How Benchmarking Applications Can Benefit Financial Services Marketing Initiatives
It originated with land surveyors who made distinctive marks-called “benchmarks”-on rocks, walls or buildings to use as reference points for their topographical surveys. Today, as adapted for business usage, the term “benchmarking” refers to the baseline used for evaluation and measurement.
Corporate benchmarking formally started less than 25 years ago. In 1979, Canon introduced a midsize copier for less than $10,000. Xerox, who could not even manufacture, let alone retail, a similar machine for that price, initially assumed that Canon was deliberately under-pricing to buy market share. Over time, however, as Canon’s copier sales continued without a price increase, Xerox engineers determined that Canon’s more efficient production methods enabled them to sell profitably at these prices. As a result, Xerox decided to benchmark Canon’s processes with the objective of reducing its own costs.
From 1980 to 1985, Xerox adapted Japanese techniques which enabled the company to cut unit production costs by half and reduce inventory costs more than 60 percent. This remarkable turnaround by Xerox launched benchmarking as a popular new management movement in the United States. Intrigued by the idea of generating corporate, organizational and marketing improvement by collecting and adapting the best practices of others, many of the nation’s leading corporations soon adopted and refined benchmarking techniques. The power and universal applicability of these techniques were formally recognized when the Malcolm Baldrige National Quality Award mandated benchmarking for all entrants.
While benchmarking had its start in manufacturing and heavy industry, a properly implemented benchmarking program can provide significant benefits to financial services engagesmart organizations. Benchmarking adherents believe that being “good enough” is never good enough.
Benchmarking has two basic elements: 1) the evaluation of a company’s own processes and procedures to identify strengths and weaknesses; and 2) the identification, analysis and adaptation of the processes and procedures of successful companies.
Listening To The Marketplace
Successful benchmarking studies begin with clear objectives that relate directly to fulfilling the needs and wants of customers and prospects. Clearly stated goals provide a “litmus test” for corporate decision-making and ensure that the process results in the creation of products and services that resonate in the targeted marketplace.
With objectives established and a reasonable understanding of customers’ preferences, the company’s next task is the systematic examination and evaluation of: internal processes and procedures within and between business units; marketing approaches for financial products and services; and the effectiveness of distribution channels. A company must know its own operations thoroughly before using them as the baseline for future endeavors. One of the greatest benefits of benchmarking is that, if a company learns nothing else, it has a much greater understanding of how it does business.
With the internal baseline established, the process moves on to the systematic identification of competitor and industry best practices. A major virtue of benchmarking is that it keeps organizations attuned to industry changes. Incremental improvements of, say, 10% or 15% may be more than acceptable until competitors take a radically new approach. An example of such a competitive onslaught in the financial services arena is Merrill Lynch’s creation of the CMA Account, which enabled it to quickly amass more demand deposits than any banking institution. The banks ceded their historical dominance in an area of significant profitability by continuing to routinely strive for greater efficiencies and incremental improvements.