Benchmarking in Business: Overview for Homebuilders
As a homebuilder, we assume your main objective is to grow your business and we know a lot of work goes into that; Marketing and sales efforts, effective leadership, great reviews and ratings, and impressive products and services to name a few. What do all these elements have in common? They each require processes and they can all be measured.
To put it simply, every aspect that impacts the growth of a business can be strategized. And benchmarking makes those strategies effective. In this article, you’ll learn what benchmarking is, why homebuilders should use it, and a quick overview of the benchmarking process.
What is benchmarking?
Benchmarking is a process of measuring the performance and quality of your company’s services, products, and processes with data, then comparing those measurements to other organizations inside and outside of your industry. This is also called competitive benchmarking. Frequently considered areas of benchmarking measurements include customer satisfaction, quality, cost, time, and effectiveness.
A benchmark example:
You notice your homebuyer satisfaction drops significantly after move-in and further research indicates your buyers are not satisfied with their warranty service – giving you an average rating of 65% satisfaction. You compare your approach to warranty with a competitor that has a 94% satisfaction rating for their warranty service. You discover they have a more thorough and proactive approach to communicating warranty details with homebuyers in the beginning, so they know what to expect after move-in. You can then use their process as a benchmark and work towards that standard by improving your procedures.
Benchmarking vs. Competitor Research
Benchmarking may seem similar to competitor research at first glance, but the two are fairly different. Here’s how:
| Benchmarking | Competitor Research |
|---|---|
| Focused on best practices in all areas | Concerned with performance measurements |
| Done through partnered sharing of data | Done with more undercover methods |
| Changes made based on customer needs | Changes made to copy another company |
| Used to create continuous improvement | Used to quickly “fix” a lacking area |
| Required for true competitive edge | Not required, but useful information |
As you can see, competitor research is more of a short-term solution that delivers short-term results, while benchmarking encourages long-term, long-lasting improvements.
Related: What’s Your Core Competitive Strategy?
Benchmarks vs. KPIs
Benchmarks and KPIs can also appear to be the same thing, here’s why they’re different:
Benchmarks are baselines to compare your performance against others in all areas of your business. KPIs are used to track performance relative to your company’s strategic goals. KPIs help you identify if goals are on track and serve as red flags if things aren’t going according to plan, so changes can be implemented.
Benchmarks and KPIs can be used in relation to each other – Benchmarks can help you set targets for your KPIs and put them into better context.
Why homebuilders should use benchmarking
As a homebuilder, you should use benchmarking because it’s a driving force for making internal improvements that result in better customer experience for your buyers and owners, and an increased bottom line.
Benchmarking allows you to identify areas within your organization that can be improved based on the gold standard – a benchmark. By comparing your company to others with superior performance and understanding exactly how and why their performance is better, you can make changes backed by hard data to improve. These improvements can result in:
- More effective performance, procedures, and processes
- Higher-rated customer satisfaction
- Reduced operational costs from better allocated resources
- A competitive advantage over similar homebuilders
- Increased revenue
Benchmarking offers you a valuable and strategic way to identify and eliminate gaps, gain a competitive edge, and effectively manage growth.
Steps of the benchmarking process
Benchmarking is a detailed process and typically involves the following steps:
1. Choose an area to benchmark
The first step is deciding what factors are most important to the success of the business. Once these factors are identified, they should be prioritized and measurements should be defined that will need collecting.
Related: Are You a Fox or a Hedgehog?
2. Choose the competitors to benchmark
Select a number of companies to study and review data from. Collecting data from a number of sources will provide you with more information to draw insights from.
3. Map your current procedures and processes
Document areas in need of improvement as they currently stand, mapping out exactly how they are performed. This will make it easier to compare your operations to that of a competitor and draw detailed conclusions about what needs to change.
4. Gather and study the data
Collecting the information is one of the more difficult parts of the benchmarking process. It involves interviews, casual conversation, and research from secondary information like websites and marketing materials. But this step can be made easy with the help of a software solution provided by a third party that gathers data for you from your direct and indirect competitors, making the analyzation process more simple and efficient.
5. Compare your performance with competitor data
If you aren’t using a third party provider, you’ll need to compare the data you’ve collected to your own operations. Looking at a side by side comparison will pinpoint what is causing a gap for you to fall behind. This is also the time to take a look at your KPIs and how they relate.
6. Create a plan of action
Now that you’ve identified the areas your company needs to focus on and the standard you’re aiming for, you can begin building a plan of clearly defined goals and steps to achieve them. Consider time frame, resources, and company culture when making decisions on what, when, and how to implement these changes.
7. Carry out the changes and monitor performance
Once you initiate your improvement plan you’ll want to monitor closely how the changes are working. Some ideas may not go as smoothly as expected and will need further adjustments. Part of the process is also being proactive about educating employees to make sure they understand what’s going on and how they’re involved.
8. Rinse, wash, repeat
Every time a process is improved successfully, the door is open to find more ways to enhance your homebuilding business. Benchmarking is an ongoing practice, not a one-time event. As long as you continue the process you’ll continue to see growth.
Read More: A Road Map for Strategic Growth
If you’re looking for a way to benchmark your homebuilding business with ease, AvidCX offers in-depth data reporting and benchmarking of competitors in your region and nationwide. Measure, understand, and improve your performance at every touchpoint in the homebuyer journey with this fully digital platform.
Time to take your building business benchmarking to the next level
Avid Insights Team
