by Janielle Denier, CEO and founder of Rainfactory Inc.
Early stage startups have plenty of challenges, but benchmarking helps pinpoint product-market fit and provide directional data. With such valuable information in hand, upstarts can rapidly and confidently pivot to snag market share.
If you’re new to the notion of benchmarking, it involves comparing your company’s metrics to those of your competitors and your industry. It’s a way to create common measurements for an apples-to-apples way of judging your company’s progress against others’ progress. For instance, benchmarking can show how your price point lines up against an industry heavy hitter or confirm you’re overpaying for customer acquisition costs. You can benchmark just about anything, but the factors you measure should be relevant to your business goals.
For an example of benchmarking in action, consider the Google News Initiative-backed Project Oasis, which aims to determine what makes some digitally native news publications stand out while others underperform. Through an exhaustive process of collecting and analyzing surveys from existing online news organizations, Project Oasis’ team hopes to objectively identify industry best practices that can be utilized by future digital news startups.
In other words, the benchmarks uncovered during the investigative process will hopefully serve to inform aspiring news media entrepreneurs looking to mitigate their risks.
How Startups Benefit From Benchmarking.
Benchmarking isn’t relegated to the upstart world, of course; it’s a practical standard, especially among seasoned marketers. However, it does prove incredibly helpful for dreamers.
At our agency, we rely on benchmarking to steer clients in wiser directions. According to CB Insights, the biggest reason early businesses fail isn’t passion or lack of money — it’s a lack of market demand. Therefore, when we work with founders, we encourage them to find and solve target customers’ true pain points through benchmarking.
How do we pinpoint market demand, then? Before launching large marketing campaigns, we survey the landscape to spot the most desirable positioning, understand which features buyers care about, and figure out a reasonable cost for the service or product. The information we gather upfront saves clients time and money, as it builds a sense of predictability during the notoriously unpredictable startup journey.
Another great example of benchmarking in action involves launching crowdfunding campaigns. During the prelaunch phase, we do lead generation from Facebook Ads based on a recommended threshold cost per lead. If we can improve initial performance significantly and hit the threshold, we can confidently use our learnings to maximize the full campaign launch.
Of course, we’ve also worked with companies that already invested in their products and are ready to use benchmarks to achieve their business plan objectives. California-based Onewheel is a single-wheeled hoverboard that aims to shake up the skateboarding scene. Our team members helped Onewheel’s innovators enter a crowded market and appeal to younger Millennials and Generation Zers.
We did this by benchmarking what worked for the company’s competitors, creating hypotheses around those benchmarks, testing those hypotheses, and continuously tweaking its overall marketing strategy. Today, Onewheel is a major player with an impressive portfolio of product options.
Tips for Startup Benchmarking.
Wondering how to use benchmarking for your own early stage business? Here are several factors to keep in mind.
1. Establish consumer interest first. Even though you can benchmark nearly anything, make sure a top factor is gleaning interest from your target demographic. Otherwise, you could find yourself without purchasers from the get-go.
What type of benchmarks measure market demand? Interest in ad copy or willingness to sign up for product news are terrific indicators. You will also need to quantify the size of your total accessible market, as well as how much potential business is realistically available. Your calculations will be especially helpful if you also need to woo investors.
2. Weigh your startup against other startups. The startup environment is very different from the legacy enterprise environment, so avoid benchmarking your company against the wrong competitors. Trying to live up to benchmarks set by a business that’s been around for years could lead to you pivoting in the wrong direction.
Plan to dig for startup statistics, or work with a marketing agency that concentrates on working with early stage founders and teams. Remind yourself that most upstarts generate little to no profits for the first year (or longer). If your other designated benchmarks are on track with the status quo, you’re on the right path.
3. Keep track of your data. The key to getting the most bang for your benchmarking buck lies in staying the course and amassing a wealth of continuously growing data. Install Google Analytics to gauge online performance, send out regular surveys, and keep your finger on the pulse of what’s being said about your brand.
Easy-to-implement consumer sentiment benchmarking strategies involve listening to the word on the street (or, rather, the internet). Check out online reviews to explore trends and figure out how you can best your biggest challengers. Then, conduct some social listening by paying attention to what people are talking about on social media. Over time, the insights you gain will assist you in making marketing and sales moves.
Benchmarking doesn’t have to be complicated or extensive to get results, but it is necessary to check your progress and chart your path. Start by tracking a handful of benchmarks and build from there. It’s more reliable than trying to run a successful startup on a hunch.
Janielle Denier is the CEO and founder of Rainfactory Inc., an award-winning full-service digital marketing agency that provides go-to-market strategy and advertising for growth-stage startups. Denier is an expert in devising action-driven conclusions based on video attribution.