Once upon a time there was a company participating in the X industry that offered a distinctive service appreciated by all its market that, based on its excellent service succeeded in keeping a captive loyal public… FALSE! The business world doesn’t work that way.
Since unmemorable times it is known that if a business idea turns into a selling idea, sooner or later the competitors will emerge, with the -pretty realistic- risk that it will take away an important mass of clients. Even more, these competitors had it so much easier to enter the market because they had certain knowledge of mistakes and tools that the business had at its beginnings. Now, were not these advantages allowing it to overcome the initial company? If you already know the answer you know we live in a world of business cannibalism and, because of not looking both ways of the road, we can lose a lot. This prevention and fighting weapon is called benchmark in the world of Revenue Management.
Benchmark is a method of continuous and systematic analysis of a company’s performance versus its competitors’. It is there where one realizes the real challenge that is “Where do I begin?”. We propose:
The definition of the competitive set is immensely important and should not be done based on the leagues in which you would like to play but on what clients really consider substitutes of your product. It is likely that you actually take in account informatic tools that under certain statistics or other aspects may give you a competitive set that is not really the adequate one. Under this perspective we must give ourselves a time to study aspects like the following to redefine the real competitors:
These aspects are basic and we can clearly consider some more, adapted to the business we manage. If we talk about the hotel industry for example, we could consider size since it is not right to compare a 20-rooms hotel with a 80-rooms one. If we talk about restaurants we should not compare a la carte restaurant with a buffet one.
Let’s not forget that modern times have also provided us with many technological facilities that ease the access to information and better practices. With brands digitalization arises online benchmarking (Google Alerts, Adwords, Minderest, social networks, etc.) which allow us to know our competitors, increase our brand’s competitivity and offer the best service to make a difference.
E-business strategies, also related to the technological changes that affect contemporary benchmarking, are being used more and more to simplify and optimize process in all kinds of business and we cannot fall behind because the added value can be significative and decisive. Sometimes it is important to get out of the box and take a risk to become number one.
Finally, it is important to know “What good is benchmarking for me?”. Three words: Learning, improving and innovating our product or service and, consequently, allowing us to improve our positioning and generating better results in our company, both quantitative and qualitative. Positioning at a product level will determine the positioning that one can have at a price level… in a market that is so competitive and transparent as the current one it is not viable to maintain prices above average if the product is below average.
Remember: Dedicating a prudent time to know your competitors is an important step to take better decisions.
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Daniela León is a founding partner of Rentabiliza, Peru’s first Revenue Management and Pricing in Perú. She has an MBA by Chilean University Adolfo Ibañez and is an economist from Peru’s Universidad del Pacífico. During her successful career, she specialized in the Revenue Management, Strategy and Commercial Management fields in organizations dedicated to the provision of services in the hotel, tourism and commercial aviation sectors.