The Better Alternative to Benchmarking

Senior management loves benchmarking. They ask for it. With this, they do not do themselves a favor.

Yes, it provides an easy answer to the ultimate question, “Are we doing good or bad”. Yes, it provides relief when you meet the benchmark. And: Yes, it gives incentives to meet competitive performance.

So, what’s the problem?

Benchmarking is Dangerous

Professor Byron Sharp conducted the largest cross-vertical study to date on understanding drivers of loyalty. What he found was devastating.

The main predictor of loyalty and churn is simply the market position. Each brand might have individual factors, but this simple mechanism explains the bulk of variance across verticals.

When you have looked at benchmarking studies, you may feel an aha moment right now. The most significant player not only has most likely a good CX score but also performs exceptionally well in most drivers. There is an implicit bias based on market dynamics and psychology.

Benchmarking assumes that your CX KPI is somehow comparable — so that the player with the higher score is performing better. This assumption is broken in many ways.

You mostly do not own the same type of customers. Some customer segments are more critical in giving ratings while still showing the same loyalty. The customers you own differ also in what’s important to them.

Even if the best competitors would be comparable, benchmarking does not answer the question “What is possible” , so it does not answer the question “what’s is good” in absolute terms.

This exposes companies to multiple risks

● RISK #1: False signals of performing well: If you overperform competition, you will be satisfied, and there is no reason to improve further.

● RISK #2: Wrong benchmark due to serving up different customer segments: This is further problematic since the benchmark is typically biased, thus wrong.

● RISK #3: False signals of performing weakly: These signals causing the blame game and even giving no information on how to become better.

In a nutshell: Benchmarking uses a broken comparison, gives you illusory security of performing well, and false warnings of performing week. On top of that, it does not provide what everyone thinks it does: a measure of “what is good or bad”.

LOOK IN THE MIRROR — THIS IS YOUR COMPETITION

Let’s take a step back. What is the use of knowing whether you are doing well or not?

Sure, you then know whether you have room for improvement (if you are very lucky).

Fine. But you still do not know how to leverage the potential.

Here is the alternative. Do this, and you don’t need benchmarks:

● Know what you need to do to improve (find most critical next actions)

● Model how much improvement is possible with a particular investment.

● Then do it, if there is a clear positive ROI.

If you have this process in place, then it is IRRELEVANT, what your competition is doing.

Just do your very best. It is the only thing you can do anyways.

Look into the mirror. This is your competition.

Yes, this is not sci-fi. The methods can be found in state-of-the-art CX-Analytics toolboxes. For instance does this training teaches how to implement it.

This is your alternative to Benchmarking:

● Know what’s important by using Causal Machine Learning. This is all you need. It works even by leveraging your customer’s text feedback

● Stop the blame games played based on arbitrary targets, instead set stretched targets on key drivers

● Constantly challenge yourself and establish a “The sky is the limit” mindset.

Questions? Not the same opinion?

Challenge me!

Frank

p.s. these resources might be helpful to get into benchmarking alternatives

Correlation is not Causation

Predictive Qual

Founder of CX-AI.com and CEO of Success Drivers // Pioneering Causal AI for Insights since 2001 // Author, Speaker, Daddy