to create, in reality it's easy to underappreciate the complexities involved in establishing and utilizing benchmarks effectively and with purpose.

However, my stance on benchmarks has evolved. I have come to see this as an opportunity. Buzzwords such as ‘benchmarks’ can be a way to start a valuable conversation, allowing us to do impactful work while simultaneously helping our teams and clients improve their analytics skills.

Consider the benchmark as just the visible tip of the iceberg. What the person asking for the benchmark may not realize is that there is much more beneath the surface. Having a solid grasp of Key Performance Indicators (KPIs) is essential for selecting the right benchmarks. Also, a robust historical data set is needed for the foundation of realistic, data-driven benchmarks. Lastly, it’s crucial to have a plan for using the benchmarks appropriately, ensuring they serve a deliberate and significant role within the organization. Let’s explore this further.

First, Understand Your KPIs

Beginning with a solid comprehension of KPIs is essential. Benchmarks are specialized metrics.  The true purpose of a benchmark is to establish a meaningful standard, typically based on accepted KPIs. A benchmark acts as an indicator of whether your KPIs are performing well or not, setting a clear performance bar.

However, this requires a clear understanding of KPIs, supported by a robust measurement framework and strategy. Random KPIs can lead to arbitrary benchmarks, resulting in wasted effort. It’s crucial to use your measurement strategy and KPI hierarchy to determine which benchmarks are needed. Not every KPI warrants benchmarking; it’s often more practical to focus on key bellwether KPIs that require long-term monitoring and business impact.

The opportunity arises in discerning whether a client possesses well-defined KPIs when they express interest in benchmarking. This opens the door to a conversation about their KPIs, their significance, and whether a sound measurement strategy is in place. Such discussions can validate the value of benchmarking efforts and encourage clients to think critically about the role of measurement in their marketing decision-making.

Second, High Quality Historical Data is Critical

An often-overlooked aspect of benchmarking is the significance of data quality and historical context. Optimal benchmarks are derived from tangible performance which requires a dependable, historical, and accessible dataset. Fragmented data and shifting data definitions can cause big problems. When a client proposes benchmarking, it’s crucial to take time to explore their data integrity. This can create an opportunity to address data quality and governance, and to establish a data management system to ensure data quality.

Good quality historical data is vital for benchmarking, providing not just a metric but also insight into the expected "normal range". Variability is normal in marketing data, and capturing this in benchmarks allows for meaningful performance comparisons. Discussing benchmarks as a range, rather than a fixed point, with marketing teams can illuminate the importance of understanding data fluctuations and when performance is outside of the norm.

Setting goals becomes possible when they are designed to surpass the normal range. I typically advocate for setting goals at least one standard deviation beyond the normal range as a baseline for goal setting, although this may vary depending on the particular metric. These discussions with clients about data history, performance trends, variability, and goal setting are invaluable. They also highlight the necessity of a sound data environment to establish meaningful benchmarks.

Third, An Activation Plan

The third key element in benchmarking is the practical application of the benchmarks themselves. It’s crucial to question their purpose: Why are they being created, and how will they be used. Ideally, these benchmarks should integrate seamlessly into an existing measurement framework. Unfortunately, it’s not uncommon for benchmarks to be developed, only to be shelved or ignored, especially if they highlight underperformance.

This situation underscores the importance of engaging clients in discussions about effective performance management. It’s about ensuring benchmarks are not just created but actively used in reporting, analysis, and dashboards. The creation of benchmarks involves substantial work, including validating measurement strategies, verifying data quality, extracting historical data, normalizing values, and more. To justify this effort, benchmarks must be operationalized, meaning there needs to be a clear plan for their application. This opens up valuable dialogue with clients about the utilization of benchmarks and the strategic role they play in performance management.

These three facets of benchmarking are particularly intriguing to me. They serve as a gateway to deeper, more impactful dialogues with marketing teams and clients. While the concept of creating benchmarks might seem like just another buzzword, it actually harbors the potential for significant, beneficial work. This approach allows us to uncover genuine opportunities to make a meaningful difference for both ourselves, our teams and our clients.