The Trouble With Benchmarking

The Trouble With Benchmarking
July 05, 2017

Whenever I talk to clients or teach workshops about how to use and work with data, the question inevitably arises: what is the average? What is an average bounce rate? What is the average time on site? What is the average conversion rate? What is the average percentage of traffic from organic or social media? On average, does ad traffic perform better or worse than other traffic?

I get it. Knowing the average performance makes it easier to compare how you are doing. Oh, my home page’s exit rate is lower than average or my conversion rate is better than average? Well, good, I don’t have anything to worry about! Or, the reverse—my bounce rate is higher than average? I better work on that!

If only it were that easy. The truth is averages and “industry benchmarks” don’t really matter. Why? Isn’t benchmarking important? Yes, you need to have some comparison point, but global or industry averages shouldn’t be your comparison point because your situation is incredibly unique. The numbers you need to hit to succeed will differ greatly from the numbers somebody else may need to hit.

The one area where industry averages can be particularly helpful is knowing what metrics you should measure. If people bother to measure something across a whole industry that certainly offers a strong indicator that metric is at least somewhat important to pay attention too.

But comparing yourself to the average value isn’t a particularly helpful exercise. For instance, one ecommerce client we work has a conversion rate that would be considered “above average” within the industry at close to 7%. This company has a decent amount of traffic so 7% represents dozens upon dozens of new orders every week. For an “average” small organization, this would be great. And yet, this client is barely breaking even because of low margins and high labor costs to process those orders. For this company, their conversion rate needs to be closer to 10%—well above any kind of average—in order to see a profit.

Or, take an example the other direction. Another client of ours has a .5% lead rate—meaning less than 1% of traffic to the site converts into a lead. An even smaller percent converts from a lead into a sale. The average in this client’s industry is around a 5% lead rate with about a 50% conversion from lead to sale. How is this company even surviving? Well, they are and in fact, they are thriving having posting record sales in the first half of 2017. They’ve done this through hard work and a structure focused on quality customers over a quantity of customers.

What this gets to is that your organization isn’t average. There are layers upon layers of things that make your website and your organization unique. From the exact nature of the product or service provided to your cost structures to the way your staff is organized to how you intend to grow in the future and more. Just hitting the industry average is no guarantee you’ll succeed.

So, what do you compare to? If you are just starting out, look at your nearest competitors (link)—the ones very similar in structure to your organization. You won’t be able to get all of their information but you want to get enough to see how you compare. Certainly, information around how much traffic competitors get (estimated, at least) is available as is information about how well your competitors perform in search or social media.

But as you begin to grow, you need to compare to what you’ve done before. Are your numbers higher or lower than last year? Where do they need to be? Were you intending to be higher or lower? In the case of the ecommerce client I mentioned above, they need to benchmark against their current 7% conversion rate performance and find ways to increase that. In the case of the lead-generation website, they need to remain flat with their .5% lead rate and are actually working to decrease their conversion to sale rate in the name of improving the quality of the customer.

Go through this with every metric that matters to the success of your website, your marketing or sales, and your business more broadly. Start by determining where the numbers are at right now. Is that metric where it should be? Is it too low or too high? By comparing against your own performance, you’ll learn how to actually make your website a success and grow your business.

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