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Is simple benchmarking harming your firm's performance?

Dr Xiaoning Liang, Assistant Professor in Marketing

Driven by the increasing complexity of modern marketing and the growing demand for greater marketing accountability, virtually every marketer has realised the need for measuring marketing performance. But what most marketers do not know is that simply using marketing metrics for benchmarking purposes may not be good for their firm but may even harm their business performance in the long run.

In our research, we set out to understand why marketing benchmarking could harm firm performance and how firms can better use their marketing metrics to remain competitive? Based on a nation-wide study conducted with more than 200 Irish-based firms, we describe how firms can go beyond simple benchmarking and make better use of marketing metrics.

1. Avoid over-reliance on benchmarking. Marketing metrics are often and mainly used to benchmark marketing outcomes against pre-defined objectives, the performance of previous years, and that of major competitors. However, over reliance on benchmarking may result in the top management team overly focusing on achieving short-term financial outcomes. Consequently, the marketing department is put under financial pressure, resulting in their paying too much attention to hitting financial targets and ignoring other critical activities, such as building strong brands, connecting with customers, and monitoring competitors. This may, in turn, give rise to the conflict between short-term goals and long-term achievements. For instance, the marketing department may risk sacrificing their long-term relationships with customers in order to reach the short-term sales targets. Eventually, this could jeopardise firm profitability and customer lifetime value in the long run.

2. Use benchmarking to direct organizational focus on critical performance issues. If firms benchmark using marketing metrics, they should not only check if marketing hits the target. Rather, they should use marketing metrics to direct organizational focus on critical performance issues that they need to watch out for. For instance, they should check if there is an area (e.g., problem customers) that needs special attention from the management team, if there is a need to alter the course of actions to cope with changes in competitors’ strategies, or if certain marketing plans should be terminated and replaced by better alternatives. In so doing, firms are able to adjust their marketing spending and resources to marketing activities that need more attention, thereby improving their ability to implement marketing strategies.

3. Use marketing analytics to generate insights from marketing metrics. Benchmarking can cause management teams to put too much emphasis on success but not enough on the potential to learn from failure. To reap the benefits from marketing metrics, marketers should apply marketing analytics to generate insights for better decision-making. For instance, by using marketing analytics to establish connections between marketing activities and business performance, firms can understand the true causes of success and failure. This may help them adjust their marketing strategies and make better marketing plans. In addition, firms can conduct frequent marketing performance and market analysis, such as trend analysis, competitor analysis, and need analysis, to get a good understanding of how things work in the market and even identify new market opportunities. For instance, a marketing manager from a retailing firm commented:

“We [the marketing department] are actually the eyes and ears for the organisation in terms of trend analysis, need analysis, and understanding where our category or categories are going to evolve in the future, which all then feed into the strategic planning for the business.”

4. Share marketing analytics information with other departments. Marketing analytics information is not only valuable to the marketing department, but may also be helpful for other departments. Thereby, it is critical for firms to encourage information sharing within the organization. For instance, firms can encourage the marketing department to generate and share insights with the HR department for better staff training, with the product development department to facilitate better product innovation, with sales teams to enable them to swiftly respond to competitive campaigns, and with CRM teams to foster good customer relationship management.

Unfortunately, not every firm is capable of applying marketing analytical techniques to facilitate strategic decision-making. In fact, of the Irish firms that we researched, many recognized the urgent need for upgrading their marketing analytics engines and developing superior data mining competences.

“[One capability we need to develop is that] we need to work with our research partners to understand how we can develop brands that would appeal to consumers and would enable us to build strong relationships with consumers, understand the needs of consumers, get insights into what consumers actually want and their desires are.”  
 (A marketing manager at an Irish Times Top 1000 Company)

We have the data [marketing metrics], but we are not extracting it. We do not have the resource or expertise to do that. I think [that] it is a gap that I have certainly recognized, because we recognize all the great intelligence that is there, but as company, we are not using it”
(A marketing director from an Irish Times Top 1000 company)

The one million dollar question then is, how to enhance data mining capability? Here at Trinity Business School, we have started a research project aiming to provide some answers to that.

If you are interested in participating, please feel free to contact me at