As human beings, we have the tendency to compare ourselves with others. We “benchmark” our success versus societal norms. We benchmark our salaries versus industry rates. We even benchmark our height & weight versus our country’s average.
It could not be any different for businesses and of course, marketing. We always want to know where our competitors spend their money, what channels they are using and how these channels are performing.
“What is the benchmark _________ in my industry?”
Fill in the blank with any of the following metrics and you will have the a list with most popular questions in marketing:
- Conversion Rate
- Cost per Sale
- Cost per Lead
Where can we find these benchmarks?
If we “Google them” chances are that we are going to come across various articles, tables & lists with some of these benchmarks.
However, these numbers are not going to work for you. They are either going to be too generic or based on a completely different market.
Even if we manage to find these golden numbers, chances are that they won’t really help to “benchmark” our marketing efforts. This is because in marketing we are rarely comparing “apples to apples”.
For example, let us think about life insurance in Singapore. How many variables are potentially affecting an insurance company’s conversion rate?
First, we have a sum of intangible assets that are UNIQUE to each company:
- Brand Reputation
- Brand Perception
- Brand Positioning
Next, we have a set of UNIQUE variables relevant to the company’s digital assets and product offering:
- Website Speed
- Website User Experience
- Price Point
In the light of the above will it be fair to say that the benchmark conversion rate for Life Insurance is 10%?
Will this benchmark apply to a new startup with zero brand equity the same way it applies to a mature company? The answer is no. Every company is unique, in one way or another.
However, there’s still a problem we need to solve. What is the benchmark conversion rate for OUR life insurance company? The best way to go is to reverse engineer that success.
As a first step, we need to calculate our break-even conversion rate. Let’s oversimplify here to run through an example. Assuming we make $100 per sale and we can acquire traffic on $1 per click (also assuming that this is our only cost). We need 1 conversion to break even. Hence our break-even conversion rate is 1%.
Now let’s take into account our margin. If we need to achieve a margin of at least 50%, our benchmark conversion rate now needs to be 2%.
That’s a much more realistic way to set benchmarks which are fully aligned with your business ambitions and operational realities.
Finding your benchmarks will not come effortlessly. A straightforward answer to the question “what is the _______ benchmark of my industry” may sound super convenient, but it can easily lead you into chasing unrealistic goals.