October 19, 2022

Benchmarking

Here's the email:

  • "Hey Kevin, question for you. Could you slice and dice all of your Elite Program data for us by industry and size of brand so that we can benchmark ourselves against similar competition? I know you've been critical of us in the past, and I just want to demonstrate that we're aligned with our competition. Thanks."

Thank you, no.

Benchmarking is one of those pointless activities that weak leaders force people to do in an effort to deflect blame for lousy performance. "It's not our fault, everybody in our vertical is within five points of rebuy rate of us."

Nonsense.

Let's assume that your "set of competitors" has a 34% rebuy rate.

Let's assume that your rebuy rate is 31%. Does that mean you are doing a bad job? Heavens no.

Let's assume that your rebuy rate is 37%. Does that mean you are doing a good job? Nope.

Your p&l tells you everything you need to know. Everything.

Are sales growing?

Are sales growing, causing profit to increase at a faster rate than normal?

Are you at 3% pre-tax profit with 65% gross margins? (hint - you are a failure).

Are you at 8% pre-tax profit with 29% gross margins? (hint - you are a success).

The vendor industry loves to prey on weak leaders who want to benchmark their brand against the "competition". Ask McKinsey how much money they've made over the years performing this task for weak leaders?

Stop benchmarking.

Start doing something.


P.S.:  When I worked at Eddie Bauer, we benchmarked ourselves against our competition (L.L. Bean, Lands' End, etc). We were a lousy company. The benchmarking exercise proved we were a lousy company. We already knew that. May as well have lit a hundred thousand dollars on fire next to the lake that Eddie himself used to fish on (a lake that is now part of the Microsoft campus, yeesh).


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